FORECAST 2023


Bill Conerly, principal of his own con- sulting firm in Lake Oswego, Ore. “The decade from 2020 to 2030 is expected to have the lowest growth of working age population since the Civil War. One reason is the retire- ment of the baby boomers; another is the low rate of immigration over the last few years.” Palisin agreed that a labor shortage


is going to be a long-term condition, and said his members are making moves to lessen the effect. “Employers are trying to be creative in the way they keep and retain workers, not only by offering higher salary rates but also by extending benefits and encouraging work flexibility. They are also investing more in automa- tion for labor-intensive tasks.”


Retail Slowdown If high employment levels can stress the bottom lines of many employers, they can also fill workers’ pockets with spendable cash. And flush consumers can help drive a robust retail sector, an important slice of the economic pie. “Wage rates, as measured by the Employment Cost Index (ECI), remain very high by the standards of the last couple of decades,” says Scott Hoyt, senior director of consumer econom- ics for Moody’s Analytics. Even so, activity is decelerating at the


nation’s stores. “2023 is likely to be a challenging year for retail, with growth only at 2.8 percent,” says Hoyt. The pro- jected growth is well below the sector’s historic 4.3 percent average as well as the 8.3 percent increase expected when 2022 numbers are finally tallied. The recent trend is well below 2021 when a 17.5 percent increase was fueled by a consumer shift away from services and toward goods. A slowing economy is contributing


to retail’s deceleration, as is a pen- chant for post-pandemic consumers to shell out less cash on merchandise and more on services such as hotels, travel, and restaurants. Any softening of inflation from recent highs should also depress results since retail activ- ity is measured in nominal terms.


FIRST QUARTER 2023


Supply Chain Disruptions Higher wages and scarce workers are not the only forces depressing business profits. Another major factor is a rise in interest rates—the Fed’s favorite tool for fighting inflation. “The purpose of increasing interest rates is to drive down demand,” says Palisin. “So, our mem- bers are expecting to see a decrease in new orders that will impact the overall economy. Too, many of our companies have lines of credit that rely on floating interest rates. Rising rates will take a hit to the bottom line as companies decide whether to utilize those lines to support their cash flow and investments.” Adding further downward pressure are


disruptions in the delivery of goods that continue to plague companies large and small. “Supply chain problems have improved over the past year, but there hasn’t been the significant resolution we had hoped for,” says Palisin. “Random shortages in materials and deliveries are still plaguing our members, and that’s leading to backlogging of orders—compa- nies just can’t get the materials or parts.” The Russia-Ukraine war has worsened


the situation, notes Palisin. “The war has created an energy crunch and a disrup- tion in raw materials from that region that have trickled through the economy to exacerbate the supply chain issues.” Companies are responding by moving to reduce their reliance on China, he adds. “They’re sourcing from additional coun- tries to reduce disruptions.”


Housing Headwinds Housing, a key driver of the economy, has also entered a period of correction. “The underlying dynamics of the housing market are changing as lower affordabil- ity spurred by higher prices and mort- gage rates is starting to significantly weigh on demand,” says Yaros. Limited affordability is discouraging


consumers from signing on the bottom line. Median prices for existing single- family homes are expected to increase 11.5 percent when 2022 figures are finally tallied. That comes off a strong 18 percent increase in 2021. Any relief will only come in 2023, when prices should


Will We Have


A Recession? The accompanying article suggests an economic slow- down as the likeliest sce- nario for 2023. But what are the chances of a recession or an actual decline in busi- ness activity? While Moody’s Analytics


sets the odds at 50-50, avoid- ing a recession will require a bit of luck. “The U.S. econ- omy will enter 2023 being vul- nerable to anything that might go wrong,” says Bernard Yaros Jr., assistant director and economist at Moody’s Analytics. He pointed to risks such as a resurgence of the pandemic in China, a worsen- ing of the Ukraine war, and another energy supply shock that would hit consumer pocketbooks. Avoiding a recession will


also depend on a couple of things going right, adds Yaros. The ebullient labor market will need to cool down at a pace that softens wage increases without sparking economic turmoil. Most important, the Federal Reserve will need to success- fully tame inflation without allowing interest rates to spike the economy. Yaros, however, is optimistic. “We think infla- tion will steadily slow from more than eight percent to a pace that is consistent with the central bank’s two percent target by the end of 2023.”


Self-Storage NOW! 19


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48