Based on a 2021 CEIR Predict session – Thought Leaders Panel, Focus on the Economy.
We’re taking a page from the Open Source community and making all the critical lessons from this year’s CEIR Predict available to everyone.
Well, that was unexpected.
To prepare for this blog, we scheduled interviews with the economists who spoke at CEIR Predict—anticipating a discussion on the labor market, consumer behavior, and transitory inflation (a conversation which, of course, happened). We did not expect the core of the discussion to be around the connectedness that drives our global economy.
It’s easy to see how connection drives the business of events. With increasing clarity, we’re starting to understand the impact it has on our economy, too.
Most of us would agree that in 2021, our globalized society almost feels smaller, not larger. 24-hour news cycles create an increased awareness of what happens across the world. This consciousness allows economists to recognize direct correlations previously unconsidered.
Dr. Chris Kuehl, Managing Director with Armada Corporate Intelligence, likens the global economy to ‘pulling a thread on a sweater – the sheer interconnectedness of it all.’
Here are two recent examples of threads:
- Did a lack of wind in the North Sea and a fire in a processing plant in Siberia contribute to the rising cost of natural gas in North America? It looks that way.
- Energy shortages in China are causing blackouts across the country and impacting factories that supply goods to the rest of the world.
Before you join me dropping collective tears in our coffee or replacing this browser window with Amazon to order holiday gifts for 2023, according to Dr. Kuehl, “These things have always happened behind the scenes. Now we recognize them, and we know why.”
Oddly that made me feel a little – or maybe even a lot – better.
The morning before we spoke with Dr. Kuehl, The National Association of Business Economists (NABE) updated its full-year economic growth projection to 5.6%, down from a forecast for 6.7% growth in NABE’s previous survey in May.*
The global economic recovery may take a little longer than Dr. Pangloss (and every last one of us) hoped. Dr. Kuehl reiterated the factors that dictate the speed at which the economy will recover from the COVID-19 recession:
- Spread of virus and emergent variants
- Impact of business investment
- Behavior of the labor market
- Whether inflation is truly transitory (supply chain stress)
I asked Dr. Kuehl if the first factor would impact the others. I don’t think you have to guess too hard at his answer: “Threads on a sweater.”
Dr. Patricia Buckley, Managing Director for Economics, Deloitte Services, LP, underscored a similar emphasis on the virus. “This is truly the case where the virus will dictate the pace of recovery. We have factored in some slowing due to the continued spread of the delta variant—but if the number of cases starts to increase rapidly, we would be looking at one of our slower than baseline outcomes.”
But then Dr. Buckley said something else, “If we get faster than expected containment, we will likely see our more optimistic scenario play out.” According to the NY Times, COVID-19 cases have fallen by 35% since September 1, 2021, and worldwide cases have dropped 30% since August.
So let’s not kick Dr. Pangloss under the table quite yet.
Beyond COVID-19 case rates, for the events industry specifically, Dr. Kuehl believes economic recovery will be impacted the most by two factors:
Specific to inflation, the time-sensitive nature of events opens us up to rising costs. We don’t have the luxury of waiting for something to be in stock or to be cheaper.
According to Dr. Allen Shaw, Chief Economist, Global Economic Consulting Associates, Inc.,”Higher inflation is likely to be transitory as the Federal Reserve believes. Job openings are much higher than unemployment and the declining labor force combined -that tells me the demand-side of the economy is very, very strong. Retail sales (excluding motor vehicles & parts) are also very high.”
Dr. Kuehl adds, “We’re seeing a re-orientation of consumer behavior. Everyone is developing new habits – consumers, businesses, even entire economies. Collectively we’re choosing economic resiliency.”
We’ve summarized all the findings from the Thought Leaders – Focus on The Economy session at CEIR Predict. You may want to bookmark this one.
What’s Ahead for the Economy:
- There is some economic slowing toward the end of this year – with an uptick starting early 2022.
- During the pandemic, people bought goods but did not buy experiences. Expect this to shift back to the previous pattern – with consumers spending more on services and less on goods.
- Despite declining population growth rates, the key to growth is business investment.
- Dr. Buckley forecasts a fairly bright outlook. Scarring is not persistent. The current situation is not like the financial crisis of 2008-09.
- Industries that are recovering are ones that were strong pre-pandemic. Technology companies are the most excited about showcasing their durability and sustainability.
- The food sector will recover better than some other sectors. Even globally.
- Healthcare wasn’t pandemic proof. There was still job loss during this time (pandemic).
- Homebuilding in 2020 grew 11% in completes over 2019. 2021-22 will see a slight decline. There are 340,000 jobs in construction, and women make up a fraction of those. Building supply materials are still up 20% YoY as demand has pushed prices up.
- Many skilled positions are close to retirement age. #1 concern is the need to get more younger skilled workers in the pipeline.
- Infrastructure is a sustaining factor in the economy. Infrastructure does not equal jobs but can create jobs. A long-term investment is desperately needed as long-term productivity is at risk. If infrastructure isn’t in place, everything suffers, and costs increase.
Global / General
- China is leading the recovery, followed by the US and then western Europe. The US government recovery programs have mitigated loss, making a recovery stronger.
- The pandemic has brought permanent business changes – supply chain management is one.
- According to NAHB, millennials are having a substantial impact on the housing market.
- Permanent change in education and retirement trends. Boomers are spending retirement funds.
- Consumers are behaving differently. The most frugal generation is Gen Z.
Ps. If you want to go down the rabbit hole about Black Swan events, this Telegraph article is worth a read. It’s specific to the UK, but not surprisingly, a proposed solution is “building a new resilience strategy’ – something the events industry knows very, very well. It also questions the importance of moving from a ‘just in time’ economy to a ‘just in case’ economy – maybe something else to consider as we plan for 2022.
See you next week.