The beginning of the pandemic was – to put it lightly – a historically tough time for businesses, many of whom were peering into the future in vain, trying to balance their books against the greatest unknown in generations.
Lance Monson, who manages risk and planning at Construction Engineers, Inc. knows all about it.
In the early days of the pandemic, construction material costs surged – about 15% from August 2020 to August 2021, Monson recalls. There were times that 2×4 wood was more expensive than 2×6 wood, a bizarre rarity. Price checks became a constant imperative for ongoing work.
“It got to the point where I was just saying to my team – no standard pricing can be used. If you’re doing a little project that has steel studs or wood studs, you need to get prices every day,” Monson said.
But now, as 2022 begins, it looks like some of the wildest moments of the pandemic economy are starting to fade. He’s looking to a calmer 2022 – even as a roiling labor market, ongoing inflation and Federal Reserve rate hikes all loom over the economy.
He’s not the only one. Business leaders around the upper Midwest are warily eyeing the next stage of the pandemic. But in contrast to earlier days, which were marked by big economic stimulus, snarled supply chains and scorching-fast inflation, 2022 looks like a potentially more balanced moment.
“In general, I would say that folks should feel really good about the coming year,” Sunil Swami, chief investment officer for Alerus Financial, said of the average upper Midwesterner. He argued that hot inflation will likely cool off soon – as a matter of both federal policy and of the economic paroxysms of the virus fading. He also pointed out that jobs are still easily found, with workers voluntarily quitting their jobs at a generational high.
But inflation could remain higher than it was pre-pandemic, and scarce labor will probably keep pressing upward on wages. That could pose thorny questions for some businesses. Brian Johnson, CEO of Choice Financial, pointed out that a local plumber or accountant might be able to easily raise prices; businesses who can’t be as flexible could feel a pinch.
“Margins are going to be compressed in 2022 for those business owners for sure,” said Johnson.
And the housing market, which had soared amid the cheap credit and urban out-migration of the pandemic, could see changes too. The Federal Reserve is expected to taper its bond-buying policies over the first few months of 2022 and is telegraphing its intent to hike interest rates. That’ll help put a brake on inflation – but it’s still not clear how the mortgage and housing market will account for it.
“That will be a tricky balance,” Swami said. “I do think that we’ll see some moderation in housing in the next year for sure – at least as far as pricing is concerned. But I do think the costs of mortgage payments will tick higher.”
The tourism sector is still grappling with the virus as well – especially as the omicron variant continues to circulate (and, as of this writing, surge tremendously). But
some industry leaders argue
that pent-up tourism demand from throughout the pandemic is fueling a turn towards more travel spending, and Sara Otte Coleman, the director of North Dakota’s state tourism program, downplayed concerns about the coming year.
“Certainly travel is impacted by discretionary income – and overall economic outlook,” she wrote in an email. “However in North Dakota we tend to be less impacted, since we market closer to home and are an affordable destination compared to other areas of types of travel.”
She even argued that the coming year could bring good news for the state’s tourism sector.
“In the past, increased gas prices have not resulted in fewer visitors,” she said. “The reason for this is likely that we offer a great value overall versus other areas.”
Monson isn’t worrying too much yet either. Prices will keep going up, he said, but nowhere near as quickly as it has recently.
“We don’t know what’s going to happen. But the biggest thing is not sitting back on your heels and thinking ‘The worst is over, we don’t need to plan for anything anymore,’” he said. “But we’re trying not to have this hair trigger where it’s like, hey, we need to plan for another 15% increase.”
