"Q4 2021 - Gorilla On the Loose"

  • By: Joseph R. Tranchini, CFA
  • February 2022








Under normal circumstances, letting a 500lb gorilla out of a cage would most likely be cause for concern… seems fairly logical, right? But what if I told you that the 500lb gorilla was not actually a gorilla, but in fact, the U.S. Economy? And what if I also told you that the cage was not actually a cage, but in fact, a confluence of supply-chain issues constraining economic growth? Well then… what initially started out as cause for concern would very quickly become cause for celebration. Welcome to the current state of the U.S. Economy.

To better understand the current state of the economy, let’s take a trip back in time to just one quarter ago and examine not only what we saw, but why we saw it. Q3 2021 was primarily characterized by positive, but decelerating, economic growth largely attributable to a lack of availability in all things effected by disrupted supply-chains, which mostly comprises of physical goods. This effect manifested itself in 3 ways. First, we saw aggregate economic growth slow markedly to a pace of 2.3% from the previous reading of 6.7%. Secondly, we saw Consumer Spending slow considerably to a level of 2.0% from a level of 12.0%. And lastly, we saw Business Inventory levels continue to erode away as companies continued to struggle with navigating the variety of issues persisting within their respective supply-chains. Individuals and Businesses simply could not get their hands on what they needed because it wasn’t there.

A natural question one might then ask would be “What would it look like if these problems were getting better?”. Well, look no further than present day. Current economic data juxtaposes very well with the economic data of the previous quarter in that it shows a well-defined reversal in all three of the aforementioned problems (Slowing Aggregate Growth, Slowing Consumer Spending, Eroding Inventories). Aggregate economic growth accelerated in the current quarter to a pace of 6.9%, up from last quarter’s rate of 2.3%. Consumer Spending accelerated to a pace of 3.3% from 2.0%. Businesses were also able to once again add to Inventories in a meaningful way by adding approximately $173B worth of provisions, which broke a 3-quarter streak of significant Inventory drawdowns. So, if last quarter’s economic woes were perpetrated by a general lack of availability in all things effected by supply-chains, this current quarter’s data may represent the initial burgeoning of a light at the end of the tunnel with regards to those issues. What used to not be available is now suddenly available.

Great! So, are we out of the woods yet? Not likely.

Important to note, the supply-chain disruptions being felt across the economy are an economic Symptom, not the actual underlying Cause itself. It is the general consensus that the underlying cause of this symptom is a large degree of dislocation between the Supply of, and Demand for, labor. At present time, there are roughly 1.5-2 million less people employed than in Pre-Pandemic times, even though there are close to an all-time high number of Job Openings available. Even weirder still, despite the fact that the Pre-Pandemic worker-gap is currently around 1.5-2 million individuals, the number of individuals who are formally considered Unemployed is only about 800k higher now relative to Pre-Pandemic levels, which by the way, were around 20yr lows at the time.

Strange? Yes. Troubling? Perhaps not.

There is a bright spot still in this very complicated mosaic that is the labor market, continued progress. So much progress that the Federal Reserve considers the economy to be currently operating at a level that is consistent with Maximum Employment levels. Additionally, it is unlikely that the economy will require the re-addition of the 1.5-2 million worker-gap to re-normalize, and therefore stabilize, supply-chains as many businesses continue to learn and adapt to the new post-Pandemic economic realities. Consider this, with the economy continuing to add jobs every quarter, and with the apparent economic reversal from last quarter’s supply-chain related growth woes, the light at the end of the tunnel may not actually be that far away, because we may have already reached it…


[See Below for Disclosures & Annotations]


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

The companies presented here are for illustrative purposes only and are not to be viewed as an investment recommendation.

Tax laws and regulations are complex and subject to change, which can materially impact investment results. LPL Financial does not provide tax advice. Clients should consult with their personal tax advisors regarding the tax consequences of investing.



  1. FactSet. “Economics – Country/Region – United States”. January 27, 2022.
  2. Bureau of Economic Analysis. “Gross Domestic Product, 1st Quarter and Year 2021 (Advance Estimate)”. January 27, 2022.
  3. Bureau of Economic Analysis. “Labor Force Statistics from the Current Population Survey”. February 4, 2022.
  4. Bureau of Economic Analysis. “Personal Income”. January 28, 2022.
  5. FRED. “5-Year Breakeven Inflation Rate”. February 1, 2022.
  6. FRED. “10-Year Breakeven Inflation Rate”. February 1, 2022.