Savannah Chamber

11 5 Price increases and demographic factors will cause spending on pharmaceuticals and other medical products to rise. Spending on grocery items will rise modestly because of restaurants will continue to take market share back from grocers. One result will be more intense competition among grocers which will lead to margin compression. Spending on clothing and footwear will decrease. Weaker housing markets will hurt sales of durable household equipment, building materials, fixtures, floor coverings, furniture as well as many other home-related goods and services. Consumers' spending on luxury goods should decline in line with the overall economy, and such spending will be very sensitive to the performance of the US stock market. Labor Markets In 2023, total nonfarm employment will decrease by 0.2 percent. Most job losses will be in the most interest sensitive sectors of the economy, such as construction, financial activities, mining and logging, and information. Modest job losses are expected for retailing. Despite a 2023 recession, some industries that suffered very large job losses during the pandemic- recession will continue to add jobs. The leisure and hospitality industry probably the best example. The "other services" industry, which includes many high-contact services, will also see moderate job growth. Professional and business services firms will see some job growth. Transportation and manufacturing, typically a very cyclical industries, are not expected to lose many jobs and could see limited job growth. Government will see positive job growth, especially local governments. In 2023, the less widespread availability of jobs means the quit rate will drop as workers feel less confident in their ability to find better opportunities. Industrial production will decrease from about mid-2022 through mid-2023. Capacity utilization will decline from its pre-recession peak of almost 81 percent to 78 percent. Supply chain disruptions will ease, but lingering trade tensions and past appreciation of the U.S. dollar will be headwinds for industrial production. Reshoring production will be a positive factor for job growth in 2023 and even more so on the other side of the recession. Indeed, reshoring will be especially important to industries favored by recent shifts in US industrial policy. One factor to consider is that many of the new post-pandemic jobs are not in the places where workers currently live. People moved to less dense and more remote locations creating job opportunities in their new places of residence, but reduced job opportunities in the places they left behind. For example, there are fewer restaurant jobs available in large-city centers and more available in the suburbs or in small towns. It takes some time for workers to move to where the new jobs are available. On net, this realignment of jobs will not determine the duration or depth of the recession, but may intensify the downturn in larger metropolitan areas and lessen the effects of the downturn in suburban areas and small towns. Regionally, this realignment of jobs will benefit the South and cost the Northeast. Assuming that labor force participation remains somewhat depressed, the unemployment rate will rise only modestly, from 3.8 percent in 2022 to 4.4 percent in 2023. The unemployment rate will be above the U.S. economy's full employment unemployment rate of about 4.0 percent, which lessens pressures on wages and benefits. Accordingly, we expect less traction for wage-push inflation. The Federal Reserve will be able to slowly relax its restrictive policy stance. With the unemployment rate rising, the balance of power will slowly shift to buyers of labor (employers) from sellers of labor (workers). Employers that have struggled to increase staffing fast enough to keep pace with rising demand for the goods and services will find it a little easier to reload their workforces. Nonetheless, tighter labor markets over the next decade due to slower growth of the working-age population will limit layoffs in 2023. Employers will not have the upper hand to the extent that they have had in past recessions. Once the economy begins to recover, it quickly will become more difficult to hire workers across many occupations and industries. Severe shortages of truck drivers for example will worsen. Workers of nearly all types will be in short supply due to demographic trends that are less favorable to labor force expansion than in the past. Indeed, demographic trends (e.g., low birth

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