Economist likes look of 2022 — kind of

COEUR d’ALENE — The good, the bad and the unknown.

Economist John Mitchell covered a lot of ground in a one-hour economic forecast 2022 on Tuesday before the Coeur d’Alene Regional Chamber.

Using charts and graphs, hand gestures and facial expressions, he talked about unemployment, the stock market, Idaho’s real estate prices, the world’s economy and yes, COVID-19.

“Think of inflation as a type of toxic brew and the hangover is uncertain,” he told about 100 people at the Best Western Plus Coeur d’Alene Inn.

Mitchell said most days, when you walk into a store, they have what you need. But because of COVID-19 issues, transportation woes, supply chain problems and labor shortages, some shelves have been empty — and may remain so this year.

“That's a part of the problem. Some of it is COVID related, but it puts upward pressure on prices,” he said.

Mitchell said things to watch for in 2022 include:

•Supply chain adjusting and improving

•Labor force changes - higher participating rates

•Evidence of easing inflation

•Omicron pattern of less severity

“The virus is going to continue to mutate and it will spread," Mitchell said. "We're gonna have to live with it for the rest of our lives. “

•An infrastructure bill — but who will build it, he questioned.

“I didn't see any unemployed construction workers in the parking lot this morning. So if you're going to spend X dollars on roads, bridges, that kind of stuff, where are the people going to come from?” he asked.

Mitchell also said that what happens in Ukraine, with some fearing a Russia invasion, does matter here.

“You look at what's going on in the Ukraine. Now, we might say now, who cares? Care.”

If Russia invades Ukraine, and the U.S. slaps sanctions on Russia, he said to watch energy prices.

“Global energy prices will soar,” he said.

Mitchell cited upside forces that include higher levels of COVID-19 vaccinations and other treatments; omicron is a mild variant; no shutdowns like 2020; rising wages; sound balance sheets; and solid inventory levels.

Drags on the economy continued to include COVID-19 impacts on airlines, hospitality, schools and supply chains; no stimulus money, inflation, diminishing excess savings and labor availability.

He expects 3-4% growth in gross domestic product. Idaho’s employment, which increased 4.1% in 2021, will increase 3 to 3.5%.

He said there will likely be higher levels of uncertainly surrounding COVID-19, which means a weaker first quarter.

“Remember, one year ago omicron did not exist and inflation was not a major worry,” he said.

Mitchell likes some of the changes he’s seen in response to the changing economy. In ways, it’s led to greater efficiencies as companies evaluated the need, for instance, that employees must come to a building. They have figured out ways to solve supply woes.

And customers have become more familiar with life without checkers.

“I have finally mastered self checkout at the grocery stores," Mitchell said as the crowd laughed. "That's a change in technology, our response to the current environment.”

He said Idaho topped the nation in population growth in 2021 by percentage, at 2.9%, followed by Utah, Montana, Arizona and South Carolina. Idaho will continue to attract more people this year.

And housing costs are expected to remain high.

All 50 states have rising home prices, Mitchell said, and Idaho was number one at about 35% based on the purchase-only index. Last was North Dakota, and their prices were up 10.5%.

"So you see this is a widespread pattern," Mitchell said.

Several Idaho cities — Boise, Coeur d'Alene, Idaho Falls, Twin Falls and Pocatello — are in the top tier of house price appreciation.

"We have an affordability issue in many places, smaller, attractive metropolitan areas," he said.

There are points of concern.

He worries about the “potential weakened link" between work and income.

He offered an example of a granddaughter who wanted a trampoline, and got one via federal stimulus money.

Good, she got what she wanted. Bad, she didn’t have to work for it.

“I don't begrudge my granddaughter a trampoline. But she didn't have to babysit, or cut lawns, or earn it. It came like manna from heaven sprinkled down,” he said, smiling. “I’m not sure that's a long-term positive."

He also pointed to cancellation of student debts and moratoriums on rent evictions as issues that could cause future problems.

“I’m not saying good, bad, indifferent, but it's an abrogation of contract. I worry about the long-term implications of that,” he said.

As he does every year in these eagerly anticipated presentations, Mitchell closed by putting his outlook in terms of a poem. It said, in part:

“Fear, old boomers, closed schools, paid not to work, are rationales for this state. Rising wages, open schools, more vaccinations, reduced benefits, may end the anomaly. The stage may be set for a productivity surge as we move toward a new normality.

"Fiscal policy is in flux with a trillion dollar infrastructure plan passed on which some Rs and Ds agree. Roads, broadband, airports, transit, rail and other hardware we might see.

"An additional $2 trillion of government entitlement expansion was crafted, a la LBJ. But Manchin, Trump, Sanders, Schumer, and Pelosi and a much smaller package is the likely way.

"We will learn to live with the virus and will cope with this test. Pandemic to endemic, invention and innovation, will serve us the best.

"Pessimism is raging in our social media-fueled existence, adaptability and flexibility will see us through with persistence."