Experts at a business forecast event in Rogers on Friday gave their thoughts and predictions on the state of the world, nation and Arkansas economies nearly two years into the coronavirus pandemic.
Amid inflation concerns and the omicron variant surge, economists remain cautiously optimistic about the road to recovery.
Juhi Dhawan, the senior managing director for Wellington Management, said she believes the current wave of the virus will peak in the coming months, and places like Europe and Asia will begin to recover as lockdowns ease and activity returns to normal.
"The world will become less divergent in 2022," she said. Vaccinations are the best tool to overcome the virus and the good news is that people are becoming more receptive to them, she said.
The University of Arkansas Business Forecast Luncheon, hosted by the Center for Business and Economic Research in Fayetteville, was held at the Rogers Convention Center. Attendees were required to wear masks.
Other factors affecting the global economy include less accommodating banks and fiscal policy as the Federal Reserve signals interest-rate increases in March, the evolution to more digital supply chains and the transition to renewable energies amid climate change. Meanwhile, the prices of everyday household items continue to rise.
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According to the personal consumption expenditures price index, the U.S. last recorded inflation levels this high in the early 1980s.
David Altig, executive vice president and director of research at the Federal Reserve Bank of Atlanta, said about 70% of the items in the consumer market basket have increased more than 3% so far. Almost half of those items increased more than 5%, he said.
The Fed has said an acceptable target rate of inflation averages 2% over time. Between 2012 and 2020 when the pandemic hit, inflation was soft, begging the question: "Are we just making up for lost ground?" Altig said. "The answer is yeah, kind of."
Fed Chairman Jerome Powell on Wednesday predicted a strong labor market with low unemployment and increased wages.
Altig elaborated on Powell's comments, clarifying that the labor markets are improved but no broad sector has recovered from the pandemic. He said the jobs are there but they cannot be filled as workers retire or search for jobs that reduce the risk of contracting the virus. Many foreign workers that the country relied on went home during the pandemic and single mothers with young children left their jobs to take care of their children.
"Is this going to turn around soon?," Altig said. "It may change as covid conditions develop for the better."
A good sign for Arkansas is that a number of jobs lost because of the pandemic are coming back.
Nonfarm employment increased by 27,000 jobs last year, said Mervin Jebaraj, director of the Center for business and Economic Research in Fayetteville. However, the state lost some 38,000 jobs over the course of the past two years, resulting in a net decline of 11,000 jobs.
Of the jobs added last year, Jebaraj said most were in the professional business services, leisure and hospitality and manufacturing sectors, among others. A decline in jobs were seen in the construction and government sectors, in large part attributed to staff reductions at public schools.
According to state data, Fort Smith, Hot Springs, Jonesboro and Little Rock all recorded job gains over the last year, but net declines since 2020. Of the metropolitan areas in the state, Northwest Arkansas had the only increase in jobs since the pandemic.
Looking ahead, Jebaraj said he believes the coronavirus won't be completely gone this year. Small and large businesses alike will continue to be affected by the virus, he said.
The state's employment population ratio declined about 1.5% from 2020 to 2021. This happened for a number of reasons, Jebaraj said, including increased retirement rates, single mothers quitting their jobs and people getting sick or taking care of people who are sick. Workers are also leaving jobs at smaller businesses for higher paying jobs at larger companies or to start their own companies. He said the number of business applications has surged in the past year.
Overall, Jebaraj had a pretty positive outlook on the economy of Arkansas.
"Hopefully there isn't another variant or surge, and if there is, hold on to those masks," he said.
The event, which draws more than 1,000 people each year, was sponsored and made possible in part by Walmart and Sam's Club, Greenwood Gearhart financial advisers and RMP law firm, Cox Communications, Regions Bank and other business partners.