The Covid-19 Delta variant will delay but not diminish US economic growth prospects and the current surge in inflation will recede in 2022, according to a forecast by Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.

“The pause in growth is due to a decrease in consumption of contact-heavy, service-sector products, such as hospitality, travel and elective healthcare because of the current surge in coronavirus illnesses and hospitalizations,” Dhawan said. “Once public health measures arrest the surge, consumer sentiment will improve, the service sector will reignite and growth will resume.”

In terms of jobs, Dhawan noted 2021 has averaged 617,000 new jobs per month from January to July, with almost 50% growth in the hospitality and retail trade sectors. The corporate sector — home to premium jobs — is not producing consistent job growth.

“Corporate job growth is at 52,000 new positions per month,” Dhawan said. “That’s only 8% of total job growth for a sector whose share of jobs is 14%. Further boosts for this sector will hinge on the global economy, which still hasn’t picked up speed because of vaccine scarcity.”

In his forecast on GDP, Dhawan predicts 5.0% growth in the current quarter, which will moderate to less than 3.0% in the subsequent two quarters before rebounding to 4.9% in the second quarter of 2022.

GDP growth for the third quarter of 2022 is forecast at 4.2%.

Dhawan also posited that three temporary factors are fueling inflation: the reopening of the hospitality and retail trade sectors, idiosyncratic supply chain disruptions and “super-sized stock market gains” leading to “spectacular home price growth.”

“Hotel room rates have spiked, with a 10% increase in each quarter of 2021, as occupancy rose sharply after a long period of inactivity. And this was mostly leisure travel (meeting friends and family and taking summer vacations), which shows up in data as a rise in the consumer price index,” he said. “But this is temporary. Another round of double-digit price increases would only happen if people began taking vacations not only in the summer, but also in the fall, and then again in winter — an absurdity, as it violates social calendar norms.”

Anomalous supply chain events (accidents at chip production plants in Taiwan) roiled US car sales when chip shortages reduced new vehicle inventory and led to upward pressure on used-car prices.

“This was a one-time price increase that is already leveling off,” Dhawan said.