Page 22 - BusinessWest January 9, 2023
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Reasons for Optimism — and Concern
Economy Shows Progress, but Workforce Remains a Challenge
BY GEORGE O’BRIEN
[email protected]
“If the workforce grows 1.5% and the number of jobs grows by 21% or 22%, as they’re projecting, we have a problem — a big problem.”
CHRIS GEEHERN
Chris Geehern says there’s been a slight but significant uptick in the Business Confidence Index issued each
month by Associated Industries of Massachusetts (AIM).
That increase is one of the many reasons why he and others are ... wait for it ... cautiously optimistic as the calen- dar turns to 2023. That phrase has been put to heavy use in recent years and recent months, especially with so much uncertainty regarding the economy due to forces ranging from COVID to inflation to an ongoing workforce crisis.
But as the state and region put 2022 in the rear view and focus on a year with even more uncertainty, there are some reasons for optimism, said Geehern, executive vice president of AIM, and that is reflected in the numbers he’s seeing.
“Our members seem pretty confident about the prospects for their own companies,” he said. “And they are reasonably confident about the state and national economies. There are certainly lingering concerns about interest rates and about whether there will be a soft landing or not. But, by and large, we’re finding that Massachusetts companies are resilient, and they seem to be navigating this kind of economic cycle pretty well right now.”
Elaborating, he said unemployment remains compara- tively low, and the state’s economy grew in the third quarter, albeit slowly, after two quarters of negative growth — anoth- er positive sign. “So, by and large, employers don’t seem to be deeply concerned by the short-term economic cycle.”
Bob Nakosteen, a semi-retired Economics professor at UMass Amherst, agreed. He told BusinessWest that, in addi- tion to growing optimism, inflation is starting to cool, a sign that the Fed’s decision to aggressively raise interest rates may — that’s may — be working. It could also be a harbinger of lower rate hikes in the future, which would certainly help business owners and consumers alike.
“And I think inflation is already a lot lower than is being reported,” said Nakosteen. “The month-to-month figures are pretty low ... I think inflation is going to drop, maybe not dramatically, but considerably in the next few reporting periods.”
Elaborating, he said ‘dramatically’ would be a drop to the 2% target set by the Fed (at its height, inflation was closer to 8%), while ‘considerably’ would be to the 3% to 4% range, which is what he expects.
“And if that’s the case, then the Fed is going to ease off on interest rates,” he said, adding that such actions should bolster the stock market and the economy as a whole as the dramatic increases in the cost of borrowing start to ease.
Meanwhile, there are other signs that the picture is improving and the odds for recession in 2023 are moving lower, said Nakosteen, adding that the labor market remains quite strong, and the Atlanta Federal Reserve’s projections for GDP in the fourth quarter are for 3.2% growth — this
on top of what has been a strong Christmas season for retailers.
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