Economists describe uncertain times as risk of recession looms
Rising inflation and increased costs of inputs and products will make planning difficult for companies and will increase the risk of a recession, economists said Thursday.
The Business Record hosted a virtual economic panel discussion Thursday, a day after a new report showed inflation at 9.1% compared with a year ago. Participating in the conversation were Peter Orazem, a professor of economics at Iowa State University, and Anne Villamil, an economics professor at the University of Iowa.
Orazem and Villamil discussed the recent inflation report, factors contributing to high inflation, and the risks of the U.S. economy slipping into recession.
Orazem said the increased economic uncertainty “makes it very difficult for businesses and consumers to figure out how they want to plan out their consumer plans going forward.”
“Anything that’s a big-ticket item suddenly becomes that much riskier and figuring out how much you’re going to pay for labor, or how much you’re going to pay for other inputs, and how much inventory you want to keep on hand is going to be that much more difficult,” Orazem said. “Clearly, increases in uncertainty make it much more difficult for the economy going forward.”
Villamil called this week’s inflation report “very concerning.” Despite the increased inflation rate, she said there is a glimmer of hope contained within it.
“The so-called core number is the only area of slight hope,” she said. “It was only 5.9%, which is down from 6%. That number excludes energy and food, so particularly there’s a difference because those are the drivers right now, but those are important numbers for consumers and firms.”
The first-quarter gross domestic report, released June 30, showed that Iowa’s GDP fell 1.3% while nationally the GDP declined 1.6%.
Villamil said that while GDP was negative in the first quarter, consumption “was still pretty robust.”“It was net exports that were the problem,” she said. “It wasn’t as bad as it might have been because there is going to be a lot of volatility in net exports.”
Orazem said the report, the third consecutive dip in the GDP in Iowa, was concerning, citing ongoing labor supply shortages.
“I’ve been concerned that the labor supply reductions in Iowa are about double the labor supply reductions nationally,” he said. That reflects the fact that we’re a relatively old state and we really lost a lot of labor supply. The number of people under the age of 45 working in Iowa increased, but over 45 it plummeted, both for men and women, and those people aren’t coming back. That insufficient labor supply is impeding Iowa’s economic growth.”
The U.S. is about 3.4 million workers below what it needs, Orazem said.
“I don’t think you’re going to solve a supply chain problem unless you fix international trade and the domestic labor supply problem,” he said.
Villamil, who participated from Australia where she is attending an economic conference, said there is concern overseas about the price of energy and inflation.
Russia is one of the world’s top energy exporters, and Europe, particularly Germany, is heavily dependent on Russia, she said.
“Germany has been an export powerhouse, so if they were to lose power or continue to be faced with high energy prices and they needed to shut down their factories or at least decrease production, that could really add to the supply chain problems, and that is a very big concern,” Villamil said.
Continue reading on BusinessRecord.com to learn more about the outlook for a potential recession in the coming months.
View the event on demand:
While the economic update event has concluded, readers can still register in order to purchase and watch the event on demand. Those who register will receive a link and access code to watch the discussion. Watch on demand
Trending News
