A new forecast for the Wichita area economy in 2023 is mostly upbeat.
Jeremy Hill, director of Wichita State University’s Center for Economic Development and Business Research, released his annual economic outlook this week.
He said Wichita should add about 3,200 hundred jobs next year, driven in large part by the aviation industry. The growth rate of about 1.1 percent will be better than most areas of the state.
Hill said he expects wages to grow as employers scramble to fill jobs in a tight labor market.
He also talked with Tom Shine and The Range about inflation, the continuing rebound of the aviation sector and possible economic problems ahead.
The interview was edited for length and clarity.
Tom Shine: Give me the headlines, both good and bad, from this year's economic forecast.
Jeremy Hill: As we go into this next year, there's a big cloud hanging over the economy, and that is … the recession.
I don't think we've gotten there, but with what's been going on in the federal reserve, it's likely that we can get closer and closer to this … That's the negative part of what's going on in the economy and there's some things dragging down.
So the positive side is if we only go into a small shallow recession or just a slowing down of the economy, I expect Kansas
and Wichita to actually perform really well, relative to the U.S. and relative to our history. I think we should do fairly well given even a downturn over this next year.
It's interesting that aerospace, which was just so battered during the pandemic, is now driving employment again in the region.
They're going to drive this economy. The business jets look good. The commercial looks fairly good. The military's done a lot better than I expected. And so that is a driver. Super good for the economy.
What impact does inflation have on the local economy?
More inflation means you may get the same paycheck, but that paycheck goes a little less. And so that impacts firms, right? Especially retail and food. They're finding that households have less dollars at the end of the month then they're going to eat out a little bit less than they had anticipated a year ago.
And then on the bigger firm size, when they look at this and see inflation, they're seeing … this is going to decrease my profit margins because the last year they increased the prices to their consumer. They don't think they can increase it as much. And so they're eating up some of the profit margins right now.
It's impossible to visit any retail business of any size that doesn't have a help wanted sign in the window.
Where are businesses going to find these workers?
The Wichita market has had this really slow migration. We had less people moving in, and we just had a really soft market over this last decade when we looked at our labor force and trying to forecast. The only way to solve this is that wages are going to go up and we're going to attract more people into the market.
So I think bringing people that are unemployed back into the market and people moving in is going to be a big shift and a different shift for this market that we haven't seen over the last decade.
What do you see for wage growth in 2023?
In 2020, I kept saying, ‘Everyone, you should really increase wages to attract labor.’ But firms are very skittish at that point and were holding back on hiring. Then 2021, you saw that big competition of hiring just that skilled labor. In 2022, we have this trying to keeping up wages … for those people you just hired.
Next year is how do you retain all of your labor force? Keep it up so that you match inflation and expectations. So you don't have someone go out the door. So yes, wages are going to go up and there's no way you can get around it.
For the state as a whole, you’re forecasting in 2023 zero percent job growth. Can you explain what that means?
So we have two forecasts for the state. So my … more optimistic forecast for the state employment is up 0.7%. That is a condition of the U.S. economy just slowing down and not really going into recession. If we slow down even further or come into a minor recession, we think employment at the state level will get close to zero percent.
There's people hiring and quitting jobs all the time. But on net, we would really stay pretty flat, which is slower than our actual rate of growth.
What is a recession from an economic standpoint?
A lot of people talk about output or what we produce and having two consecutive quarters of negative growth. And we had sort of that on the books this year. However, the data … comes out early and it comes out without all the information and data behind it. I think there are likely errors in there and that would be revised up, probably closer to zero percent or some growth.
So that gets into what is this recession? It's not just … output slowing down. It has to go over broad measures. It includes things like output and retail sales and employment, right? And even maybe the housing market.
It can't be completely in a recession when firms have been very aggressive at hiring the first half of this year. Retail sales have been expanding, even though they've slowed down a little bit, they've been expanding. So it's kind of hard to say we were in a recession when we don't see that broad, slowdown in economic growth across the economy.
