Uric Dufrene, Sanders Chair in Business at Indiana University Southeast, delivers his mid-year economic update Thursday. The event was held virtually. Screenshot from virtual presentation
A "Now Hiring" flag flies in front of Which Wich Superior Sandwiches in New Albany on Thursday. Daniel Suddeath/News and Tribune
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SOUTHERN INDIANA — Uric Dufrene stuck to his November predictions related to job recovery and a return to normalcy across employment sectors by the end of the 2021, but he warned that labor shortages could push employers into investments in automation.
Dufrene, Sanders Chair in Business at Indiana University Southeast, was the keynote speaker in the university's Mid-Year Economic Update that was held virtually Thursday.
Overall, Dufrene's outlook was a positive one for Southern Indiana and the nation.
“I still believe that the region will fully recover lost jobs by the end of 2021,” he said.
But challenges remain, and one of the biggest is the availability of employees.
Dufrene said the Louisville Metropolitan Statistical Area, which includes Floyd County and Clark County, was a tight labor market even before the pandemic. But the issue is being complicated by an even smaller labor force as businesses reopen and attempt to return to full service.
“Until we see a resumption or an increase in the labor force, we'll continue to see this tight labor market,” Dufrene said.
And, a small labor force could have future implications.
Dufrene said employers are investing more in capital to account for the lack of employees. The move means there could be fewer jobs in some sectors in the future.
“If you cannot fill positions, then a business owner has to decide, in order for us to meet this demand, and there's a lot of demand right now, can I do this by automating some processes,” Dufrene said.
Advancing automation and depending more on machinery as opposed to employees also has wage and training implications.
A wages survey for five Southern Indiana counties, including Floyd and Clark, showed average pay increased by about $92 a week for the fourth quarter of 2020 compared to the previous year.
“When I took a look at this, I couldn't believe what we were seeing,” Dufrene said. “We're seeing total wages go up, but fewer jobs compared to the previous year.”
It remains to be seen as to whether the elevated pay is due to wage inflation, but Dufrene said a trend could form where employees in some sectors receive higher average pay because of automation.
Essentially, employers will need to hire employees with advanced training and skills to work in an automated-leaning work environment. Those employees will earn more on average, but the employer will require fewer laborers to meet demand, Dufrene said.
Such a scenario means there will be even more emphasis moving forward on educational attainment and advanced training, he continued.
There's been disagreement on many fronts as to why the labor market is so tight, with some believing increased unemployment benefits are keeping people out of the workforce. Others have suggested concern for safety during a pandemic and lack of opportunities to attain a job that pays a livable wage have stifled the labor market.
One topic that most everyone agrees on is that the U.S. jobs report for April was dismal. Experts believed the country would add about a million jobs, but instead only recorded about 267,000 gains.
“Last month was a big disappointment,” Dufrene said. “I do believe, however, going forward you will see payrolls increase from last month.”
And there are plenty of job openings available.
Dozens of Southern Indiana businesses — restaurants, industries and retail shops — have signs posted asking for help.
Help wanted
There are record amounts of job openings nationally. In Southern Indiana, compared to January 2020, Dufrene said there's been a 62% increase in job postings for tractor-trailer drivers, and a 95% increase in openings for freight workers over the past 30 days.
Those openings show there's a great need for moving supply, Dufrene said.
Consumer behavior has also been affected by the pandemic. There's been pent-up demand and many households have additional money due to stimulus payments.
Dufrene said retail sales have increased dramatically, and restaurants and businesses related to travel are seeing a steady uptick in activity as people are getting out of their homes with restrictions lifted.
But Dufrene doesn't anticipate the current spending habits will last. Instead, he said households are more likely to take a “never will this happen to me again” approach.
“I believe long-term, after we work through the pent-up demand of the pandemic, we will likely see elevated savings rates, and we will likely see more frugality and cautious spending,” he said.
The IUS economic outlook events occur twice a year. The university is also hoping to get other in-person events back on its schedule in the coming months, including the Sanders Chair Speaker Series.
IU Southeast Chancellor Ray Wallace said such events are part of the university's commitment to Southern Indiana.
“Our primary mission here at IU Southeast is to educate our community,” he said. “As educators, we are committed to helping our region thrive by providing an educated workforce.”
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