Pandenomics: Despite COVID Waves, Strong Economic Growth to Continue in 2022 - February 3, 2022
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Pandenomics: Despite COVID Waves, Pia Orrenius
Keynote Speaker
Strong Economic Growth to Continue in 2022
February 3, 2022The views expressed are my own and
do not necessarily reflect official positions
of the Federal Reserve System.Overview
• Pandemic an unusual economic downturn due to the rise in incomes,
surging demand for goods and housing, collapse in demand for services,
labor shortages
• Despite significant impact of COVID on public health and labor supply,
Texas growth outperformed the nation in pandemic overall and in 2021
• Growth in region accelerated in second half of 2021
• Dallas Fed economic outlook suggests Texas will outperform the nation
again in 2022 but risks to the outlook include
• Additional COVID waves
• Lasting supply-side constraints
• Continued high inflation
3Pandenomics: A Recession (and Recovery) Like No Other
Pandemic recession stands apart from others:
much sharper, shorter-lived decline and steeper recovery
% of peak employment
102
100
98
96
94 Pandemic
92
90 1982 1986 2001 2008 2020
88
-2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Months after business cycle peak
NOTES: Shown is Texas nonfarm payroll employment. Recessions are indexed to on peak employment: Mar 1982, Jan 1986, Mar 2001, Aug 2008, and Feb 2020.
SOURCE: Bureau of Labor Statistics.
5Also unusual for a recession, personal income rose
Percent change
8
Personal Income
6 Wages & Salaries
4
2
0
-2
-4
-6
-8
2020 2008 2001 1990
NOTE: Data for Texas. Change in real per capita personal income and wages & salaries, from first quarter to last quarter of recession.
SOURCE: Bureau of Economic Analysis (BEA)
6And unlike Great Recession, house prices soared
Dollars (thousands), four-month moving average*
375
U.S.
350
325
300
275
Texas
250
225
200
175
150
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21
*Seasonally adjusted, real dollars.
NOTE: Data on median house price through Dec. 2021. Shaded bars indicate recessions.
SOURCES: Multiple Listing Service; seasonal and other adjustments by FRB Dallas.
7How Texas Fared in Pandemic
Texas is one of only four states that have exceeded
their pre-pandemic level of employment
Job growth (percent), Dec 2021/Feb 2020, SA
6
4
2
0
-2 Texas
-4 U.S.
-6
-8
-10
-12
-14
LA
VT
AK
PA
KY
VA
KS
IN
AZ
IL
OH
OR
OK
U.S.
IA
SD
SC
AL
AR
GA
ID
TX
HI
NY
DC
CA
RI
NJ
NV
ND
NH
CO
FL
MI
CT
MA
NM
ME
WY
MN
WI
DE
MD
MO
MS
NC
NE
TN
MT
UT
WV
WA
NOTE: Data show non-annualized job growth since beginning of pandemic. Texas data are not early benchmarked to allow comparison across states.
SOURCES: Bureau of Labor Statistics.
9In Texas, three sectors have now surpassed pre-pandemic
employment. In nation, only one…
Job growth Dec 2021/Feb 2020 (percent)
10 8.1
4.6
5 3.1
0.5
0
-0.3 -0.2 -0.4 -1.2
-2.1 -1.7
-5 -3.1 -2.9 -2.8 -3.8
-4.1 -4.8 -5.5
-10 -7.2 -7.1
-15
-20 U.S. Texas
-20.0
-25
Trade, Prof. & Gov't Educ. & Leisure Mfg. Fin. Constr. Info. & Oil & Gas,
Transp. Bus. Serv. (15.1%) Health & Hosp. (6.8%) Activ. (5.7%) Other Svcs Mining Sup.
& Util. (15.3%) Serv. (10.2%) (6.6%) (4.9%) (1.4%)
(20.2%) (13.6%)
NOTE: Data show Dec. 2021/Feb. 2020 non-annualized job growth. Numbers in parenthesis indicate share of total state employment in December.
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; FRB Dallas.
10Austin, DFW first metros to recover all lost jobs;
other metros catching up
Employment Change by Major Metro (Dec 2021/Feb 2020)
Percent change, SA
6
5.0
4
2
1.7
0
-2
-1.6 -1.9
-2.8
-4
-6
DFW Houston Austin San Antonio El Paso
(30.3%) (24.0%) (9.3%) (8.3%) (2.5%)
NOTES: Data refer Dec. 2021/Feb. 2020 non-annualized job growth. Numbers in parentheses refer to share of state employment in Dec. 2021.
SOURCES: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by FRB Dallas.
11Texas job growth fueled by domestic migration,
which accelerated in pandemic
Number of people
250,000
Prepandemic net migration
200,000
Pandemic net migration (2020:Q1-
173,813 2021:Q2)
150,000
108,530
100,000
50,000
0
Texas Florida North Carolina South Carolina Arizona
NOTE: Data and analysis from Yichen Su “Largest Texas Metros Lure Big-City, Coastal Migrants During Pandemic,” Southwest Economy, 4th quarter, 2021.
SOURCES: Federal Reserve Bank of New York Consumer Credit Panel, Equifax.
12Even though migration flowed mostly to D-FW & Austin, almost
all Texas metros enjoyed higher inflows in pandemic
Dallas-Fort Worth-Arlington
Austin-Round Rock
San Antonio-New Braunfels
Pandemic (2020:Q1-2021:Q2)
Houston-The Woodlands-Sugar Land Prepandemic
Killeen-Temple
Corpus Christi
Tyler
Waco
McAllen-Edinburg-Mission
Amarillo
-10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
NOTES: Data shown are net in-migration figures for Texas metros from Yichen Su “Largest Texas Metros Lure Big-City, Coastal Migrants During Pandemic,”
Southwest Economy, 4th quarter, 2021.
SOURCES: Federal Reserve Bank of New York Consumer Credit Panel, Equifax.
13Texas Recent Economic Performance
Texas job growth above U.S. rate since Sept. 2021
Percent8Change, M/M, annualized, 3MMA
U.S. Texas
7
6
5
4
3
2
1
0
Nov 20 Dec 20 Jan 21 Feb 21 Mar 21 Apr 21 May 21 Jun 21 Jul 21 Aug 21 Sep 21 Oct 21 Nov 21 Dec 21
NOTE: Data through December 2021.
SOURCE: Bureau of Labor Statistics; Texas Workforce Commission; seasonal and other adjustments by FRB Dallas.
15Manufacturing output and service sector revenue growth
robust in 2021 but slowed in January 2022
Diffusion Index, SA
60
Expanding
40
20
0
-20
Manufacturing production
-40 Services revenue
Contracting
Mfg production 10-year average
-60
Svcs revenue 10-year average
-80
2019 2020 2021
NOTE: Data through January 2022.
SOURCE: Dallas Fed Texas Business Outlook Survey
16Outlook for 2022
U.S. GDP expected to grow 3.9 percent in 2022,
2.5 percent growth in 2023
Billions, real 2021$
22000
21000
20000
19000
18000
U.S. Real GDP Blue Chip Forecast
17000
16000
15000
14000
2019 2020 2021 2022 2023 2024
NOTE: Data through December 2021.
SOURCE: Bureau of Economic Analysis; Blue Chip Economic Indicators.
18Dallas Fed 2022 Texas jobs forecast between 2 and 4 percent
growth (Dec/Dec); point estimate is 3 percent
Percent, Y/Y
10
5.1
5
3.0
0
-5
Actual Forecast
-10
-15
NOTE: Forecast scenario estimates Texas payroll employment for 2022 are based on IHME monthly hospitalization projections for COVID-19 in Texas, direct
COVID-19 impacts in March-June 2020, US GDP growth estimates for 2022, and WTI prices following the futures contract curve as of 1/27/22.
19Texas COVID cases falling sharply, hospitalizations slowing
Cases, 7 day MA (thousands) Deaths, 7 day MA
80 450
Daily cases
Currently hospitalized 400
70
Daily deaths
350
60
300
50 35,168
250
40
200
30 178
150
20
100
10 12,822 50
0 0
Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan
NOTE: Hospitalization data are daily through January 30, 2021. Case and death data through January 30, 2022.
SOURCE: New York Times, Texas DSHS.
20Texas businesses report on impact of Omicron surge; staff
absenteeism biggest problem
Share of firms (percent)
90
83
80
70
60
50 47
44 44
40
30 25
20
10
0
Increased absenteeism Reduced productivity due to New or worsened hiring New or worsened supply- Lower demand
alternative work difficulty chain disruptions
arrangements
• NOTES: Respondents reporting a negative impact to their business by the current COVID-19 surge were asked to indicate how they were impacted.
N=257. Percentages are calculated as shares of all responding firms, not the subgroup noting a negative impact.
• SOURCE: Federal Reserve Bank of Dallas Texas Business Outlook Surveys, January 2022
21Supply chain disruptions and staffing shortages are firms’ top
revenue constraints in December survey
46
Limited operating capacity due to staffing shortages 32
21
44
Supply chain disruptions 41
17
19
Weak demand 24
57
15
None/not applicable 21
12
14 Dec. '21
Other 14
16
Aug. '21
9
Reduced productivity due to alternative work arrangements 9
15 Jul. '20
4
Limited operating capacity due to state/local restrictions 5
21
0 10 20 30 40 50 60 70
Percent of firms
SOURCE: Federal Reserve Bank of Dallas, Texas Business Outlook Survey Special Questions.
22TBOS firms report on hiring impediments;
lack of applicants top complaint
73
Lack of available applicants/no applicants
53
Workers looking for more pay than is offered
43
Lack of technical competencies (hard skills)
33
Lack of experience
31
Lack of workplace competencies (soft skills)
18
Inability to pass drug test and/or background check
16
Lack of child care, including school interruptions
Jan. '22 Oct. '21 Jul. '21 Apr. '21
16
Fear of COVID-19 infection
0 10 20 30 40 50 60 70 80
Share of firms (percent)
NOTES: Respondents were asked, "Are there any impediments to hiring or recalling workers? Please select all that apply." N=251.
SOURCE: Federal Reserve Bank of Dallas Texas Business Outlook Surveys, January 2022.
23Wage and price pressures surged in 2021 in Texas
and are expected to remain elevated in 2022
Annual percent change
12 Average 2017-2019 2020 2021 2022 (expected)
9.9
10
8
7.0 7.1 6.9
6.4 6.4
6
4.1
4 3.7
2.7 2.6
2.1
2
1.1
0
Wages Input prices Selling prices
NOTES: Respondents were asked each December, "What annual percent change in wages, input prices and selling prices did your firm experience in [current year]?"
Respondents were also asked about expectations for the upcoming year, shown here for 2022. Over 300 firms responded. Values are 5 percent trimmed means.
SOURCE: Federal Reserve Bank of Dallas Texas Business Outlook Surveys.
24U.S. CPI inflation highest since 1982
Percent, Y/Y
16
14
12 Headline CPI inflation
ex food and energy
10
8
6
4
2
0
'80 '85 '90 '95 '00 '05 '10 '15 '20
-2
NOTES: Data through December 2021. Shaded bars indicate U.S. recessions.
SOURCES: Bureau of Labor Statistics; National Bureau of Economic Research.
25Summary
• Texas employment forecast to grow between 2 and 4 percent in 2022—
more slowly than in 2021, but still well above trend and nation
• Accelerated migration of people out of high-density, high-cost-of-living
areas should continue to benefit Texas and boost growth
• Inflows not without some growing pains
• Supply-chain disruptions and labor shortages expected to be a
continued drag on growth – no strong expectations of significant relief
through first half of 2022
• Further outbreaks of COVID remain a downside risk to the outlook, but
tend to constrict supply, not demand
• Price pressures likely to remain elevated
26Thank you!
28
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