INDIANAPOLIS – Economists at the Kelley School of Business at Indiana University expect the economies of the United States and Indiana to remain somewhat resilient in the face of the challenges presented by COVID-19 and the supply chain issues, but labor shortages will continue to be a major concern for many businesses in 2022.
The US economy could only create an average of about 300,000 additional jobs each month, according to a forecast released today by Indiana University. Kelley School of Business.
Over the past 12 months, it has done so at an average rate of about 450,000 per month.
“It will be about two-thirds of the rate from last year, but it will be enough to put year-end employment above its pre-pandemic level,” said Bill Witte, author of the forecast from the Kelley School and Associate Professor Emeritus. economy. “The total number of jobs remains 4.5 million below its pre-pandemic level. This deficit is not the result of insufficient demand for labor – there are currently nearly 11 million job vacancies in the United States – it reflects a sharp decline in labor market participation.
During the shutdown, the participation rate fell by 3.2 points – a very significant change. In the first four months of the restart, it recovered almost half of it, but within the 14 months that followed, it made no progress Labor market The situation confuses other problems on the supply side. Building new capacity requires manpower, both for construction and finally for staffing. “
Indiana – which has seen an estimated 60,000 workers drop out of the workforce – will mirror the nation, with workforce growth close to 2% in 2022. Most of the job gains in the state will be in Services.
“Last winter we thought the slowing labor market would provide growth opportunities in 2021, but Indiana, along with the rest of the country, reported labor shortages – a reversal of expectations.” said Timothy Slaper, co-director of the Kelley School’s Indiana Business Research Center. “We hope to see the workforce recover in Indiana by the end of 2022. There are many factors that will affect the recovery, including stimulus, supply chain restoration, participation rates. at work and the continued demand for goods and services. “
One area of the labor market that is particularly anticipated to hamper economic production in Indiana is trucking. The Commercial Carrier Journal reported a shortage of 80,000 truck drivers nationwide.
“This leaves manufacturing-oriented states like Indiana in the middle of the supply chain bottleneck,” Slaper said. “With the aging of truckers and the early retirements favored by COVID-19, as well as logistical disruptions for shipping, the problem only escalates.”
Kyle Anderson, Clinical Assistant Professor of Business Economics and Kelley’s Faculty Chair Evening MBA program, said the Indianapolis Metropolitan Statistical Area – which accounts for 31 percent of the state’s population and about one-third of state employment and revenues – will continue to be the economic engine of the State.
But Anderson added that downtown Indianapolis may need to reinvent itself in some ways as fewer people are returning to work.
“Tourism and conventions are expected to pick up in 2022, bringing in welcome dollars from across the country,” Anderson said. “Residential development in the region marks a shift towards a more balanced and healthy economy. However, these gains are offset by working from home trends that will continue for the foreseeable future. Office real estate will remain underutilized, limiting economic growth for the city. “
Job growth over the next three years in Indianapolis is expected to reach nearly 3%.
Witte, who has helped prepare the annual trade outlook forecast for more than three decades, is also concerned that higher wages caused by current labor shortages could produce “severe inflationary pressures.”
“The Federal Reserve says it will be temporary,” he said. “Sounds a lot like what they said in the late 1960s and 1970s when inflation went from 1% to double digits.”
Other key points of the forecast:
- Production growth will return in 2022 but will slow down during the year. Growth will total about 4 percent for the year.
- The global economy is expected to grow 4.9% in 2022, although growth will be uneven due to inequality in countries’ access to vaccines and differences in their ability to provide fiscal and monetary incentives to support the reprise.
The starting point for the forecast is an econometric model of the United States, developed by IU’s Econometric Models Research Center, which analyzes numerous statistics to develop a national forecast for the coming year. A similar econometric model for Indiana provides a corresponding forecast for the state’s economy based on national forecasts as well as data specific to Indiana.
A detailed report on the outlook to 2022 will be published in the winter issue of Indiana Business Journal, available online in December. In addition to forecasts for the nation, state and Indianapolis, it will also include forecasts for other Indiana cities and key economic sectors.
The Kelley School presented its forecast today at the Crowne Plaza Downtown / Union Station hotel in Indianapolis. Kelley’s professors will present their forecasts in nine other cities across the state, where they will be joined by local panelists from other UI campuses and other universities, offering perspectives on global economies and financial markets, national, state and local. The tour is sponsored by the Kelley School of Business, Kelley School of Business Alumni Association, IU Alumni Association, IU campuses and many community organizations.