2022 Economic Outlook

2022 Economic Outlook

There’s been a lot of talk about the economy lately. From inflation to employment, wages, rising interest rates, and more, 2022 is starting out as a year where the economy is set to take center stage.

Recently, TRICOM’s President / CEO Julie Ann Bittner sat down with Jason Turner, Chief Investment Strategist of Great Lakes Advisors to talk about the economic outlook as it stands today. They discussed what it tells us about the current environment and what the year may bring in terms of changes and trends. Jason also addressed questions such as:

What is “the Great Resignation” of 2021 and how is it impacting employment supply and demand?

Will wages increase to meet the shortfall between job openings and hiring as well as workers demands due to the rising cost of living?

What is the media not talking about?

Earlier this month, Julie Ann and Jason sat down to discuss the topic that’s been on everyone’s mind lately: the economy.

Jason describes the current economic environment including: above-trend inflation, unemployment down from the high levels of 2020 and hovering around the mid-4 percent range, and GDP growth above-trend as expected. Jason predicts that inflation will ease toward the middle of the year, but is still predicted to end the year above 3 percent.

However, what most business owners (and especially staffing companies) have been struggling with is the shortage of workers and the high number of open positions. In the fall of 2021, there were over 11 million open positions.

What’s been called “The Great Resignation” has resulted in more open orders for staffing companies with fewer candidates to fill them. While nationally unemployment is around 4.2 percent, Jason notes that there are both long and short-term trends at play when it comes to the labor force (or lack thereof).

Since the spring and summer of 2020, there have been a large number of people who have left the labor force that the unemployment rate doesn’t capture. The unemployment rate only represents those workers actively looking for work and does not represent the actual, dramatic drop of the labor force participation rate. Some of this is due to baby boomers choosing to retire (some a year or two earlier than planned).

Looking at the long data trend, Jason points out that the increase in job openings has been persistent for six years prior to the pandemic. “We’ve seen an American economy that needs more labor and the labor hasn’t been there to meet those trends,” Jason notes.

While boomers may be retiring early, younger adults are also choosing to leave the workforce and rely on a single income due to family commitments – specifically to care for children or elderly family members. This has not been the trend for the last 60 years, and it’s also unlikely to be a long-term trend as Jason predicts some may begin entering back into the workforce in the next one to six months, especially as inflation continues and inflation remains high.

Another trend that is also driving the number of open positions is the number of people quitting jobs to move to other opportunities. Fidelity recently conducted a survey that showed that 4 in 10 (40 percent) American workers are anticipating switching jobs in 2022. This percentage is usually in the upper teens at the previous highest rate. “This headwind (the quit rate), plus shortages in labor force participation and a longer-term trend for a need for more labor contributes to the current shortages in the labor market,” explains Jason.

Jason also points out that inflation and wages are closely inter-related. Even though inflation is up, real wages are 1-1.25 percent short of where they need to be to keep up with inflation, so there remains room for wage growth. Jason predicts that pressure to increase wages will spread across industries in 2022, resulting in increased labor costs for businesses.

The Federal Reserve is also on track to increase the interest rates in March, with 2-3 more increases expected in the next year, and possibly more in 2023 and 2024. Jason points out that rates have been relatively low in the last 10 to 12 years, so many economists are waiting to see the impact that multiple rate increases will have.

Julie Ann and Jason also spoke about COVID’s continuing role in the economy, especially with the Delta variant, and more recently with the onset of the Omicron spike. While Delta didn’t have the same impact on the economy as earlier spikes, it did slow some activity. Jason notes that Omicron is surging in what is already a lull time in the economy, so it may help the economy to hold on to some of its gains.

Jason goes on to talk about how some industries have adjusted to the “new normal” that the pandemic has brought – specifically with adapting to supply chain issues. He also talks about what the media isn’t covering but should be – which we encourage you to listen to the podcast to discover his thoughts on the topic.

Julie Ann and Jason’s discussion can be found as part of TRICOM’s monthly podcast series, Insights With Insiders, which can be viewed on TRICOM’s home page, as well as on YouTube. While this post covered some of the highlights of their discussion, you definitely don’t want to miss all the insights into the economy that Jason shares.

Click to listen!

Want to hear even more of Jason’s economic insights? Jason is also our featured presenter on our December Industry Insider webinar, Economic and Market Outlook for a Post-Covid World. Click to view the presentation.