Savannah Chamber

10 4 As usual, GDP growth will be the most important factor that will sustain job creation, but it will help that financing will be easy to obtain. Venture capital--which fuels job creation--will be widely available on very favorable terms. Less positively, foreign direct investment will remain subdued. One factor that will temper employment growth is a mismatch between available jobs and available workers. The pandemic accelerated the adoption of existing technologies and trends that made many job skills obsolete, or at least less valuable. Investments in automation, labor saving equipment and processes, online delivery of services, and online retail were especially heavy. Businesses took advantage of the shutdown to revamp their operations and business models, and as a result, many jobs were erased. Moreover, concerns about Covid prompted older workers to retire at a higher than normal rate. Assuming that labor force participation remains somewhat depressed, net job creation will bring the unemployment rate down to 4.2 percent in 2022. This will keep upward pressure on wages, providing traction for some degree of wage-push inflation. The Federal Reserve will need to shift its current policy stance from simulative to neutral, then make it restrictive by the end of 2022. With the unemployment rate at low levels, the balance of power will favor workers over employers. Companies will struggle to increase staffing fast enough to keep pace with rising demand for the goods and services they produce. It will be very difficult to hire workers across many occupations and industries. Already severe shortages of many types of construction workers and truck drivers will worsen, but workers of nearly all types will be scarce. In mid-2021, the prime-age employment-to-population ratio was 77.8 percent, which is 2.2 percent below the 80 percent ratio that typically associated with a strong labor market. It will rise in 2022, but it is likely to remain below 80 percent due to lingering fears about Covid as well as the family care responsibilities that many workers shoulder. Telework arrangements will account for a substantially higher proportion of work arrangements than was the case prior to the pandemic. Demographic trends (e.g., low birth rates) suggest that unless foreign immigration increases, a shortage of workers could be a feature of the post-pandemic U.S. economy. That bodes well for a rebalancing of income from capital to labor, which should help to reduce inequalities in income. In 2022, compensation per hour will rise by 3.5 percent. In essence, rising demand for labor will put upward pressure on wages and benefits. Faster productivity growth is likely to offset about half of the increase in compensation per hour, which should keep unit labor costs from rising by more than 2 percent. Housing Housing markets will drive growth again in 2022, thanks to job growth, low mortgage rates, and cyclical factors. Demand that was not satisfied in 2020-21 (due to shortages of homes for sale) will support higher sales of new and existing homes in 2022. Millennials are reaching the age where they will buy homes in much larger numbers, especially in the South and West where overall population growth is strong. Real estate investors will be more active. It's l ikely that the pandemic caused a structural shift that favors owner-occupied housing over rental housing and low-density housing over high-density housing. Teleworking, online education, more caregiving at home, and more leisure time at home means the home is more important than ever. This will not change when the pandemic ends. Put it all together and people are willing to pay more for a single-family home than prior to the pandemic. Homes are more valuable because they are scarce.

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