The economy we knew before COVID-19 may be closer than we think, says M&T official Peter Kneis during CenterState CEO meeting
By Aaron Gifford
These are uncertain and particularly unusual economic times: New and used cars selling at sticker price; grocery stores with bare shelves; fast food restaurants or retailers offering astounding starting wages but still unable to fill positions; businesses closed due to staff shortages. And yet, unemployment rates are low and housing markets are red hot.
Regardless of politics, supply chain issues or COVID-19, these trends are uniform across the nation. But the more familiar economy we knew before COVID-19 may be closer than most people think, a noted economist recently told a group of local leaders and business professionals.
“The question is, can we get back to pre-pandemic levels?” Peter Kneis, M&T group vice president for commercial banking, said in a recent interview. “Maybe, if everyone can embrace some changes.”
Kneis presented the region’s 2022 Economic Forecast in January to members of the CenterState CEO. He said that, at the national level, the U.S. economy is being disrupted by four key drivers: labor shortages and wage costs, supply chain disruption, pent-up demand and savings, and inflation.
As for the labor market, private sector employment is 2.1% lower than before the pandemic, with almost 3 million jobs (16,000 in the Syracuse metro area) that still haven’t been recovered. But at the same time, there are not enough workers to fill available jobs.
“There’s a job and a half for every person who is unemployed,” Kneis said.
“And people want more. In some cases, the expectation is 20% or 30% more than what we saw a couple years ago.”
The situation, nationally and locally, is more complicated than just the number of jobs compared to the number of available workers. In many places, the jobs require a certain amount of experience, credentials or education levels that are hard to find. Moreover, millions of people are not ready to go back to work if COVID-19 is still a threat.
“Political views aside,” Kneis said, “unemployment benefits were good. People need an incentive to work.”
The unemployment rate, currently below 4% nationally, is based on tallies of people applying for benefits. It does not factor in people who are not looking to return to the work force. In Syracuse, the unemployment rate through November 2021 was 4.7%, compared to 4.6% in Rochester, 4.0% in Albany, 5.0% in Utica-Rome, and 5.1% in both Binghamton and Buffalo.
Wages, meanwhile, are increasing at the fastest pace in 20 years. Kneis said the average increase is about 3.6% per year.
Bank deposits are also at the highest amounts in recent history, due to past stimulus checks coupled with the fact that people were not going out to spend money. The question is, Kneis said, how will that money be spent — investments? goods and services? vacations?
“And, of course you have inflation,” he said. “Everything costs more now than it did two years ago.”
‘The question is, can we get back to pre-pandemic levels? Maybe, if everyone can embrace some changes.’
In the Syracuse metro area, employment in the business and professional services sector has surpassed pre-COVID-19 levels, at 101%, thanks to workers in those types of jobs being able to work from home. Remarkably, transportation and warehousing has also spiked upward, at 106%. Kneis attributes that trend to consumers ordering goods online in lieu of shopping in person. And manufacturing has remained stable, with only a 4% loss of jobs since March of 2020.
“The goods made in factories are still needed,” Kneis said, adding that local factories pay well and those that are unionized have a loyal group of workers.
The Syracuse area leisure and hospitality sector, which includes restaurant and hotel jobs, is only at 82% of pre-COVID-19 employment, though still up 42% from where it was in May 2020. This is because many local eateries closed for good after the pandemic began, and many have reduced hours due to staff shortages. Hotels, of course, lost business because far fewer people are traveling these days. Healthcare and education jobs, meanwhile, are at 90%. And retail is still 6% below pre-pandemic levels.
The good news is that most Upstate New York cities have seen population increases since the pandemic began.
According to U.S. Census figures for the period of 2010 through 2020, Buffalo topped the list with a 6.5% population hike in that 10-year period, followed by Syracuse at 2.4%, Albany at 1.4%, Binghamton at 1.3% and Rochester at 0.4%.
“All of the sudden, cities are getting cool again,” Kneis said, adding that younger adults make up a sizable chunk of the urban population hikes across Upstate New York.
Most of the counties that encompass Upstate cities have also reported population increases, including Erie County (Buffalo) at 3.8%, Albany County at 3.5% and Monroe County (Rochester) and Onondaga County (Syracuse) both at 2.0%. Broome County (Binghamton) saw a 1.0% population decrease.
Regarding home sales, Kneis added, the inventory is still low, asking prices in most places are still increasing and it continues to be a sellers’ market, though this activity is expected to cool down when interest rates go back up.
Going forward, Kneis advised, local governments and business leaders need to embrace some of the changes that have already taken place in the past two years if they want to make Central New York a place where people want to live and work.
“With labor,” he said, “you have to think about how and where your employees work.”
Kneis concluded that the region could benefit tremendously from federal infrastructure funding planned in the months and years to come.
“It’s a great opportunity to juice the local economy,” he said.