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GBC Economic Outlook highlights: Worker shortage a ‘defining issue’

Anirban Basu, chairman and chief executive officer of Sage Policy Group. (The Daily Record/Maximilian Franz)

Demographic shifts, the global supply chain, remote work and the labor shortage will continue to be hallmark economic issues nationally, regionally and locally into 2022, according to experts who spoke at the Greater Baltimore Committee’s annual Economic Outlook Conference.  

Held virtually Friday morning, the conference featured Tom Barkin, president and CEO of the Federal Reserve Bank of Richmond; Mark Vaselkiv, vice president and chief investment officer, Fixed Income Division, T. Rowe Price; and Anirban Basu chairman and CEO, Sage Policy Group, who discussed the economic future of the region and the country at large. 

Here are the top takeaways of the event: 

The labor shortage isn’t going anywhere.

Many were hopeful that the fall would bring an end to the labor shortage as pandemic unemployment benefits came to an end in September and as schools opened back up, freeing parents from having to stay home with their children daily, Barkin noted. But instead, labor force participation — the percentage of people either working or seeking work — has remained flat, and retirements and resignations have risen, a trend he doesn’t anticipate will end anytime soon.

The Baltimore area lost a smaller percentage of workers than businesses did nationwide, according to U.S. Bureau of Labor Statistics data. The Baltimore metropolitan area was down 2.8% filled jobs from February 2020 to August 2021, as compared with 3.4% nationwide and 3.9% statewide. Many of those unfilled jobs were in the government sector, and, Basu noted, are likely to bounce back.

Still, it’s going to take serious efforts from policymakers to figure out how to get Americans back into the workplace, Barkin said.

“I think this is going to be our defining issue for at least the next decade.” 

Demographic shifts are going to affect Md. in the coming years.

The United States’ steadily aging population, spurred by Americans having fewer and fewer children over the past half century, is going to have numerous impacts across industries (and certainly won’t do anything to help the worker shortage).

But in Maryland, that impact is most strongly going to be felt in the higher education sector, one of Maryland’s largest and most influential sectors, with flagship institutions like the University of Maryland and Johns Hopkins drawing other industries and talent into the state. Starting in 2025, incoming classes nationwide are going to get smaller and smaller, said Vaselkiv, which could be a rude awakening for smaller colleges already struggling with finances.

“That’s probably bad for our regional economy,” he said. “Baltimore is a college town.” 

Remote work may have a real impact on Baltimore

Many companies have been switching to hybrid or fully remote work environments ever since the pandemic made it clear most employees can be just as productive at home as they can be in the office. But while this shift will likely be welcome by many workers — and companies who may be able to cut down on their overhead costs by eliminating in-person office space — it won’t be good for the commercial real estate market in Baltimore, and it might limit who’s willing to move to the city, which is already facing population declines.

At T. Rowe Price Group, for example, Vaselkiv has noticed that fewer employees, especially student interns from top universities, are willing to relocate. 

“We’ve started to allow more and more top-level professionals to base themselves out of New York City, West Coast, across Europe,” he said. “Where I do express concern is culturally. The teams that really worked together well for many, many years — they’re losing that secret sauce of collaboration.” 

Inflation and supply chain issues may ease in 2022

It’s no secret that 2021 saw a major breakdown of the global supply chain, but some of the impacts of that breakdown may not be so obvious. For example, retailers have become more concerned with finding wholesalers that can provide a consistent supply over those who offer the lowest price, Barkin said.

One of the less surprising effects is inflation. Consumers, armed with stimulus cash and money that went unspent during the height of the pandemic, are willing to spend more on products, leading to price increases across sectors. 

Vaselkiv believes that the supply chain may normalize in the next year, but whether inflation will continue at its current rate depends on a variety of factors. Basu noted, for instance, that if Americans are given further stimulus money to spend at their will, it could make inflation worse.

“The supply curve is as close to vertical as I’ve seen in my life,” he said. “As demand picks up, that supply cannot respond accordingly.” 

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