Intel plan could help soften recession in Licking County
But banking expert says overall picture isn’t good
NEWARK − The nation may soon be in a recession, if it’s not already, although the record low unemployment somewhat contradicts that theory, a local banking expert said.
Brad Zellar, vice president at Newark-based Park National Bank, told a Granville Chamber of Commerce audience on Feb. 15 that high inflation, mostly due to a huge spike in government spending at the beginning of the COVID-19 pandemic, makes a recession likely.
The Intel project and related developments could help soften the recession in Licking County, he said, but Intel production will probably begin after the recession has ended.
Conflicting economic statistics, recovery from a worldwide pandemic and the largest commercial development in Ohio history all combine to complicate economic forecasts in central Ohio, but the overall picture is not good, Zellar said.
The contradictory statistics are everywhere. There were two consecutive
quarters of negative gross domestic product growth a year ago, which traditionally meets the definition of a recession. And, inflation soared, reaching 9.1%.
But unemployment remains at record low levels and inflation has declined for seven consecutive months to 6.4% in January. And, Zellar said, there’s been a good level of economic growth.
“There’s a decent chance we’re in a recession right now, and we’re really not in a great position from a consumer perspective to withstand that,” Zellar said. “We’ve seen all of that stimulus money – that’s all gone now.
“One of the positive things is the jobs reports have been good. We have recovered all the lost jobs during the
pandemic. If job growth continues, I think you’re probably going to see a recession that doesn’t last a whole long period of time and hopefully isn’t real deep.”
Licking County economy
In Licking County, unemployment has remained near record lows, ending the year at 3%. In May, Licking County employment hit an all-time high of 90,300, and in July the workforce reached a record of 93,300. The unemployment rate also matched an all-time low of 2.7% in May and November.
The January employment numbers in Ohio will not be released until March 14.
“Low unemployment -- that’s probably the sole thing that has kept us out of an official recession, in my mind,” Zellar said. “The fact the unemployment rate is so low.”
New car sales fell 19% in 2022, compared to 2021. Likewise, home sales dropped 14%, commercial building 1.6% and residential building 6.5% last year. Governments did well, with Licking County sales tax receipts up 6.5%, and Newark (8.1%), Heath (9.1%) and Granville (13.1%) all collecting more income tax.
The $20 billion Intel development will certainly help Licking County’s economy when production begins in 2025. Before that, however, the construction industry should get a boost from building for Intel, all its suppliers and other businesses seeking to capitalize on the commercial activity.
“Intel has the potential to totally transform the local economy,” Zellar said. “This is a big deal. From the amount being spent and hiring, and all the manufacturing that’s going to happen.
“It kind of depends on the timing. That thing’s not going to be ready for a few years, so if we go into a recession now, I don’t know that there’s a whole lot that’s going to attract new jobs. But, eventually, yea, we would be better able to weather challenging conditions when there’s that kind of demand for jobs.”
Commercial building in Licking County soared in January, compared to a year ago, with $19.9 million spent. It was just $7.2 million in January 2022. Residential building was down 23% in January and home sales were down 25%.
Inflation public enemy No. 1
Inflation remains the biggest enemy for a healthy economy, and the Fed will likely continue with four or five 0.25% interest rate increases this year, Zellar said.
Economic activity needs to catch up with the huge increase in money supply, Zellar said, but that will be a slow process.
“The Fed’s target for inflation is 2% and 6.4% is a long way from 2%,” Zellar said. “There’s going to be some real challenges to get that in my opinion. To get to 2%, you’re going to have to be a lot more aggressive.”
Zellar said following the COVID-19 shutdown, government stimulus payments in the form of unemployment benefits, paycheck protection program and business loans, which were not repaid, significantly increased the monetary supply.
“You see this huge spike in money supply,” Zellar said. “That was a direct result of what the government did to try and offset the effects of the pandemic.
“If the pace of that increase significantly exceeds economic activity, then you’ve got a lot more dollars chasing after the same or fewer amount of goods and services. And inflation follows, and that’s what we’re experiencing now.”
Zellar did not say the stimulus payments were the right or wrong approach to the worst pandemic since 1918.
“You could argue both ways,” Zellar said. “It certainly helped stabilize the economy. I think what people didn’t expect is that the level of stimulus would be so great that essentially it made people not want to go back to work.”
Returning to the workforce
John Trott, executive director of Greater Ohio Workforce Board, told a Licking County Chamber of Commerce Local Leaders breakfast audience on Feb. 22, that employers need to attract those who left their jobs and are not planning to return.
Licking County’s 2022 population of 182,159 included 143,670 people who were at least 16 years old and not institutionalized, making them potential workers.
There are 91,848 in the county’s workforce, which combines those employed and those actively looking for work, leaving 51,822 on the sidelines for various reasons.
Retirement is one reason those people are not working. About 2 million Baby Boomers retire each year, but in 2020 it was a record 3 million.
“They finally said I’m going to pull the trigger on this,” Trott said. “I’m out of here. They decided it’s not worth it for me.”
People were asked in a survey what would bring them back into the workforce. Flexible schedule was identified as the No. 1 incentive by Generation Z (18-24), Millenials (25-40) and Generation X (41-56), and a close second for Baby Boomers (57-plus). Employer retirement contributions was No. 1 for Baby Boomers.
kmallett@newarkadvocate.com