MAY 1-7, 2023 SPRINGFIELD BUSINESS JOURNAL · 21 NEWS Springfield Business Journal’s 2023 Economic Growth Survey is coming soon to an inbox near you, marking the fifth year area business leaders will be polled regarding current and future needs and plans for personnel, capital, real estate, expansion, contraction, retirement and more. In 2019, SBJ set out to capture real-time data – not being measured or readily disseminated elsewhere – that would aid area businesspeople in informed decision-making and that could serve as a guide for local economic development. Thanks to an overwhelming survey response in that first year, we were able to capture baseline data that allowed us to establish a Springfield business confidence index one year prior to a pandemic that changed the world. The survey went out twice in 2020, pre- and post-COVID onset. Again, the time dedicated by local business decision-makers to respond to these surveys proved invaluable to measuring the impact of the pandemic and predicting future needs in a way that likely shortened and informed local business recovery. In 2021, some very solution-oriented discussions began to take place surrounding survey data that forecasted increasing workforce needs paired with additional barriers to workforce attraction and/ or reentry with regard to housing and child care needs. In 2022, discussion group participants visited several new local development sites of note in Ozark, Republic and Springfield in an effort to identify additional opportunities. So, let me first express my gratitude. Thank you for taking the time to respond to these surveys. Thank you also for thoughtful participation in forum discussions over the last four years in person and on Zoom. Thank you for your willingness to help other local businesses recover and prosper by sharing your candid observations and forecasts. Thank you for those who joined us in 2022 on tours and previews of the Amazon, Finley Farms, Sports Town and Forward SGF facilities. Your time and participation made all the difference! Now for the ask … The 2023 survey is no less important than those that preceded it. I urge you to take the 10-12 minutes required to respond to the survey questions that will be delivered to you via email or that you can access by scanning the QR code accompanying this column. The primary survey is clearly geared toward management level decision-makers. If you do not function as a decision-maker within your organization, I would urge you to forward the survey to appropriate people in your business. Solving today’s complex problems requires an engaged community with multiple perspectives. That’s why SBJ is investing in this initiative and why we are asking you to once again invest your time. Just as we were unaware of the changes that were looming in 2020 as the pre-COVID survey circulated, there are most certainly bumps ahead that are currently unknown to us. Really measuring and understanding the known variables is key to navigating the path and to proactively creating the environment where local businesses can thrive. Here’s my promise: You can expect the time invested here to come back to you in multiples. Springfield Business Journal, along with the 2023 sponsors of the Economic Growth Series, are committed to bringing this data back to the business community in a very digestible fashion via six special pull-out publications that will accompany your regular print edition in the months to come. Whether you have followed and participated in this data collection project since its launch in 2019 or your involvement begins today, your input is valuable. Thank you in advance for your participation. Springfield Business Journal Publisher Jennifer Jackson can be reached at jjackson@sbj.net. Where does the Fed go from here? Economic survey captures needed data to navigate road ahead For more than a year, the Federal Reserve has been waging a war against stubbornly high inflation, which has been raising the cost of living for Americans. The U.S. central bank’s strategy has been to tighten the money supply in the economy through a series of interest rates hikes designed to slow economic activity and eventually lower prices. It’s a tightrope walk for the Fed: Tighten too little and keep inflation elevated for a longer time as it attempts to engineer a soft landing of the economy or act too aggressively and risk pushing us into a recession, or a hard landing. So, how did we get here, and where are we headed? Policy matters In the decade leading up to 2020, the Fed supported the U.S. economy by keeping interest rates incredibly low. This policy created a healthy U.S. money supply – the total sum of currency and other liquid assets flowing through the economy – and allowed businesses and consumers seeking credit easy access to it. Then the COVID-19 pandemic and subsequent lockdowns hit in 2020. The U.S. economy whipsawed from a position of relative strength to a recession within the span of about 30 days. At the onset of the pandemic, the federal government, including the Fed, pumped trillions of dollars into the system to buoy the economy. This fiscal medicine worked but with a significant side effect: too much stimulus that led to inflation, which started to rise in late 2021. By spring 2022, inflation rates surged to levels not seen in more than 40 years. The Fed’s response was to enact an aggressive strategy of raising its federal funds rate – the interest rate charged by the Fed to banks and other lending institutions on funds borrowed overnight. Since March 2022, the Fed has hiked interest rates nine consecutive times, raising the federal funds target rate essentially from 0% to a range of 4.75%-5% today. Wait for it Is it working? Unfortunately, it’s too early to tell. Inflation, as measured by the consumer price index, moderated from its peak of 9.1% in June 2022 to 5% in March. It’s an improvement but still far higher than the Fed’s 2% inflation target range. And there could be unintended consequences. It typically takes 12 months for the full effect of a single rate increase to work its way through the U.S. economy. Given the Fed has made nine rate increases in just over a year, it will take some time for us to realize the full impact of this strategy. One thing is certain: The economy, is cooling. Activity in the manufacturing and service sectors, as measured by the purchasing manager’s index, has contracted five straight months. Commodity prices have fallen on items like raw materials and oil. Soft or hard landing? The U.S. labor market has fluctuated some, though the unemployment rate remains around 3.5%. But keep this in mind: Employment is a very coincident indicator to recessionary conditions. In other words, by the time jobs are declining significantly on a regular basis, it’s likely the economy is already in a recession. The Fed has indicated it’s near the end of its rate hiking program, with another increase possible in May. Commerce Trust believes the Fed will follow through on the increase and then keep rates steady for the near term as the economic cycle plays out. Whether or not the Fed achieves a soft or hard landing is still in play. Stay tuned. Don Davis is a senior portfolio manager for Commerce Trust Co. in Springfield. He can be reached at don.davis@commercebank.com. GUEST COLUMN Don Davis PUBLISHER’S PERSPECTIVE Jennifer Jackson OPINION WE WANT TO HEAR FROM YOU Springfield Business Journal welcomes responses from readers. Letters to the editor should be brief, preferably under 300 words, and may be edited for clarity, style and length. No anonymous letters will be printed. Send letters to sbj@sbj.net. Please include your full name and the city where you reside. Rates and Recession The 2023 Economic Growth Survey is now open: Since March 2022, the Fed has hiked interest rates nine consecutive times.
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