Here are four key economic trends that could affect Charlotteans in 2022
Instead of widespread shutdowns and soaring jobless claims seen earlier in the COVID-19 pandemic, local economic experts say consumers in the Charlotte region can expect a different set of concerns heading into 2022.
That includes increased prices, supply chain struggles and disruptions caused by the rapid spread of the omicron variant.
Here’s a deeper look at what they’ll be keeping an eye on in the new year, and how it might affect your pocketbook.
No. 1: Inflation
One thing Charlotteans can expect to continue well into the year? Price increases, economists said.
“We know we’re going to have an inflation problem in 2022,” said John Connaughton, a professor and economist at UNC Charlotte.
Rising inflation is especially troubling because it has a disproportionate impact on lower and middle income Americans, Connaughton said, who have less discretionary income and spend more of their income on basics like gas and groceries.
Expect elevated prices for fuel, food and housing, economists said. The Consumer Price Index, which measures inflation, is rising faster in Charlotte than in other parts of the country, said Mark Vitner, an economist with Wells Fargo Securities.
“Inflation is probably a little worse in Charlotte, and it’s probably going to get worse over the first half of this year,” he said.
Nationally, prices have risen 6.8% over the past year, according to data from the Bureau of Labor Statistics. In Charlotte, that number is closer to 8%, Vitner said. The increase is primarily driven by rising rents.
Earlier in 2021, much of the rise in inflation was expected to be temporary, said Laura Ullrich, a regional economist at the Charlotte branch of the Federal Reserve Bank of Richmond.
“It was things like the price of used cars, the price of airline tickets and hotel rates — things that were completely pandemic related,” she said.
But in recent months, there’s been a much broader increase in prices. In response, the Federal Reserve has “telegraphed pretty clearly” that they’ll take action on inflation by raising interest rates in the coming year, she said.
Still, consumers should plan accordingly, Connaughton said.
“There’s nothing particularly complicated about this,” he said. Wages have started to rise but aren’t keeping pace with prices, he said.
Over the course of the year, rising prices could feel like an extra sales tax, he said, and if inflation keeps rising at expected rates, “your take-home pay in real terms (will be) less than it was last year.”
No. 2: Supply chain struggles
Longer delivery times and lower inventories will also persist into the new year, Ullrich said.
“I think a few of us several months ago were more hopeful that might not last well into 2022,” she said. “We’re going to have to be a little more patient.”
Some of those issues are directly related to the pandemic, she explained, like COVID outbreaks triggering overseas factory closures. But much of it has to do with logistics, like fewer international flights.
Vitner said that, as U.S. production ramps up, he expects those bottlenecks to improve over the course of the year. That might also aid the inflation outlook, he said.
“At the end of 2022, we’re still going to have supply chain disruptions,” he said. “They’re just not going to be as severe as they are today.”
No. 3: Labor shortages
If you’ve noticed more “Now Hiring” signs plastered on the front doors of businesses around Charlotte, it’s no coincidence, Ullrich said. Employers like restaurants, retailers and daycare centers are still struggling to fill their ranks.
But the labor shortage in Charlotte is less acute than you might think, she said.
“Instead, I think what we’ve seen is a re-sorting of where and how people are working,” she said.
While employment numbers are up in sectors like construction and warehousing, they haven’t bounced back in sectors like hospitality or education, she said.
“The types of jobs that people have left are the ones we interact the most with — they’re customer-facing,” she said. Those staffing levels may depend on how effectively those employers can lure back workers that have switched industries, she said, or attract those that for some reason are sitting out of the labor force.
Overall, U.S. employment has recovered to pre-pandemic levels, Connaughton said. “The recession from an unemployment standpoint is basically over.”
No. 4: Omicron
Connaughton and Vitner will be keeping an eye on the spread of the omicron variant, they said. The new COVID variant has driven a sharp increase in infections in recent weeks.
It’s hard to predict what will happen with the course of the new variant, Connaughton said, and he’ll leave it to the medical professionals. From an economic perspective, he called omicron a “known unknown” for next year.
Several economists have recently downgraded their growth forecasts for early 2022 as the variant disrupts some pieces of the economy, the Wall Street Journal reported recently. Experts cited red flags like universities shifting back to online classes, airlines canceling thousands of flights and entertainers scrapping live performances.
Vitner called omicron “the big elephant in the room” for the economic outlook of 2022. But the good news is that COVID-19 vaccines are now widely available — and research may prove that the new strain causes a milder illness.
“If that comes to pass, I think that this wave will only prove to create some minor disruptions for the economy,” he said.
This story was originally published December 29, 2021 at 6:00 AM.
