Indiana's outlook for 2022.

• Author: Brewer, Ryan

Quotes and quips about forecast risks, uncertainty and the unprecedented economic conditions would not do justice to the uncharted terrain where the U.S. and Indiana economies find themselves.

Turn on the radio or peruse a news outlet, and it would seem that each day brings another type of economic fallout resulting from the COVID-19 pandemic.

This doesn't mean that all is lost, but it does make it a challenge to know how to prioritize the economic risks and potential threats. We'll begin with the challenges and close with the better news, namely, we do foresee modest growth in the coming year.

Challenges

The following are likely the most concerning economic forces:

* Supply chain disruptions leading to too few goods on the shelves and resulting supply-shock price increases

* Labor shortages aggravating supply shortages, transportation bottlenecks and increasing production cost pressures

* Lower labor force participation, together with relatively low population growth, in Indiana constraining overall economic growth

* Labor market mismatch as employers seek candidates and skill sets that returning and new-entry workers do not have

* Slow reawakening by small businesses that do not have the financial resources and cushion to risk reopening in uncertain times

* Inflationary pressures resulting from too much money (fueled by ham-fisted federal stimulus responses) chasing too few goods

* Relative price adjustments complicating household budget/spending priorities across housing, energy, food and other necessities

* Pent-up demand for travel, leisure and hospitality constrained by labor and capacity and ongoing fears of health and safety given new COVID-19 variants

* Women and Black Hoosiers experiencing greater-than-average job losses in Indiana, threatening the financial security of households

* COVID-19 variants continuing to spread worldwide, especially among trading partners and, thus, exacerbating global supply chain constraints

At the heart of our current economic challenge set lies the ongoing COVID-19 pandemic, replete with its cadre of threats, realities, fears and unknowns. For example, one way the virus continues to hamper the prospects for output in Indiana is through its impact within the trucking industry. The Commercial Carrier Journal reports that we have a shortage of 80,000 truck drivers across the country, leaving manufacturing-oriented states like Indiana in the middle of the supply chain bottleneck. (1) With aging truck drivers and early retirements fostered by COVID-19, as well as logistics interruptions for shipping, the problem is only amplified. In spite of the virus, we have come a long way from one year ago, a time when we had neither vaccines nor vaccinated people. Now, we have both.

COVID consequences

That said, increasing rates of vaccinations throughout the world and the broad acceptance of COVID-19 protocols, such as using masks and other personal health protection measures, have created a workable new-and-hopefully-temporary normal. While there will be the occasional household quarantine, across-the-board shutdowns appear to be an erstwhile strategy. Over time, we can expect that the currently seen economic vertigo in the economy will work itself out and we will return to the relatively mundane quandary arising from the fusion of monetary stimulus, fiscal actions, consumer demand, savings rates, technology and the like. Until then, however, we will continue to experience economic turbulence born from COVID-19, and Indiana is no exception.

Indiana has not fared as well as the nation as a whole on the vaccination front. As of this writing, 50% of...