Labor Shortage Affecting Inflation, Local Jobs
NILES, Ohio — From a 30% drop in one quarter related to COVID shut downs to an unprecedented immediate restart of the economy and the inflation we are now left with, the last three years have been hard to navigate for even seasoned economists.
What will 2023 look like?
The Youngstown Warren Regional Chamber held its annual Economic Forecast Breakfast Thursday, an event that included presenting Schaefer Equipment of Warren, a division of Wabtec Corp., the Excellence in Manufacturing Award, in partnership with MAGNET.
Held at the Eastwood Event Centre, chamber members heard from David Valentiner, a chartered financial analyst and director of interest rate management at First National Bank, about the future of the economy, including whether the Federal Reserve’s efforts can avert a full-blown recession.
“They are raising interest rates faster now than at any time in the past 40 years,” Valentiner said, noting he does not see an end to those hikes, nor the Fed quickly cutting interest rates any time soon.
Valentiner points out the Federal Reserve is doing well at one of its jobs – keeping people working – but not in keeping prices low. He questions if it can keep people working while slowing down the need for goods.
“I’m not a doom-and-gloom guy,” Valentiner said. “We have almost 11 million job openings in this country. They can calm the economy down just by taking some of that high demand for workers out without necessarily putting us into a recession. But I think it’s going to be a tricky way to try to thread that needle.”
Valentiner explained why he does not believe the inflation is transitory as some top economists predicted earlier. He noted while it was hard for any economist early on to compare 2021 monthly performance to that of 2020, when the economy was artificially depressed, it became apparent that it was not transitory as inflation continued to escalate in 2022. While used car and truck prices fell and housing costs are falling, inflation is still rising.
Valentiner relates there are four conditions driving the inflation, including the amount of money the put into the economy due to COVID slowdowns. While people may have saved 30% of that money early on, most consumers now have lower savings than before the pandemic began and are now spending on credit cards, Valentiner said.
Secondly, he lists supply chain issues, which occurred as the country switched 20% of spending from the service industry to goods. At this point, Valentiner sees the supply chain starting to improve in some industries, while a backlog remains for others.
Third, he cited commodity prices, such as the increase in energy costs, which are affecting the economy here and abroad with our trade partners.
With talk of lower diesel fuel inventory and concerns there is just 25-days of diesel supply left, he points out we still have refinery capabilities, which he predicts will keep us from running out, but will also lead to higher prices. Valentiner said the average person who heats their home with fuel oil will see a 27% increase this year.
Finally, Valentiner talked about the tight labor market, which is causing employers to spend more to hire workers, pay more in wages. This is passed on through increased prices for goods and services.
Before COVID, about 1.5 million baby boomers were retiring every year. In 2020 and 2021, that increased to 3 million per year. Younger people leaving the workforce will probably come back. But Valentiner does not see those retirees returning and the experience they took with them is causing a skills shortage that now requires extensive job training.
“The worker crisis is really the problem that’s driving inflation and it’s driving the Federal Reserve,” Valentiner said. The number of workers participating in the workforce is just getting back to where it was pre-pandemic, yet the economy has continued to grow.
Add the fact that people in all developed countries are starting their families later and having fewer children, which is leading to a change in the workforce, Valentiner said.
Here in the Mahoning Valley, manufacturing is growing, but the area is still seeing some of the same worker shortages and an aging workforce. Guy Coviello, president and CEO of the Youngstown/Warren Regional Chamber, said many jobs are being created right here in the electric vehicle, lithium battery and chip production industries.
Projects such as those started at Ultium Cells, Foxconn and Trumbull Energy Center, as well as others in the works, will lead to more jobs. He predicts additional announcements over the next 12 to 18 months.
“Just grab on for the ride because [there’s] going to be some exciting announcements we’re going to be making,” Coviello said. “We call it a COVID-calibrated economy. COVID exposed a lot of weaknesses in the global supply chain and those weaknesses are being fixed through manufacturing opportunities in Ohio in general and here in the Mahoning Valley.”
Building on the announcement that Intel will build a chip manufacturing complex in the Columbus area, and alternative energy investments made in the Inflation Reduction Act, Coviello predicts new types of manufacturing jobs coming here.
“Chip manufacturing is predicted to grow more in the next 10 years than it did in the previous 40,” said Coviello, adding the Mahoning Valley has the infrastructure to provide large amounts of both water and electricity needed to manufacture them.
“We are creating jobs at a generational pace,” Coviello said, “And we don’t see any slowdown of that in our community. At the same time, that means we need to repopulate our community to bring the people here to fill the jobs. So we talk about the millions of Ukrainian refugees who just need a place to live and work. We are that perfect place.”
Coviello referenced the war in Ukraine and the Mahoning Valley history that saw a large number of Slavic immigrants. He believes those fleeing the war in Ukraine could find new lives right here.
The keynote speaker at the event, Dr. Nick Kupensky, who was born in Youngstown, studied and lived in both Ukraine and Russia and is now a professor of Russia at the U.S. Air Force Academy. Kupensky said he was asked to speak about the war between the two counties, but not be depressing.
“How could you not be depressing watching the things we have been watching on TV since February,” Kupensky asked rhetorically. “In fact, it is possible not to be depressing speaking about this war. Ukraine’s heroic, impassioned resistance in the face of this truly barbaric Russian invasion can tell us a lot about the power of dignity and pride, the allure of freedom and liberty, the influence of grit and resilience. There’s a lot of things Ukraine can teach us.”
Kupensky showed slides demonstrating the diverse beauty, culture, arts and history of the country before the war, stating we rarely talk about what Ukraine is fighting for. He sees a country that is more affiliated with southern Europe than Russia and a place that has been strongly fighting for itself against oppression since before Russia was a country. Kupensky said he does not see the Ukrainians giving up and talked about hopeful signs for the future for the country against the Russian invaders.
Pictured at top: David Valentiner, chartered financial analyst and director of interest rate management at First National Bank, talks about the forces driving the economy into 2023.
Copyright 2023 The Business Journal, Youngstown, Ohio.