Growth in an Uncertain Economy: You Asked, Experts Answered

During our February 2023 Market Pulse Webinar, we explored the national and regional insights purpose-built for your customer journey, whether you are reacting to rapidly changing consumer trends or trying to strategically capture the influx of small businesses in the market. Employment, technology, and delinquency were top of mind during our February 16 question-and-answer session. Our webinar presenters and panel of experts answer your questions below. 

The presentation started off with introducing our Chief Economist, Amy Crews Cutts from AC Cutts & Associates and Jesse Hardin, Risk Advisor from Equifax, who demystified key macroeconomic and consumer credit insights. Then, commercial expert Patrick Reily from Uplinq went over what is currently going on in the commercial market which you can find in our recap blog.

For employment, do we know how much of the data shown in the presentation is new jobs vs. filling jobs left from lock down?

Amy Crews Cutts: Implicit in this question is whether we can match previous jobs with new hires. We can't but what I can say is that total employment is higher now than pre-pandemic but not as high as it would be if there had not been the pandemic and lockdowns. That is, it has not returned to the pre-pandemic trend.

The Philadelphia Federal Reserve Bank recently publicized that it would be publishing its own early benchmark data for state payroll employment each quarter, essentially implying that the Bureau of Labor Statistics is overstating its data and the Philly Fed’s data offers more accurate and timelier estimates. What do you make of this? 

Amy Crews Cutts: The Federal Reserve Bank of Philadelphia is correct I believe, but we won't know for sure until the Bureau of Labor Statistics (BLS) does their annual revision in a few months. The issue is simply that the monthly BLS employment reports rely on a "small" sample of about 131,000 firms representing some 670,000 establishments (think locations). Each quarter, the BLS does a bigger count covering some 11 million establishments and it publishes this data, in a monthly table, about 5 months after the quarter ends. The FRBPhil uses this quarter data to estimate the revision to the covered months to do a more timely update than what the BLS does annually each June. The research done by the FRBPhil indicates that their methodology closely matches the eventual BLS revisions and that they have greatly increased the accuracy of the data in a more timely manner.

What global trends do you think will shape the world economy in the next 5 to 10 years?

Amy Crews Cutts: I think the two biggest ones are related to the production of goods. And these are global in scope. First is supply chain reconfiguration for resiliency in addition to efficiency. For the past 40-50 years, we have been working on better efficiency and “just-in-time” delivery. The pandemic showed that our supply chain model is fragile, proven by widespread shortages throughout 2020, 2021 and continuing into 2022 (though it began to normalize a bit). So now, manufacturers are looking at diversifying their supply chains to increase resiliency which means giving up some cost efficiency. This is expensive and it will take time to execute fully.

The second is decarbonization. Small businesses are implementing known scalable technologies today, which are more expensive* than those they are replacing, but costs are falling fast. In addition, new technologies will keep coming that will be amazing, but we may not even know about them today. But this kind of transformation is expensive and will take time to adopt fully. Automation will of course be part of it, but it will not be the end of the worker. The jobs will change but the demand will remain. Whether the supply of workers with the right skills is big enough is of course always a concern.

Over the last few months we have seen delinquencies rise. Do you think we’ll see delinquencies continue to rise and reach pre-pandemic or '08-'09 levels?

Jesse Hardin: We do think delinquencies will continue to rise, however we don't think it will broadly be in every product by every score band. And unfortunately, we don’t have a “delinquency crystal ball.” We would continue to watch lower scoring consumers to monitor stress. We will also continue to see delinquency uptick in bankcard trends recently seen in the last half of 2022 as consumers build more balances on credit cards. This underscores the importance of continuing diligence on customer portfolio reviews so you have a better pulse on the credit stressors on your customer base.

For the complete experience, download the webinar deck and watch our full recording here.

And to learn how to navigate this market and stay resilient right alongside your customers despite global and domestic pressures, check out these recommendations. 

* The opinions, estimates and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any representation or warranty with respect to such material and should not rely upon it as such. Equifax does not assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice. The opinions, estimates, forecasts, and other views published herein represent the views of the presenters as of the date indicated and do not necessarily represent the views of Equifax or its management.