Three industry experts and an economist this morning shared their outlooks for 2023 at the annual BizTimes Milwaukee Economic Trends Event.
Here are some key takeaways:
In presenting his annual macroeconomic forecast, former White House economist Michael Knetter, now president and CEO of the University of Wisconsin Foundation, said that while U.S. economic dynamism is “alive and well,” there are “two forces creating tension” – the slow-going recovery of the labor force, and the desire of the Federal Reserve to tamp down inflation without impeding that process.
While Knetter last year expressed confidence in the ability of the Federal Reserve to thread the needle of economic recovery, unforeseen actions such as the Russian invasion of Ukraine as well as U.S. tension with China added to pandemic-related adverse supply shocks, which in turn kept inflation higher for longer, he said.
“But inflation is coming down at a pretty good pace right now, so we should know in a few months how much work the Fed is really going to have to do in raising interest rates,” Knetter said. “I still think good times are ahead.”
Regardless, U.S. labor supply has not yet returned to pre-pandemic levels of participation, leaving the workforce short approximately two to three million, Knetter said. So, the good times ahead are predicated on several factors, ranging from a shift in employer/employee dynamics to an increase in consumer confidence.
The status quo is no longer an option
To Molly Thiel, chief people officer of Brookfield-based talent acquisition company Cielo, talent is everywhere – not merely in the office.
Thiel isn’t alone in her thinking; the most-searched key phrase on job sites in 2022 was “work from home,” and there is now six times as much work from home on a full-time basis relative to pre-pandemic levels. Moreover, all else being equal, the value of work from home to employees is estimated to be about 10% of pay.
While she noted that there is a “tale of two cities in hiring” – tech and media layoffs continue while health care systems still struggle to find workers, for example – candidates lucky enough to succeed in the job market have increased their leveraging power, Thiel said.
“Employees are starting to say, ‘I care about my environment. I care about what it feels like to work here,’” Thiel said. “Yes, there will always be baseline expectations around income and benefits, but those areas are becoming more expected and less an area of focus.”
Which leads to a concept called total rewards, defined by Thiel as “recognizing what humans need and helping them to fit work into their lives instead of work dictating their lives.”
“We need to be thinking about more innovative ways of ensuring that our employee experience is positive,” Thiel said.
Ultimately, by allowing work from home, or investing in learning development, employers may in the long run curate a loyal, engaged pool of talent that differentiates a company from its competitors, Thiel said.
“The next generation is looking for training,” Thiel said. “We can’t keep doing what we’ve been doing.”
Marty Brooks, CEO of the Wisconsin Center District, echoed those statements, adding that with tourist groups returning to Milwaukee and the Republican National Convention expected to bring in 45,000 guests and $200 million to the city in 2024, rebuilding the leisure and hospitality industries is a top priority.
“Be obsessive about who you surround yourself with and empower others to do the same,” Brooks said.
To Knetter, switching up the status quo may look like a “4th industrial revolution around the world,” complete with AI, robotics and virtual reality. In fact, these conditions are changing the landscape already – look no further than computer program ChatGPT.
Not quite a recession
“The reason the economy is not in a recession, even though we technically had two consecutive quarters of decline, is the unemployment rate,” Knetter said, adding that his odds of a recession in 2023 are 50/50.
Knetter’s outlook for 2023 is that “there is a possibility of a soft landing” depending on the recovery of the labor force, as well as the recovery of China’s manufacturing sector. He expects GDP will grow about 1% this year, unemployment will remain below 5% and core inflation will reach about 3% by year-end in December.
Frank Krejci, president and CEO of Milwaukee-based automotive access control products manufacturer Strattec Security Corp. expressed a similar view about the state of the economy.
“I’m not looking at this as a recession,” Krejci said, adding that globalization is here to stay. “I’m looking at this as a serious rebalancing.”
