Experts weigh in at this year’s Economic Outlook Conference and Wilmington Biz Conference & Expo.
This article was contributed by Jenny Callison, freelance writer.
With consumers painting very different economic pictures with what they say about the economy and the amount they are spending, the U.S. is in what Dr. Mouhcine Guettabi calls a “vibe-cession.”
“The vibes are negative but people are still spending,” Guettabi said at the Oct. 6 UNCW Economic Outlook Conference, held in partnership with the Wilmington Biz Conference & Expo. “Maybe this is revenge spending. The Federal Reserve wants consumer spending to crack but it’s not cracking. Nobody’s ‘acting their wage:’ We think things are bad, but we are making that reservation at that very nice restaurant.”
Guettabi, an associate professor of economics at the Cameron School of Business, presented the conference’s keynote talk. It was his public debut as UNCW’s regional economist, and the occasion handed him the challenging task of trying to make sense for his audience the confusing economic trends. He spoke about where those trends seem to be going as the U.S. – and the Cape Fear Region – enter what he calls “the great unwind” on the heels of the Covid-19 pandemic.
“If we have begun the great unwind, what does that mean for offices, for housing prices?” he asked. “How long will the labor market slow down?”
Guettabi noted the high level of migration into the Cape Fear area during the pandemic, a factor that helped send home prices soaring. Some new residents, along with locals, swelled the remote workforce.
“The work-from-home level pre-Covid was 4%,” he said, citing New Hanover County data. “The share of the workforce working from home now in New Hanover County is more than 18%. This trend has affected both the labor and the real estate markets.”
Even with the recent softening of demand for residential real estate, that market is doing far better than the stock market, Guettabi observed.
What about the labor market, which has folks scratching their heads when they see “Now Hiring” signs everywhere but hear that unemployment remains very low? Are individuals simply withdrawing from the labor force?
Guettabi said he likes to puncture the myth that there are still a lot of people playing video games in their parents’ basement.
“The labor force participation rate is now less than 1% lower than it was pre-Covid,” he said. “All categories have recovered. Labor force participation for teens is higher than before. The decline [in labor force participation] seems to be driven by workers over 55, not by people in their prime working years.”
But being back on the job doesn’t necessarily mean that workers’ paychecks are healthy, especially with inflation more than tripling what it was pre-Covid.
“There is massive variation in the effect of inflation by [industry] sector and by where you live,” Guettabi said. “Between July 2021 and July 2022, construction earnings grew 12.5%, faster than inflation. Education and health care services, however, are underwater. In Wilmington, private-sector earnings grew by almost 12%. Wilmington’s consumer price index is 5% higher than for the state as a whole.”
Some of the biggest wage gains during and since the pandemic have been scored by people who have switched jobs, he said, adding with a laugh, “I’m not telling you to quit.”
But overall, Guettabi said, the Wilmington area labor market is doing really well.
“Jobs grew by 3.1%: there are just about 6,000 more jobs now than in July of 2019. There is hope they will grow at pre-pandemic levels. Almost every sector of the local economy grew except local government.”
Guettabi’s remarks built on those of his co-keynoter, Brian Daley, head of equity strategy in Merrill and chief investment officer for Bank of America Private Bank. Daley pointed to the government’s infusion of money into the economy – the largest since World War II, he said – as a big driver of inflation, but mentioned also continuing supply chain bottlenecks and the war in Ukraine as contributing to economic negatives here and abroad.
Despite some bears in the forecast, Daley was generally upbeat. He said he was pleased to see fiscal and monetary policy working together for the first time and advised investors, “Stay with your plan; don’t try to time the market.
“Remember, markets are cyclical,” he added. “We are in the tightening part. The economic data will slow down going into 2023. There’s a 50% chance we will see a recession, but the banks are in good shape.”
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