NCCI's Quarterly Economics Briefing – Q2 2022

WHAT: NCCI’s newly released Quarterly Economics Briefing - Q2 2022 [u7061146.ct.sendgrid.net] addresses the critical issues impacting the economy and weighs the risks of inflation and recession from the perspective of workers compensation insurance.

QUESTIONS ADDRESSED: What is causing today’s inflationary surge? Can the US Fed control inflation and are its efforts to do so likely to turn a slowdown into a deep downturn or recession? How is inflation affecting workers compensation, and what have we learned from the COVID experience about the potential effects of a future recession?

KEY THEMES AND TAKEAWAYS:

• Job creation stayed strong through the second quarter and jumped in July, with nearly half a million new jobs added in that month alone. Several indicators point to a coming slowdown in hiring demand, but a slowdown is not evident in employment data through July.
• Wage growth for production and nonsupervisory workers slowed to a 4.9% annualized rate for the month of July, down from the torrid 6.2% pace over the previous 12 months but still much higher than pre-COVID wage increases under 3.5% per year.
• Consumer price inflation, running hot since summer of 2021, reached a new high at 9.1% for the year ending in June. Today’s price inflation is dominated by price increases for several goods and services, with major contributions from food, energy, and housing rents. Medical price inflation is running at 3.1% annualized for 2022 through June, a much smaller increase of about one percentage point for the three years since 2019.
• Although several indicators show that the US economy is beginning to slow down, data through midyear do not point to an imminent recession. The US Federal Reserve’s soft landing—gradual inflation subsidence and real economic growth settling at 2% per year by 2024—is a reasonable future scenario, in our view.
• If a soft landing fails, the most likely bad-case scenario is a prolonged downturn—stagnant economic growth through 2023—with or without a recession. The biggest risk factor for a long economic downturn is the Russia-Ukraine war continuing through winter, as appears likely.
• Today’s price inflation is not so far adversely impacting workers compensation. Payroll as an exposure base adjusts automatically for wage inflation and wage-related benefit increases; and medical price increases have not jumped along with general inflation. The main effect of a future downturn or recession, should either occur, will be a decline in workers compensation premium and benefit payments commensurate with the fall in employment.

WHO: Leonard F. Herk, PhD, Executive Director & Senior Economist and Patrick Coate, PhD, Economist

TO ACCESS THIS REPORT: Quarterly Economics Briefing – Q2 2022 [u7061146.ct.sendgrid.net].

FOR MORE INFORMATION: To learn more or to schedule an interview with one of our experts, please contact:

Share This Article: