Savannah Chamber

9 3 We believe that there is a strong possibility that the pandemic caused a structural shift in consumers' spending that favors goods over services. High-contact service businesses may never claim the percentage of GDP that they did prior to the pandemic. Full economic recovery for some types of service businesses therefore will take many years, and some may never recover. Sales of both durable and nondurable goods are expected to increase in 2022, with spending for nondurables growing faster than spending for durable goods. Sales of durable goods would be significantly stronger if not for supply shortages. For example, vehicle sales will rise by about 15 percent, but the gain would be much sharper if not for shortages of many popular models. In addition, vehicles destroyed by hurricanes will need to be replaced and, due to shortages, many will be purchased in 2022. There are some additional factors that bode well for future vehicle sales. In post-pandemic America, people will be less inclined to use public transportation. Similarly, vehicle sales will benefit from people's greater interest in traveling to destinations closer to home rather than to far-flung destinations by plane or cruise ship. Strong sales of boats, campers, and trailers will support sales of trucks and other personal vehicles capable of towing heavy loads. In addition, stronger preferences for homes in the suburbs or rural areas boosts demand for new vehicles, especially light trucks. Still, this sanguine outlook assumes that supply chain issues are resolved. Strong housing markets will support sales of durable household equipment, building materials, fixtures, floor coverings, furniture and many other home-related goods and services. Price increases and demographic factors will underpin spending on pharmaceuticals and other medical products. Spending on groceries will rise only modestly because restaurants will reclaim market share from grocers. Spending on clothing and footwear also will increase although spending on luxury goods will be very sensitive to the performance of the stock market Labor Markets Late in 2022, the U.S. labor market will fully recover the jobs lost to the Covid-19 recession. If so, full recovery will take about two and one-half years, which is about twice as fast as after the 2007-2008 recession (five years). One reason why the labor market is healing relatively quickly is massive federal fiscal stimulus that equaled about 25 percent of pre-pandemic GDP. It also helped that there were not many imbalances in the economy when the pandemic began. In 2022, total nonfarm employment will increase by 2.7 percent, or by 3.9 million jobs. Job growth will be very broadly based across industries. Some of the industries that suffered the greatest job losses during the recession will post the largest percentage gains. The leisure and hospitality sector is probably the best example. The "other services" category, which includes many high-contact services, will also see fast job growth. Courtesy of the housing boom, construction will see solid job growth, which would be even faster if not for shortages of workers in construction trades. The information industry will add jobs due to the rapid digitization of the economy and the rollout of 5G networks. Transportation, utilities, and manufacturing will see solid employment growth, too. In fact, no major economic sectors are expected to lose jobs in 2022. The widespread availability of jobs suggests that the quit rate will remain quite high as workers feel confident in their ability to seek better opportunities. The prospects for manufacturing are quite good and would be even better if not for shortages of critical inputs. Industrial production will increase by about 5 percent due to firming factory orders and very lean inventories. Manufacturing will add jobs despite lingering trade tensions, supply chain disruptions, and past appreciation of the dollar. Re-shoring production will be a minor factor behind manufacturing job growth in 2022, with the possible exception of pharmaceuticals and other medical goods where re-shoring could be more important.

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