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Regions Chief Economist says, “Nothing has been normal about the economy the past two years”

By Tom Ballard, Chief Alliance Officer, PYA

“Nothing has been normal about the economy the past two years,” Richard Fisher said as the Senior Vice President and Chief Economist for Regions Financial Corporation concluded a lunchtime presentation yesterday at the bank’s Bearden Financial Center.

He was responding to a question from Rob Stivers, Region’s Market Executive here, and answered that question with one of his own: “When is it going to get back to normal and what will that look like?”

It was the second presentation of the day for Moody on Friday where the Alabama alum shared his thoughts about the economy and his forecast going forward. He had addressed a group at breakfast, speaking on both occasions for about 45 minutes without referring to any notes.

About the local region in response to a question we asked about the Southeast compared to the nation as a whole, he observed that “Knoxville’s economy is growing faster than Tennessee’s which is growing faster than the country.”

Moody began his conversation by asking those in attendance if they thought the economy was in recession. Some said yes, others said no, and still others were unsure. Observing that the answer “has turned into something of a spectacle” and frequently depends on an individual’s political persuasion, he noted that many pundits believe it has, based on the decline of gross domestic product (GDP) for two straight quarters.

“Two of the last three recessions did not have back-to-back GDP declines,” Moody explained, adding that the country is not in a recession according to the National Bureau of Economic Research’s Business Cycle Dating Committee, the official recession.

“One thing that is very good about the economy is the labor market” which has recovered all of the jobs lost during the COVID-19 pandemic, he said. About 528,000 jobs were added last month alone, the employment rate sits at 3.5 percent, and salaries are increasing.

At the same time, 10.7 million jobs are unfilled nationally, meaning there are fewer people in the labor force than there were before the pandemic began in early 2020. Moody cited three reasons for that fact.

  • There is a portion of the workforce that is concerned about their own personal health or are focused on taking care of a relative and have opted out.
  • “Another group we saw leave in large numbers were married females,” he said, many because of the implementation of remote education. “They have started to come back.”
  • A third group falls into the demographics of the aging workforce, many of whom started to leave the workplace earlier than expected. “We don’t think they are coming back,” Moody said.

Other trends that he talked about that impact the economy included:

  • Automation that is an option to offset the labor shortage, albeit one that will take time to impact sectors like home building.
  • The housing market which Moody said had been “chronically and persistently undersupplied for more than a decade.” That said, he also observed that he believes the “housing market is normalizing.”
  • Consumer debt which he said declined during the pandemic as individuals and families had more discretionary income and used it in part to paydown debt.

On the matter of inflation, Moody observed that “it’s going to be a slow trip” to get it down from the current 8.5 percent rate to what the Federal Reserve Bank (Fed) wants – 2 percent. He suggested that it would be at least the end of 2023 to the middle of 2024 before than was achievable and unexpected world events could slow, stall or even reverse declines.

“The Fed thinks the unemployment rate is too low,” Moody added, saying a rate of 4.5 percent would be a comfortable level. Why is that? He observed that the Fed really can’t do anything about the supply – the number of people filling jobs, so working on the demand side is where the agency is focused as a way to reduce inflation.

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