The New Jersey Chamber of Commerce in partnership with NJM Insurance Group presented a webinar focused on what small businesses can expect to happen over the next year. Curtis Dubay, Senior Economist of Economic Policy at the U.S. Chamber of Commerce provided his insights on what is happening in the national economy and the impacts that may be felt by small businesses going forward. The main takeaway is that businesses can expect to face up to two more years of volatility in the economy. It will take time to tame the inflation we are currently experiencing and bring supply and demand back into balance.
What is unique about the current economy is that while inflation is high and consumer confidence is extremely low, businesses are still hiring and investing and consumers are still spending. Businesses know that workers are hard to find so they will do whatever they can to keep the workers they have. Mr. Dubay thinks its unlikely to see many layoffs over the next two years. The Federal Reserves efforts to reduce inflation will likely be seen over the next 12 months with a cooling housing market, fewer new builds in construction which will trickle into all other areas of goods that are related to housing. We should also continue to see improvements in the supply chain which will help increase supplies of goods and bring down demand thus bringing down prices.
Mr. Dubay believes that there is only a 50/50 chance that the U.S. will enter into a recession over the next two years and if it does it will likely be mild and last only a few months. However, there are several unknowns that businesses need to be aware of that could throw a curveball into the economic outlook. There could be an unexpected hard landing as the Federal Reserve tries to control inflation that results in inflation lasting longer than 2024. There is the risk of geopolitical turmoil that can affect the economy. The situation in Russia and Ukraine could get worse, the situation in China and Taiwan may become unstable. These are just two potential global risks that could impact US businesses. Then there are political risks on both sides of the political spectrum. If the Democrate maintain control after the midterm elections, they will enact more spending polities and new taxes and regulations all of which can impact inflation. If the Republicans take control, they will cut spending. This could leave to government shutdowns and other disruptions.
Bottom line, things will continue to be unpredictable for small businesses and growth will likely be slow. Unpredictability makes planning difficult and when businesses are unable to plan accurately, lenders are reluctant to invest. It creates a significant weight on the economy. However, with a strong labor market, strong demand for goods and services, if busineses can ride out the volatility of the next two years, the outlooks seems positive heading into 2025.