Jeremy Hill shares his economic forecast for 2022
Jeremy Hill talked with Tom Shine about what 2022 will bring, including more wage growth, a continued shortage of workers and general aviation’s rebound.
Wichita State University economist Jeremy Hill has prepared an annual economic forecast for Wichita and Kansas for more than a decade. Hill, director of the Center for Economic Development and Business Research at WSU, delivered his 2022 findings Thursday at the university’s Economic Outlook Conference.
The forecast is similar to last year’s in many ways: A continued slow recovery from the financial mess caused by the pandemic and job growth of about 1 percent locally and statewide. But Hill said the survey he conducts with business owners as part of the forecast revealed something new.
He talked with Tom Shine and The Range about what 2022 will bring, including more wage growth, a continued shortage of workers and general aviation’s rebound.
The interview was edited for length and clarity.
You've done so many [forecasts] now, how does this one fit in? Is it good? Is it bad? Is it surprising? What's kind of your overall perception of number 13 here?
As soon as I came here, I implemented a survey and asked the business community to give us all these factors of how do they feel now? And then their future employment costs … a whole bunch of questions.
They're more optimistic about growth. They’re more optimistic about profit margins. This is the most optimistic I've seen them the entire time, this 13 years I've done it.
Now put this in the right context, right? This is coming after last year. So after last year, clearly definitely devastated, but they're more optimistic than they were before. We have a better, clearer growth expectation over this next year than we've had in the past 13 years I've been here.
Wages grew nearly 5% in 2020, which was a record for Kansas. They’re expected to grow this year and next. Talk a little bit more about the wage increase.
There's so much growth demand. Employers are really hungry. And so when you can see all those new job openings and employers are being very competitive, trying to find not just talented people, but just bodies.
This is, of course, tied to the labor shortage. There's not enough bodies for the jobs that are available. So employers are willing to pay more to get them.
Actually, at the national level, for every one opening there's only .8 people available to fill that job. And honestly, that's probably even tighter here in Kansas, where we have lots of job openings and even less people.
The service industry—including leisure and hospitality—they really felt the brunt of the pandemic more than many industries. It's expected to continue to rebound in 2022 in terms of employment, but will remain below pre-pandemic levels for a number of years. Can you talk about leisure hospitality and the employment there?
So leisure hospitality includes two broad, key ones. You have a tourism side and … they're still coming back. They're seeing some improvements, and there's a lot of demand for it.
The one that's the tricky part is restaurants. We have this insatiable appetite to want to go out and eat. … We think more jobs are going to come back, but that one's even more difficult when you come to this tight labor market issue.
Now that the labor market has improved so much, people that were in that workforce … went and got jobs in other sectors; full-time jobs. And so although we see that coming back, that one is not going to come back nearly as fast because there's too much opportunity for someone to find a full-time job with more consistent hours that actually might be even higher pay than they were making prior.
Spirit AeroSystems said this summer it expects to return to nearly full employment in 2024. Is that the same kind of timeline we're looking at for Wichita's economy to get back to pre-pandemic levels?
Commercial aviation, which clearly got hit because of COVID, and Spirit, which is our biggest employer, obviously had a big hit on this. But military, which I'm actually quite surprised by, we have continued to get more and more military contracts. … When I had conversations with some of our companies of production and including the supply chain, like smaller suppliers, military has done really well.
The real shining star, which is hard to believe, is this general aviation side. Those business jets have done phenomenal. They're doing so much better than they have done before. And the opportunity for that market is looking … really good.
And although they probably won't create tons of jobs, I think that market is going to come back. Whereas we've had a decade of negative stories there, we're now seeing this positive story coming back for the sector.
Construction jobs will grow statewide and locally in part because of the demand for housing. How has housing demand continued to grow so well despite a somewhat shaky economy?
So that's one of those fascinating stories about how COVID impacted the economy. COVID impacts certain sectors, but it didn't impact at all other sectors.
And so the reason why it's growing is all demand driven. And so there's … a lot of concerns about house-price bubbles and things like that. But when you really look at the fundamentals of this, this is driven because there is real demand and that demand is driven because there's income increases in wealth and the savings rates are there.
Although the monthly supply is low and there are issues in the housing market, the demand is there to continue to grow that route.
Retail sales in Wichita, after a good year in 2021, are expected to decline by about $135 million in 2022 in Wichita. Why is that?
When we do these forecasts, we're trying to figure out – in Wichita in particular – how many jobs are going to come back in aerospace. And since those haven't really flushed back in the way we would want them to. While it was looking better and better every day, without those jobs, without having that big increase, that's going to be the big driver of retail sales coming back.
If aerospace comes back stronger – and actually I'm personally more optimistic than what our model’s saying about aerospace – then we'll see that retail sales improve much more in line with what we expected nationally and at the state level, where you had all these savings, you have all this opportunity, and we can go spend and consume.