Southbound - Summer 2022

Getting this one right is difficult

By Michael Randle

There are lots of moving parts in this uncertain economy, way more so than normal. Does anyone really know the answers? We have conflicting data. In May, nearly 400,000 jobs were created, a great month under any circumstances. However, labor is so tight that we cannot even create a staff that is sufficient to serve meals at some restaurants. I have never quite seen anything like it in my life. Even worse, thousands of restaurants and other businesses — some three generations old or older — have closed this year as a result of nil, nada, naught and zilch labor.  

For most economic developers in the South, creating jobs has now been replaced by efforts to find labor as the No. 1 task. We have averaged about 500,000 jobs created monthly as the nation fills jobs lost during COVID. For the most part, that has been accomplished. That being the case, look for monthly job totals reported by the federal government to drop to nearly 100,000 in the next two years, and even less from there. 

We were so right years ago when we wrote ad nauseum that pure demographics will rule all aspects of the economy for years. . .the fact that more people are aging out of the workforce than entering it while immigration was being reduced. There is nothing left to backfill our workforce other than immigration; the fertility rate among women of child-bearing age is the lowest it as ever been in the nation's history. Young adults do not believe they can afford to have children. Baby boomers are retiring at rates that cannot be replaced in the workforce. 

The U.S. has three options when it comes to an exhausted labor force. We can (1) incentivize having a child (paying couples for babies); (2) embrace immigration, including vetting refugees to work in the U.S.; (3) accept slower growth as a result of a workforce that is losing members every single day. Those are your choices. It's not politics, it's math. 

Recessions can be started by excessive tightening by the Fed. Look for three aggressive fed rate hikes this year and next to help slow inflation. 

One of the chief factors in this round of inflation is the energy crisis. The world is grappling with gravity-defying energy price spikes on everything from gasoline and natural gas to coal. Some fear this may just be the beginning.

Current and former energy officials say they worry that Russia's invasion of Ukraine in the wake of years of underinvestment in the energy sector has sent the world careening into a crisis that will rival or even exceed the oil crises of the 1970s and early 1980s. Unlike those infamous episodes, this one is not limited to oil.

"Now we have an oil crisis, a gas crisis and an electricity crisis at the same time," Dr. Fatih Birol, head of the International Energy Agency watchdog group, told Der Spiegel in an interview published in June. "This energy crisis is much bigger than the oil crises of the 1970s and 1980s. And it will probably last longer."

Mark Vitner, economist at Wells Fargo, described this no-growth economy in early June when he said, "As far as what the economy is trying to do, I think businesses, households and governments are trying to figure out what the post-pandemic economy will look like. The markets have been off all year because they feel the Fed has no choice but to reduce the amount of stimulus in the pipeline because inflation is so high.” 

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