This time last year, after being so badly battered by the COVID-19 pandemic, there was great optimism that the country would soon see brighter days ahead. As vaccines were being rolled out on a more widespread basis to the general public, many were hopeful that the coronavirus would drift into our rearview mirror as we slowly started making our way back to a life without masking, quarantines or virtual learning mixed with Zoom conference calls. These many months later, we unfortunately still find ourselves mired in the pandemic; and while it’s true that things are marginally better than the spring of 2020, the day-to-day uncertainty of it all remains perplexing.
Of course, while COVID-19 was first and foremost a global health crisis, its tentacles spread and quickly became a financial crisis as well. As we inch closer to the two-year anniversary of the pandemic, the U.S. economy continues its rocky road to recovery from Wall Street to Main Street. And though it may not have risen to pre-pandemic levels just yet, there are promising signs as employment numbers continue to rise and recent factory surveys are showing cost increases are slowing and supply chain disruptions are lessening.
With those headwinds, one would rightfully expect to find increased levels of optimism approaching 2022 versus 2021. But new variant mutations, higher infection rates and increased hospitalizations have renewed some concerns and further shown the critical importance of having solid plans in place should the need to pivot arise.
Trying to predict the future economy, both in the short- and long-term, can be a futile exercise, but we spoke with area experts who feel things are definitely trending upward and that the trickle-down-effect will give South Jersey a real boost moving forward. At the same time, their fairly positive outlook is tempered by the fact that if there’s one thing we’ve learned about the pandemic thus far, it’s that the ebbs and flows often come without much warning.
Stuti Jha, an associate professor of economics at Rowan University, is encouraged by what she’s seen of late with regard to the trajectory of the U.S. economy. As it moves toward a pre-pandemic GDP level, she says there are several reasons to be optimistic about 2022, even despite the recent surge of the Omicron variant.
“First, businesses and consumers have learned to live with COVID restrictions. Second, the Omicron variant may have peaked in the countries that reported these cases first, giving hope that it may slow down in the U.S. [quickly]. Lastly, there is very little appetite for lockdowns within government and the public. The likelihood of a 2020-like shutdown is quite low. All of these factors contribute to an optimistic forecast for 2022 not just for the nation but also for South Jersey,” Jha says.
As the pandemic remains a moving target, there is also hope that high vaccination rates in New Jersey and its neighboring states will further contribute to boosting the economy as folks are able to return to work or find new employment more readily. What’s more, the recently revised guidelines for reduced isolation put forth by the Centers for Disease Control and Prevention (CDC) should help those impacted by COVID-19 experience less operational interruptions to their business.
“Isolation and economic growth are mutually exclusive,” says Nick DellaRova, COO and senior consultant with CLM Advisors. “When people can’t work normally, they work less efficiently; there is no escaping this. So, it stands up to reason that a greater return to normalcy will lead to a stronger economy.”
Even with the nation’s unemployment rate falling to 3.9%, labor issues remain very real for countless executives. Fueled by the Great Resignation—which saw droves of workers quit their jobs during the pandemic in search of new opportunities—employees are now stepping into more favorable gigs with high expectations. As a result, business owners have been forced to adjust remuneration rates as well as modify their thinking on work/life balance in order to not only attract, but retain top talent. While that’s been generally good news for the working population, it can prove to be a bit of a mixed bag for employers.
“Wage inflation is happening—that’s for sure,” says DellaRova. “But, let’s think about the consequence of that—if workers want more control over how, when and where they work, then shouldn’t employers respond by evaluating their employees’ performance more objectively? Everything is a tradeoff; if you want more freedom, then you have to take more responsibility.”
“The labor shortage is something everyone is dealing with and it will take some time to be worked out. There has been a mindset change among employees. With the ability for many to work from home and the need for additional hires, employees have a lot of power, control and options. That is why it’s so hard for many companies to return to the office in-person,” says Nick Pantle, vice president of financial planning services with Masso Torrence Wealth Management.
“The Great Resignation will delay the return of the ‘normal’ work lifestyle,” Pantle adds. “Many companies will continue with a hybrid model and be flexible during this transition period. Employers do need to attract as well as retain talent, which right now includes increased compensation and other benefits not previously offered.”
Certainly, fewer COVID surges would help increase labor force participation and help mend supply chain issues, but that progress alone isn’t likely enough to curb high inflation rates anytime in the near future.
“We believe inflation is here to stay for a little while,” Pantle admits.
“Most economists believe that prices will continue to rise in 2022,” adds Jha. “Crude oil prices continue to increase, deferred demand is still an issue and we may experience supply chain bottlenecks—at least in the first few months of 2022. In addition, competitive wages, a booming housing market and more will contribute toward higher than usual inflation.”
As the South Jersey business community continues to pick up the pieces to help put the economy back together, the region appears well positioned for substantial growth based on the bevy of activity that has been taking place both prior to and during the pandemic. Whether talking about how the area will soon become a major player in wind energy, the e-commerce boom in our industrial parks being led by Amazon’s growing presence or the perpetual evolution of the eds and meds sectors, it’s easy to see why experts remain bullish on our future.
“South Jersey is a great location with a strong, growing economic future,” Pantle says. “The area will continue to grow as more industries expand and competition intensifies, which is a win for residents and business owners.”
Jha agrees, saying that renewable energy and health care will generate impactful revenue for South Jersey, provide greater employment opportunities and improve socioeconomic conditions for years to come. “Even the tourism industry should bounce back once COVID stabilizes. All these factors look promising for the economic outlook of South Jersey.
DellaRova also acknowledges the growth potential, but he feels strongly that any sort of local recovery needs to be at least partly driven by giving smaller businesses the necessary tools to succeed and flourish in the communities they serve. Having large companies like Amazon plant their flag in South Jersey is one thing, but it’s local neighborhood businesses that he sees as the real lifeblood of economic development.
“I’d prefer a stronger commitment to attracting and retaining smaller and middle-sized businesses, which means keeping people in the state. New Jersey has high corporate income taxes, high individual income taxes and high property taxes. Then we tend to give it back in the form of tax breaks to big business in order to keep the jobs here. That strikes me as a losing policy in the long run. Improvement in these areas—at the state and local levels—could go a long way,” says DellaRova.
A lot will be determined over the next 12 months and there will undoubtedly be more ups and downs during the course of 2022. Hopefully, the lessons learned since the onset of the pandemic will serve the South Jersey business community well as it’s faced with new challenges. As DellaRova points out, “economies—especially under non-market driven disruption—are easy to break and hard to repair.”
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Published (and copyrighted) in South Jersey Biz, Volume 12, Issue 1 (January 2022).
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