Midsummer economic checkup: Inflation's down, jobs are up

The local economy is growing, albeit very slowly, and there’s a good chance we’ll avoid a serious recession and instead, navigate to the much-discussed “soft landing.”

That’s the assessment of Northern Kentucky University economist Janet Harrah, who delivered a midsummer economic checkup July 21 to university leaders, business owners, and the public.

Janet HarrahOver the last four quarters, economic growth (as measured by the gross domestic product) has averaged 0.4% in Ohio and 1.2% in Kentucky, slower than the average of 1.8% nationwide, according to Harrah’s presentation.

Inflation is slowing, as the prices of food, gasoline, energy and everything else we buy have stabilized – not dropped – to more normal levels.

The local job market remains extremely strong. After unemployment spiked during the pandemic shutdown, the jobless rate has plummeted back to 3.1% in the Greater Cincinnati metro region, lower than the 3.7% U.S. rate.  

One notable bright spot is the strength of manufacturing employment, which has returned to pre-pandemic levels and continued growing. The number of factory jobs is up by a little more than 1% over May 2019 to 121,818, Harrah said.

However, “real wages,” a stat that takes into account inflation and measures actual buying power, have fallen compared to before the pandemic. Since the last quarter of 2019, real wages have fallen 1.5% in the metro region, while rising a meager 0.9% in the U.S. overall.

That may help explain why roughly half of the public says the nation is currently in a recession, even though we’re not. Although inflation has eased, some prices are still high, and the Federal Reserve’s campaign of raising interest rates has made buying car and houses more expensive.

“The lingering impacts of inflation and high prices coupled with higher interest rates are straining family finances,” Harrah says. “On the bright side, the Cincinnati labor market is still very robust with year-over-year employment growth above 3 percent, and the unemployment rate remains very low at just 3.1 percent.”

So far this year, the economy has performed better than economists expected it would. Harrah said economists generally forecasted a recession this year, and that now appears unlikely. Economists also predicted inflation would continue to rise at high levels through the year, but prices have moderated significantly.