It's a new year, but a lot of the economic challenges look awfully familiar.
A worker shortage. Inflation. Supply chain disruptions.
Even so, prospects for growth this year remain strong after a bounce-back year in 2021, said James Glassman, head economist for commercial banking at JPMorgan Chase.
"So we're kind of back on track," he said.
Here's how Glassman sees things shaping up in key areas:
1. Employment picture and worker shortage. AÂ dominant theme of the recovery is businesses struggling to fill a plethora of job openings. That hasn't changed. Some businesses have gone to the extent of trimming their hours of operation.
On the flip side, workers have lots of options, Glassman said.
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"Honestly, the jobs situation for most people is quite decent," he said. "Unemployment is almost back to where it was (pre-pandemic). A lot of folks dropped out. But everybody knows there's plenty of jobs out there if you want to come back. You just look at the help-wanted signs. And pay is doing a little better."
As businesses have struggled to find new hires, they have learned how to cope and operate more efficiently.
"Businesses are finding they've got to pay workers more, in order to get them and to retain them," he said. "But it's not really a threat to profits, because if you're more efficient, then you can justify better pay. I think it's really a win for everybody: a win for the business community and a win for the worker."
"I have a feeling over time, you're going to see a lot of those folks coming back in. … We've gotten used to working at home, being at home, getting benefits from unemployment insurance," he said. "But that doesn't go forever. Leisure is great – people have gotten used to having a little more time, but that doesn't pay the bills. So I think you'll probably see some normalization."
Glassman said the worker shortage is an issue that was fueled by Baby Boomers retiring and exacerbated by the pandemic.
"Up to 4 million people dropped out of the job market," he said. "That will get solved slowly. But I think what that did is, it underscored how big this challenge was becoming, and they're making people realize it's not going away any time soon. You're going to have to figure out ways to make the working environment more attractive, to get people and to keep them."
2. Inflation and supply chain disruptions. Glassman expects that pricing pressures and supply chain problems will eventually ease. The inflation and supply chain issues are linked, he said.
"I think we're going to see (inflation) settle down, because honestly, this just kind of came out of the blue," he said. "This is a very different kind of inflation than we normally are used to looking at. It happened because businesses are not able to get the parts – their supply chains are all choked up. Things at the ports are all jammed up."
The U.S. auto industry, which has struggled to get its hands on microchips for new vehicles, is a prime example, Glassman said.
"Sales are pretty low because the dealers don't have the cars on the lot to sell," he said. "What happens is, everybody goes and they bid up the price of a used car. That's a real big part of what's going on in the inflation measure."
The Federal Reserve Bank of New York has created a barometer to track global supply chain pressures, taking into account factors like shipping rates. The index "seems to suggest that global supply chain pressures, while still historically high, have peaked and might start to moderate somewhat going forward," Federal Reserve researchers wrote earlier this month.
3. Small business optimism. A JPMorgan survey found small and mid-sized business owners were generally upbeat about 2022, in spite of the well-documented obstacles.Â
"It's because the business community doesn't see these things as a threat to business," Glassman said. "They see them as things to figure out. It's not that they think these things are going to kill the economy. It's that they realize that if they can figure out and work around it, there's more business out there for them."
Many of the challenges small businesses face are happening because "business is good, the recovery is moving pretty aggressively," Glassman said. "They're not signs of things that are a danger to the economy. They're signs of a robust economy."
The JPMorgan survey was conducted in November, before the rise of the Omicron variant. But based on his recent conversations with businesses, Glassman believes the results wouldn't look much different if the survey were taken now.
"You're not really hearing anybody say, 'We're going to have to think about locking down the economy again,' " he said. "There's a lot more focus on testing and getting the rapid tests out and wearing masks and all that."
4. National economy. Overall, the economy has rebounded remarkably fast from the pandemic-driven shutdowns, Glassman said.
"All the things that people worry about – the difficulty of finding workers, the supply chain bottlenecks, the price pressures – these are all the result of a rebound that was much more resilient than people expected," he said. "The fact that we were able to sort of recover the ground we lost by the end of 2021, within two years, it's pretty impressive when you think about the kind of dislocation we had."
5. Industries still under pressure. Manufacturing, for the most part, has been "thriving" during the pandemic, Glassman said. But the auto industry remains challenged by the chip shortage, cutting into automakers' ability to sell new cars and trucks.
Aircraft manufacturing is also struggling, mainly because of a drop-off in international travel, Glassman said. Domestic air travel has rebounded strongly, although business travel is still lagging, he added.
Certain other sectors are also facing pressures. The Centers for Disease Control and Prevention has advised Americans to avoid traveling on cruise ships.
"Anything connected to hotels, aircraft manufacturing, air travel, tourism – that industry still has upside," Glassman said.