There’s both good and bad news to report regarding America’s recovery from the Coronavirus (COVID-19) Pandemic-induced healthcare crisis and economic downturn, resulting in an 8.5 percent increase in the inflation rate from March of 2021.
That was among the financial data shared with some 250 businesspeople and 39 exhibitors representing Elmhurst and 23 other west suburban chambers of commerce at the 20th Annual Economic Outlook Luncheon held at Ashyana Banquets in Downers Grove on April 19.
Anna Paulson, Executive Vice President and Director of Research at the Federal Reserve Bank of Chicago, delivered the event’s Keynote Address in-person for the first time following her March 3, 2021, debut via Zoom video conferencing.
Titled “The Economy: How Did We Get Here and Where Are We Headed?”, Paulson’s power-point presentation highlight the “rapidity” of both America’s Coronavirus (COVID-19) Pandemic-induced financial crisis and the inflation-producing recovery.
Prior to his introduction of the Keynote Speaker, John Quigley, President and CEO of the Elmhurst Chamber of Commerce and Industry, thanked Westmont Chamber of Commerce and Tourism Bureau Executive Director Larry Forssberg for his collaboration and gave a brief history of the event—which started in 2003 as a joint venture of the WSCCTB and ECCI.
Carl Tannenbaum, Executive Vice President and Chief Economist at Northern Trust, served as the Keynote Speaker for the first five years and then William “Bill” Strauss presented for 13 years before retiring as Senior Economist and Economic Advisor in the Economic Research Department at the Federal Reserve Bank of Chicago shortly after the February 2022 luncheon.
“Our Keynote Speakers have provided essential insight into the working of the American economy—often predicting Bear-like challenges and Bull-like opportunities a year or more in advance,” stated Quigley, ECCI President and CEO since 1999.
Paulson stated that doing an in-person presentation after years of virtual meetings and events was much welcomed and an honor for her to follow in the footsteps of Tannebaum and Strauss.
Her presentation started out by highlighting the disparity between key economic factors, such as the increasing rate of inflation versus low interest rates and relatively “tight” job market versus historically-low unemployment rates.
Paulson reported that the “rapidity” of economic downturn was mitigated by the “rapidity” of the recovery thanks primarily to a strong fiscal policy response by the federal government, strong monetary policy response by the Fed and strong public health response.
“We developed vaccines in a record time,” stated Paulson, reporting that nearly 70 percent of the population is fully vaccinated, “and made them available to the masses.”
The increase in the rate of inflation is a by-product of an economic recovery from June of 2020 to today that has been both faster and stronger than anticipated. A number of factors have exacerbated the inflation rate such as both supply chain and job staffing issues, and rising food costs and sky-rocketing gasoline prices stemming from Russia’s war on Ukraine.
“Inflation and labor (concerns) might be the trade-off we will have to accept against a slower recovery and possible recession,” stated Paulson.
The Federal Open Market Committee (FOMC) is project continued low unemployment rates and for the inflation rate to moderate towards historical norms.
Factors reducing the inflation rate include a moderation in supply pressures and less-accommodative fiscal/monetary policy. Supply pressures include a shift in consumer consumption from goods back to services, supply response to higher relative prices and return of workers to the labor force.
“Will inflation moderate?” stated Paulson. “People’s expectations are for inflation to moderate.”
Household income has been buoyed through the pandemic by financial assistance at the federal level and increased unemployment insurance benefits, most wage growth has benefitted low- and moderate-income workers, and personal savings is higher than normal.
Consumer consumption has skewed toward goods (automobiles, electronics, etc.) over services (restaurants, entertainment, etc.) during the pandemic versus the traditional breakdown of two-thirds for services and one-third for goods.
An entrepreneurship anomaly coming out of the economic crisis is that a historically-high number of small businesses were created over the past two years.
“While bigger businesses can absorb higher costs (for labor, materials, etc.),” Paulson stated, “small businesses can be more nimble and adapt changes quicker.”
The luncheon program also included a power-point presentation on the Metropolitan Emergency Response & Investigation Team (MERIT) by Village of Westmont Chief of Police Jim Gunther, who is serving a two-year term as Chair of MERIT’s Executive Board.
Prior to the luncheon, Anna Paulson met in round table-style with participating chamber executives to learn more about the concerns of their member businesses.