CANFIELD, Ohio – As long as there are enough jobs in the labor market, the U.S. economy should be able to weather any turmoil thanks to continued consumer prosperity, a First National Bank economist said Thursday.
“I’m optimistic,” said Ahmed El Nokali, managing director of capital markets at FNB, after speaking at the Youngstown/Warren Regional Chamber’s annual economic forecast breakfast at Waypoint 4180. “I know it’s difficult sometimes when we have headwinds, but I think from the fundamentals through 2024 I’m relatively optimistic.”
El Nokali said that if the U.S. economy falls into recession, the overall strength of the banking sector, the oversupply of job openings across the country and consumer spending are likely to cause the recession to be very short and superficial.
“We have a labor shortage,” he said. “Under this premise, I am convinced that the consumer will continue to drive the economy in many jobs through 2024 and beyond.”
Today, there are 1.5 jobs available for every unemployed person in the labor market, he added, up from more than two jobs for every unemployed person at the start of the recovery from the pandemic.
Those who left the workforce during the pandemic are returning, particularly women between the ages of 25 and 54. “Some are returning,” he said. “Men’s participation rates are increasing but still have the opportunity to reach the levels of two decades ago.”
Normally, a recession would lead to job losses, he said. In the event of a “soft landing” or “no landing” situation, the vacancies are lost, not the jobs.
Despite high interest rates and inflation, consumers’ net worth increased by almost 40% on average between 2019 and 2022, El Nokali said. This is important because consumers now make up 70% of the country’s gross domestic product, or GDP.
“I think there’s a bigger buffer right now than a lot of people expected,” he said. “The pandemic, the response to the pandemic — I think the money that went into the system — was underestimated.”
Another positive trend pointed out by El Nokali concerns corporate debt and its management during the pandemic. Before the Federal Reserve Bank began its series of interest rate hikes last year, many companies took advantage of low interest rates during the pandemic and refinanced their debt at a fixed interest rate.
“At the beginning of this Fed rate hike cycle, we had rock-bottom interest rates,” he said. “Many companies took this opportunity to refinance their lock-in rates and carry them well into the future.” Additionally, corporate default rates are far lower than economists would generally expect in a higher interest rate environment.
He noted that the Federal Reserve’s traditional policy of raising interest rates to cool inflation and the economy appeared to have no impact on consumer spending or the labor market, while corporate profit margins remained healthy.
“We are in a fantastic position,” considering this economic segment.
However, in the long term there are concerns about US debt, said El Nokali. Demand for buying U.S. debt appears to be waning as the government continues to issue record amounts of debt, he noted.
“This is worrying,” he said. “I think it’s a long-term concern.”
In the short term, however, it could have a positive impact on the overall economy from an economic perspective.
That optimism is also reflected in local economic trends, according to Guy Coviello, president and CEO of the Youngstown/Warren Regional Chamber.
Coviello said the number of economic development project managers has exploded this year, particularly related to megaprojects. These are large-scale developments such as the Ultium Cells LLC plant in Lordstown, which represented a $2.3 billion investment and created more than 1,100 jobs.
“Throughout three-quarters of 2023, we will be managing more economic development projects than we could ever imagine in the history of this activity.”
Typically, the chamber would receive about 50 leads for a megaproject every two years. In 2020, for example, the chamber processed 55 leads and one megaproject, Coviello said.
Then, in the wake of the pandemic, the chamber saw a 20% increase in leads in 2021, three of which were for megaprojects, he said. This trend continued in 2022, with a further 20% increase in lead traffic, including seven for megaprojects.
“By the end of this year, we are expected to receive leads for 108 projects,” he said. In the last three quarters, the chamber has received 18 proposals for megaprojects and expects to commission more projects by the end of 2023.
Coviello said the projects completed and under construction are expected to create 1,450 jobs over the next two years.
Those projects, scheduled to be completed in the next two years, are expected to create an additional 3,505 jobs and $1.4 billion in capital expenditure, he said.
Coviello also presented data showing a small turnaround in population trends, housing conditions and poverty rates in the Mahoning Valley.
A USA Today study showed that the Mahoning Valley has the highest percentage of millennial homeownership in the United States at 74%, Coviello said. “This is the most critical population of our current and future workforce,” he said.
Coviello, who previously highlighted the Mahoning Valley’s 40-year population decline, cited a recent Deloitte study that looked at population trends between 2020 and 2021 for the Youngstown-Warren metropolitan statistical area.
The population increased by 1%, Coviello said.
Additionally, the poverty rate across the Youngstown-Warren MSA has declined by 2%, while it has remained stagnant nationally, he said. And those in the region who have a bachelor’s degree or higher in the region also increased during this period for the first time since 2015.
“Given all the other things we’ve seen with megaprojects, where megaprojects have yet to come online to become part of our supply chain, I feel like this is a trend,” Coviello said.
Pictured above: Ahmed El Nokali, managing director of capital markets at First National Bank.
Copyright 2023 The Business Journal, Youngstown, Ohio.
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