Jobs in Cincinnati and Ohio have bounced back higher than what they were before the COVID-19 pandemic.
Here and across the country, unemployment hovers near lows not seen in decades as the economy rebounds − but consumers are miserable.
Economists blame still not-quite tamed inflation for undermining the optimism they might otherwise feel.
While the annual inflation rate slowed to 3.2% in October (the lowest in two and a half years), the cost of living is still 19.2% higher than it was in March 2020, according to the U.S. Bureau of Labor Statistics. Meanwhile, consumer confidence has slowly recovered from its all-time low in June 2022 as inflation began to abate, according to the University of Michigan’s Consumer Sentiment Index.
“The air is still thick with consumer anxiety reflected in a continuing consumer confidence decline through the second half of the year,” Dipanjan Chatterjee, principal analyst at Forrester Research and fellow at the University of Cincinnati’s Kautz-Uible Economics Institute, told The Enquirer. “Yes, inflation has practically halved since last year, but there is still the lingering pocketbook trauma from inflation as high as 9%.”
Local and Ohio jobs rebound
Jobs in Greater Cincinnati and Ohio have returned to pre-pandemic levels and grown still more through 2023, driving the unemployment rate to decades-long lows.
The Cincinnati region employed nearly 1.2 million workers as of September, having added nearly 25,000 jobs in the previous 12 months, according to the U.S. Labor Department. The metro area recouped its pre-pandemic employment level in April 2022 and now employs almost 43,000 more workers than it did in February 2020, just before the U.S. COVID-19 outbreak.
In April, Greater Cincinnati’s unemployment rate dipped to 2.8% – the lowest level recorded since at least 1990. As of September, the jobless rate was still at a very low 3.3%.
Meanwhile, Ohio returned to its 5.6 million pre-pandemic number of workers in April and has since added tens of thousands more. In July, the unemployment rate was 3.3% – the lowest recorded since at least 1976. It has only risen slightly to 3.4% as of September.
Inflation, consumer discontent and softer spending
Cincinnati, Ohio and America have their jobs back, plus a few more, but soaring inflation starting in 2021 lasting into this year has taken its toll on national and regional consumer confidence, according to the University of Michigan. Sentiment is a key concern for economists since two-thirds of the U.S. economy is driven by consumer spending.
Officials with the Federal Reserve Bank of Cleveland, which oversees Cincinnati as part of the central bank’s Fourth District, reported that businesses told them “consumer spending was flat to down” and that customers were cutting back where they could to cope with higher overall prices, according to the latest Beige Book report in October on recent economic conditions. Businesses from auto dealerships to high-end restaurants and real estate firms to construction companies said demand was slowing.
Even businesses dealing in essentials, such as Cincinnati-based Kroger, have disclosed signs of consumers economizing as inflation rose. So far in 2023, the supermarket giant has noted its house-branded goods were outselling national brands as shoppers have snapped up cheaper generic brands. Last year, Kroger said its overall identical store sales (which excludes the impact from new stores, mergers or volatile gas prices) rose 5.6%, but sales for house-branded goods increased 9%.
Consumer sentiment is soured by prices, politics
The University of Michigan’s closely-watched Consumer Sentiment Index hit an all-time low reading of 50 in June 2022 – the same month year-over-year inflation hit 8.9%, the highest 12-month increase in the U.S. since December of 1981. Sentiment in the North Central Region (which includes Ohio) bottomed out in July 2022, according to the university.
U.S. inflation jumped in April 2021 amid supply disruptions during the pandemic and trillions of stimulus spending from both the Trump and Biden administrations. It moved even higher after the Russian invasion of Ukraine in February 2022 and subsequent embargoes.
While remaining at lows not seen since 2011 following the Great Recession, consumer sentiment has recovered slightly as inflation has begun to slow: The year-over-year inflation rate has dropped from 6.3% in January to 3.2% in October, according to federal data. Consumer sentiment briefly rebounded to 71.5 in July, but has since slid back to a 60.4 reading in November as interest rates have climbed to recent new highs and dampened spending plans.
“The consumer sentiment may be dampened by high interest rates (on credit cards and consumer loans) and the cumulative effect of high inflation,” Iryna Topolyan, head of the University of Cincinnati’s Economics Department. “Although the rate of inflation has decreased significantly, the prices are still rising, it is just that the rate of their increase has stabilized.”
Interestingly, politics appears to play a major role in consumers’ confidence in the direction of the economy, according to the Michigan index.
While Republicans, Democrats and independents have all grown more pessimistic as inflation rose in recent years, there are big differences in how bad they view the economy. Their perspective also appears to be influenced by whether their party is in power.
Republican sentiment hit its lowest to a reading of 36 in August 2022, as inflation raged last summer. Independents were also down on the economy, but not as bad: notching a 52.6 that same month. Meanwhile, Democratic sentiment was also down but only at a 69.1 reading.
And the Democratic mood wasn’t even at its lowest. The Democrats were at their most pessimistic in June 2020 (when Trump was still in charge amid the pandemic) when their sentiment was 56.6. Conversely, Republicans were almost sunny, logging a 95.4 reading.
Democratic sentiment soared in early 2021 when Biden settled into the White House, while Republican sentiment plummeted in the same months.
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