b'14 ECONOMIC UPDATEcontinuedfrom pg. 13markets becoming moreof very deep economic downturns, contractors will pervasive, theres everycontinue to be scrambling for talent and that will push reason to believe thatwages higher.the pace of consumer outlay growth will softenWhile employers never like having to raise wages, going forward, said Basu.putting a cap on paychecks has taken a back seat to a more urgent concern: keeping valuable talent For the immediate future though, consumer confidencefrom jumping ship. The big question now is not so seems secure, due primarily to the healthy job market.much who can pay the most for entry-level and skilled The unemployment rate has been very low, bouncingjobs, but what can they do to retain these folks within around between 3.5% and 3.8% for some time, saidtheir companies, said Palisin. Manufacturing in the Hoyt. A slowdown in job growth orchestrated by theUS over the last year has continued to hire pretty Federal Reserves interest rate hikes should moderatesignificantly, and were not seeing a lot of layoffs, things. We think unemployment will trend upwardso that tells you that many companies are hoarding a bit, ending 2023 around 3.9% and 2024 aroundtalent. Employers are fine tooling their operations 4.2%. (Many economists peg an unemployment ratein the areas of workplace flexibility, benefits, and of 3.5% to 4.5% as the sweet spot that balances theculture changes.risks of wage escalation and economic recession.)Housing marketsLow unemployment may fuel happy sentiments amongGiven the generally upbeat consumer sentiment, citizens, but it presents employers with two practicalprospects are good for the housing sector, an important challenges. The first is the need to raise wages todriver of the overall economy. New home sales are attract sufficient workers. Wage and salary incomerunning at the top end of the range set in the decade Dedicated to keeping its members at the forefront in their industrygrowth has been strong, fueled by a tight labor market,preceding the pandemic, said Yaros. One reason said Hoyt. Were expecting it to increase just a shadeis that a lack of existing inventory is pushing buyers over 5% both for 2023 and 2024. In 2022 the growthto consider new homes. The construction industry is was a little over 8%. stepping in to close the gap, and housing starts have exceeded expectations.Reinforcing the estimates of the economists, Palisin said his members have had to hike their compensationThe construction of new homes is being fueled by a to remain competitive among themselves and othercold hard fact: There arent enough existing homes economic sectors. The groups entry level hourlyto meet demand. The 3.1 months supply of existing wages increased an eye-popping 8% to 10% in bothhomes remains well below the four to six months 2022 and 2023, far higher than the historic averageof inventory that is considered a balanced housing of 2.5% to 3.0%. market, noted Yaros. Strong demand caused a 10.3% increase in the median price for existing homes in Problem No. 2 is a scarcity of workers. Based on2022, and a 0.6% increase in 2023. A correction of survey data, the number one issue for construction1.1% is expected in 2024.firms continues to be the inadequate supply of skilled workers, said Basu. Thats not just a function ofFor an explanation of the scarcity, look no further the fact that the U.S. economy came screaming outthan the run-up in mortgage rates. The ultra-low of the pandemic in the form of a V-shape recovery.interest rates of existing mortgages amount to a Its a long term, structural, demographic issue thatstrong financial incentive for existing homeowners to transcends business cycles. America simply does notstay put. Current homeowners had refinanced their produce enough skilled craftspeople, and this impactsinvestments at 3% or 4%, noted Bill Conerly, Principal various industries, whether energy, manufacturing,of his own consulting firm in Lake Oswego, Oregon logistics, or of course, construction. In the absence(conerlyconsulting.com). Replacing what they had continuedon pg. 16The InsulatorDecember 2023'