Arkansas State Chamber of Commerce CEO Randy Zook talks to business leaders – large and small – every day. Through his crystal ball, he expects major headwinds for national and international economic conditions, but sees reasons for optimism in Arkansas if workforce issues can be addressed.
Appearing on this week’s edition of Talk Business & Politics, Zook said the Federal Reserve Bank’s efforts to curb inflation through higher interest rates will eventually tame inflation, but it won’t be overnight.
“It will work, ultimately. The problem with Fed policy is that it lags,” Zook said. The [economic] signals are clear, but it takes a good while for a lot of these new costs associated with higher interest rates to work through the economy. We’re already starting to hear about slightly lower real estate prices, longer times for houses to sell compared to just a few weeks ago, companies not quite as aggressive in their hiring practices or efforts. So there are already early signals, but it’s going to take a while. This inflation is going to persist for a good while. I would guess at least six to 12 more months.”
Zook, who is also the CEO of the Associated Industries of Arkansas, noted that inflation is a worldwide problem. China, Japan, Germany and other major economies are dealing with inflation from reasons ranging from COVID-19 policies to recovery spending to energy supplies – all symptoms that he considers “headwinds across the globe.”
In Arkansas, publicly traded companies are posting strong profits and the state has very low unemployment. For an inflation-driven potential recession, Zook said he still expects some businesses to struggle.
“Well-managed companies will continue to do well despite the headwinds, maybe with not quite as robust results. But the fact is, the worst of this has yet to manifest itself. We’ve got some tough headwinds just a few months down the road,” Zook said.
“That doesn’t mean the bottom is going to fall out. That doesn’t mean anything is going to be crazy, but we’re going to have a softening economy,” he added. “It’s a paradox. We have a ‘full employment slow down.’ I want to call it that instead of a recession, so far.”
“Arkansas is healthy. Our commodity prices are strong. We’ve got energy resources that are sort of dormant right now that need to be re-tapped. We’ve got full employment, we need people, is what we need. We’ve got businesses that are constrained because they can’t fully staff themselves. And that’s everything from hospitals to poultry plants to steel mills to grocery stores. We don’t have enough people ready, willing, and able to go to work,” Zook said.
With midterm elections less than two weeks away, there is considerable polling evidence that Republicans will take back the U.S. Congress and the U.S. Senate is considered a coin flip. With a Democratic President, the results could easily lead to gridlock in Washington, D.C. if the parties divide their representation.
“Personally, I think gridlock is about the most desirable situation that can develop. But you know, we need the heavy hand of government to lighten up, not to play further in and deeper into the economy. The economy will mend itself, ultimately. Market forces will prevail. Market forces will result in a return to something more normal. You know, we have spent and blown about $5 trillion on top of the normal federal expenditures over the last 12 or 14, maybe 18 months. So that’s a big rock to throw into the pond. And we’re going to pay for it for a long time,” he said.
You can view Zook’s full interview in the video below.