The effects of COVID-19 provided a consistent backdrop for keynote presentations at Thursday’s WilmingtonBiz Conference and Expo. A capacity lunch crowd, wearing masks, celebrated the return to an in-person event.
Two economists led the lunchtime presentation, titled “Economic Outlook: A Time for Agility.”
Matt Martin, regional executive with the Federal Reserve Bank of Richmond, gave a national overview of how the pandemic has affected the country’s growth, supply chains and labor market, as well as charting the effects of federal stimulus and projecting how stimulus initiatives might play out in the future.
Using automotive sales as an example, Martin discussed how high demand and low inventory are driving up prices of both new and used vehicles as customers wait weeks or months to take delivery of hot-off-the-assembly-line cars and trucks. Not only is a shortage of computer chips slowing production; but labor shortages at ports and in the trucking industry are delaying delivery of finished products: not just vehicles but construction and manufacturing supplies and equipment.
“My best guess as to when we return to normal is at least another year; it might spill over into 2023,” he said.
Martin shared data on the labor market that show many people have not returned to the workforce. While unemployment numbers are declining, many former workers are still sitting out the pandemic.
“The number of employed people remains about 5 million below the peak,” he said. “Where did these workers go? Some retired, some are staying home to take care of kids who aren’t in school. Fiscal support means maybe [a family] only needs one income right now. And some people are taking care of a parent because of COVID.”
The Fed will continue to review and reassess its monetary policy as time goes on, but Martin said he is not overly concerned about the current rate of inflation, which is running about 4.3%. He and his colleagues expect inflation to moderate over the next year or so.
Next, regional economist Adam Jones presented a summary of how the area’s economy is faring after 18 months of COVID-impacted activity. Jones, chairman of the Department of Economics and Finance at University of North Carolina Wilmington’s Cameron School of Business, compared the economic picture to ads for allergy drugs: first, showing the relief that comes from medication, followed by a list of possible side effects that aren’t so pleasant.
“From a massive government stimulus to shutdowns, we threw everything at [the pandemic] we could. By last summer we were feeling pretty good. Now maybe we have a bit of a policy hangover,” Jones said.
Like Martin, Jones looked at labor shortages, but through a regional lens.
“Our three-county unemployment rate popped up to just shy of 16%,” he said of Brunswick, New Hanover and Pender counties. "It has worked down to a little over 4%, but this is based on folks who are working or looking for a job. It ignores folks who have stepped out of the game. If COVID had not disrupted the labor market, we would have about 11,000 more workers now.”
The importance of the tourism industry to the region’s economy meant that those three counties were hard hit when COVID shut down hotels, restaurants and amusements. At the pandemic’s height, leisure and hospitality business was off 52%, Jones said. But demand returned in the summer of 2020, when many hospitality workers were staying home. And that demand has only intensified, he said.
“In the summer of 2020 people were coming back, but the Room Occupancy Tax (an indicator of tourism levels) is up 50% over pre-pandemic levels,” he added. “Businesses can’t find people to work, so the people who are working have to be much more efficient. The hospitality industry is almost 60% more productive now than during pre-pandemic times. People are working their tails off, reinventing systems, and handing some of their work to the customer. Customers make their own beds and use the same towels.”
Jones said he expects the economy will trend back to normal levels again over the coming year, but cautioned that much uncertainty still exists.
“The pandemic is messing up things here and interrupting global supply chains. And next year is an election year. But I’m assuming that we as a society will continue to make progress on the virus: actual and mental progress. That means for Southeast North Carolina that our 2021 numbers will look pretty good, but our 2022 numbers may not look as good.”
A slowdown might be a positive thing, he said, allowing overworked employees to catch their breath and allowing sidelined workers to return to the marketplace. When they do, they will participate in an economy where wages have increased.
Following presentations by the two economists, Cameron School Dean Robert Burrus facilitated a discussion of economic agility during a complex time. Panelists were Chakema Clinton-Quintana, vice president of inclusive small business at Live Oak Bank’s inclusive small business center; Kim Hufham, president and CEO of the Wilmington and Beaches Convention and Visitors Bureau; Jeff James, CEO of Wilmington Health; and Paul Loukas, broker in charge and partner with Cape Fear Commercial real estate firm.
The four spoke to the challenges and successes their industries had experienced during 18 months – and counting – of the pandemic. Clinton-Quintana will be working with Live Oak’s new center to provide resources to owners of underserved small businesses and aspiring entrepreneurs. She spoke about the struggles of undercapitalized enterprises during a COVID economy.
Major issues for these businesses are lack of access to capital and grants, as well as the need to develop communication and collaboration networks. “They don’t know where to go to find this,” Clinton-Quintana said.
Hufham, echoing Jones’s comments about the high demand for leisure and hospitality in a time of staffing shortages, said the pandemic had introduced Wilmington and surrounding beaches to new audiences of people who might otherwise vacation abroad.
“Our industry has been very innovative,” she said. “Some of our attractions have found a better business model that is more efficient. We don’t want visitors to get here and be disappointed.”
James talked about how his health care organization, which prides itself on lean practices, used its decentralized command and control model to speed innovation and problem-solving.
“Rapid change was essential,” he said.
Loukas said that the commercial real estate market has fared well during the pandemic, and that reduced need for office space by some companies has been balanced out by demand from expanding companies and companies moving to the area. And for the first time, Wilmington’s commercial real estate opportunities are getting a serious look from institutional investors.