Chair's Message

BY NICK LAMBROW

In my 35-plus-year career, I can think of plenty of times when the outlook was cloudy, but never a time when there was so much disagreement about the current state. Declaring whether the U.S. economy is in recession, which may seem simple, is suddenly a matter of opinion.

Without weighing in on that debate, I can say three things with confidence: Businesses are facing unprecedented challenges; finding qualified labor is paramount; and Delaware is well-placed to succeed.

Businesses have been whipsawed by a massive shift in consumer spending over the past year, from heavy purchases of retail goods towards services. Fiscal stimulus over the pandemic topped off checking accounts and waves of COVID- 19 variants kept consumers buying physical goods until this year.

Now the data shows a downshift in that spending and a consumer stepping back into travel, leisure, and professional services.

While a shift is occurring, there is a noticeable slowdown in aggregate spending as pandemic-era savings declined and consumers face higher prices at the pump and grocery stores. That inflation has pushed national consumer sentiment down to record levels in the widely watched University of Michigan survey. That same inflation has hit businesses that are facing record-high producer prices via a combination of expensive commodities and wage pressure.

Residential construction has also been hit by a near doubling of the national average 30-year mortgage rate as the Federal Reserve raised interest rates to fight inflation. Delaware builders have held their own, with housing permits rising 55 percent from pre-pandemic to a peak in mid- 2021 and have since come back down. Through it all, Delaware businesses have excelled. Those involved in the retail boom scrambled for labor in a challenging environment of the Great Resignation. This year our service companies are enjoying stronger consumer spending, but still face the labor challenge. A positive sign for our state is the regained labor force that now exceeds the pre-pandemic level, a feat not yet seen nationwide.

But with all the dynamic change that has occurred, Delaware firms require new skills and finding a good match still proves challenging. Competition for workers remains high. Job openings in Delaware reached 74 percent above the pre-pandemic level by the end of 2021, according to Indeed. That has fallen a bit in 2022, but still 54 percent higher than before COVID-19.

The outlook remains uncertain, but I expect Delaware businesses to remain strong. While business and workers have stepped up to meet the challenges, the competition for labor is a journey, not a destination. Our policymakers must continue to support workforce and regulatory initiatives that will enable the ongoing growth of our economy, worker productivity, and shared success.