Summary of national and local economy heard at Outlook Conf.

Summary of national and local economy heard at Outlook Conf. The News Review will publish a series of articles on the 2022 Economic Outlook Conference sponsored by the Ridgecrest Chamber of Commerce. These articles will include the addresses of the conference speakers. The first will be part one of the keynote speaker Dr. Mark Schneipp. He addressed the economy both nationally and locally.

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The recovery of the national economy from the pandemic recession has been relatively steady since the late spring of 2020. The complete reinstatement of economic activity has been slowed by new waves of coronavirus, intermittent public health restrictions on businesses, and school closures. The latter has prevented a complete return of workers—mostly worker parents—to the labor force.

New issues during 2021 emerged, including the supply side bottlenecks and the onset of inflation. Furthermore, vaccine mandates are creating a substantial degree of divisiveness that is further weakening the outlook of consumers on the economy in 2022.

On surveys that monitor sentiment about or confidence in the economy, American consumers are nervous about the future. Inflation, product shortages, and the often arbitrary response to the pandemic by elected officials and their public health czars is contributing to deteriorating consumer attitudes.

Inflation is impacting the stock market, which will further increase consumer pessimism if general share prices meaningfully erode. The stock market is also vulnerable if the global economic climate softens as a result of policy missteps by foreign governments, mostly in response to the pandemic. Recently, global Gross Domestic Product (GDP) estimates for 2022 have been downgraded due to a slowly recovering Europe and China.

GDP continues to expand as does the restoration of the labor market. The unemployment rate has now declined to 4.0 percent and there is a shortage of workers to fill positions. Job openings today are at unprecedented levels.

The pandemic’s disruption on the labor market was originally catastrophic but conditions have dramatically improved, and for some states and some regions of California the labor market is back to its pre-pandemic status. But not yet in the principal metro areas. In general however, it’s not that people can’t find a job, it’s that they don’t want to work.

The return of many workers who had left the labor market during the pandemic because of childcare or eldercare responsibilities will take place over a longer period of time than was predicted earlier in 2021. It was assumed that the reopening of schools in August and September last year would bring a large influx of parents who had been unable to work back into the labor force. Other workers are staying out because of illness, concern over the virus, or excess saving built up in 2020-2021 due to stimulus checks and/or the federal unemployment bonus. Furthermore, about two million more workers than expected ended up retiring.

A return to pre-pandemic employment levels will occur when new entrants into the labor market are sufficient enough to fill the spate of job openings. Furthermore, a restoration of normal goods production domestically and globally, along with the return of transportation workers for efficient distribution is required to resolve supply constraints and product shortages.

At the ports of LA and Long Beach, stacks of empty containers are preventing truck drivers from leaving their own empties and swapping them for fulls to deliver to desperately needed destinations. Furthermore, more ships heading this way from Asia are on the horizon. Unless a plan is devised for empty containers hording port space, ongoing congestion problems will persist.

Inflation

The inflation issue is one of the principal concerns for the U.S. economy as indicated by consumer surveys. The headline consumer price index rose 7.5% in January, the largest year-over-year increase in 40 years. What changed? A combination of demand pull and cost push forces. The former is the result of an unexpected surge in consumer buying that commenced in the spring of 2021. The latter is the result of the new energy policies impacting oil prices, and shortages that resulted from the interruption of supply chains.

Having inflation at 7.5% on a year-ago basis, compared with the 2.1% average growth just a year ago, is costing the average household $276 per month. Therefore, it is easy to see why inflation is politically and publicly unpopular. The Fed needs to respond, and sooner rather than later. Economists are now looking for a 50 basis point increase in rates at the next meeting in March. Waiting until March, however, is risky.

Meanwhile, the 10 year Treasury Bond Yield has decidedly spiked, eclipsing 2.0 percent on February 10 for the first time since July 2019. This benchmark rate is now forecast to push past 3.0 percent by early 2023. To Be Continued.

Laura Austin File Photo: Dr. Schniepp Director of the California Economic Forecast in Santa Barbara.

Story First Published: 2022-03-04