FNB Economist Outlines Headwinds in Recovery at Chamber Breakfast

BOARDMAN, Ohio — The labor shortage and inflation are the major factors influencing the economy as it recovers from the consequences of the COVID-19 pandemic, an economist with First National Bank of Pennsylvania said. 

Ahmed El Nokali, managing director of capital markets for FNB, offered his insights on the economy during the Youngstown/Warren Regional Chamber’s economic forecast breakfast Thursday morning. 

Held at Mr. Anthony’s Banquet Center, the event featured a keynote presentation by George Brown, executive director of the Ohio Oil & Gas Energy Education Program with journalist Salena Zito. It also included the presentation, with Magnet, of the Excellence in Manufacturing Award to Commercial Metal Forming, as well as the new Valley Champion award to professional golfer and Warren JFK graduate Jason Kokrak.

“There’s been a lot of unintended consequences of not only the shutdown but the reopening,” El Nokali said. Of the factors playing a large role in the local business community, the labor shortage is at “the top of the list,” with inflation following right behind. 

To the extent that labor shortages remain an issue, labor-intensive industries such as hospitality will continue to face headwinds, El Nokali said. Capital-intensive businesses – such as those that are investing in automation – likely will emerge more efficient.

Labor force participation, which peaked at 67% in the early 1990s, now is at about 61.5%, down a fewpercentage points, or 5 million workers, from February 2020.

El Nokali pointed to factors influencing the labor market, including the boost in savings provided by the three rounds of federal stimulus checks that many Americans received during the pandemic. On average, people save 7% of their income, but that figure rose to 35%, he said. 

One theory is that people are sitting out of the workforce because their financial balances are strong enough . But a couple other factors are at play, he said. Boomers are leaving the workforce at “a higher than normal clip,” with more than 3 million retiring last year because they are finally able to thanks to rising home values and stock prices. 

Another factor is the drug epidemic. Last year, more than 100,000 deaths were ascribed to drug abuse, mostly opioids, he said. Also, a Cleveland Fed report attributed 44% of the decline in labor force participation since the start of the decade to the opioid crisis.    

“We’re trying to get to the bottom of where are the workers, when will they come back,” he said. “Until we figure this out and get more people into the economy, we do have a bit of a constraint on how far we can grow.”

El Nokali also said he foresees changes in monetary policy on the horizon, following the Federal Reserve’s meeting Wednesday night. 

“I would expect going into next year, you would see a little bit of normalization of policy,” the effects of which will be interesting to see, he remarked. The economy has gotten used to “very loose, cheap money, so seeing how that plays through would be a very interesting theme for 2022.” 

The long-and short of the energy issues facing the U.S. economy are supply and demand, and constraints on getting product to market to keep up with the recovering economy, George Brown said. 

“We’ve seen energy demand across the globe increase, so it’s really been a challenge for producers and the industry to keep up with demand.”

Last year, OOGEEP launched a campaign to enhance public awareness about how oil and gas industry affects people’s daily lives, from the energy used in their electronic devices to the petrochemicals used to manufacture the products they use every day. 

“That often gets forgotten and overlooked in this conversation that takes place about energy development. You have the dialogue that’s occurring of folks who want to eliminate oil and gas production,” Brown said. “When you talk to people and remind them of that, they then understand the importance.”

The Appalachian Basin, where the Mahoning Valley is situated, is “the heart of it all” when it comes to exploration, production, transportation and refining, but also on the downstream aspect, such as manufacturing. 

Other downstream opportunities include the $1 billion energy production faculty in Wellsville and the Lordstown Energy Center. “And then you take that next step into the Voltage Valley, which is where things are headed,” he said. He also noted that this morning there were more than 1,400 jobs in oil and gas related fields on the OhioMeansJobs website.

Salena Zito noted that one of the interesting aspects she has seen in her coverage of the energy sector is how many of the companies engaged in it are based in their communities.

“The decision-makers don’t live outside of the towns and cities and the places where people work. It’s sort of very reminiscent of the benevolent owners of companies 100 years ago,” she said. 

In presenting the manufacturing award, Ethan Karp, Magnet president and CEO, said Commercial Metal Forming, which was founded in 1920, is the largest manufacturer of tank heads and tank accessories in North America. 

Bob Messaros, president of Commercial Metal Forming, attributed his company’s success over its 101-year history to its employees and its culture. 

“We’re committed to the success of every person we touch. We don’t want great employees. We want great dads, great moms, great sons, great daughters, great kids,” he said 

“Manufacturing doesn’t run on machines, it runs on the people inside,” Karp said. “And Bob is the first to tell you that the key to success is how that talent, how the folks in their company are treated.” 

Professional golfer Kokrak, who lives with his wife and sons in Hudson, said he moved back to northeastern Ohio because he wanted to instill in his boys the values, strength, integrity and hard work that it takes to become a champion. He recalled his last win “against all odds” against the world’s top golfer, Jordan Speith.

“It was just the determination and the grit that I was given by growing up in this area that I came out victorious,” he said. 

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