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The Future of Economic Health

Two Areas to Focus On, But First:

April saw major activity on the global stage including unrest in Sudan and the rejection of continuing grain movements from Ukraine through the corridors of Poland, Hungary and Slovakia. The latter is impacted by cheap grain being moved into the European Union and logistic issues in moving grain from Ukraine across its borders. In addition, Russia only agreed to a 60 day grain export extension which is in jeopardy of extending past May 18. The first point I mentioned, Sudan, could have a major impact on energy prices given their geographic location, refining capabilities and ongoing civil war. A point worth bringing up is the just-in-time production schedule for a lot of commodities. There is a fine balance and it’s easy for one hiccup to start to affect other areas with non-ideal timing given volatility and the inflationary environment we’re in. 

Now that I have the two current events out of the way for the week I’ll shift gears to the two topics I continue to try to digest as the global economy struggles to find its path forward.  

Interest Rates:

Given it’s the number one topic that comes up when I travel for work, I’ll spend some time on where interest rates have been and the Federal Reserve’s trajectory as it starts to unwind. When asked about the direction of rates over the past five years, I, along with so many others, thought that we had some direction on where things would go, which was higher rates due to coming off historic average lows. This is typically the wrong forecast. Fast forward to 2022 and I was finally right in not recognizing the speed and trajectory the Federal Reserve would assume. Right or wrong the federal funds rate has marched higher from a benchmark of nearly 0 in March of 2022 to 4.75 – 5.00% by March 2, 2023. The Fed has signaled price stability and a core inflation target of 2.00%. As of April 12, 2023, the latest barometer reading of core inflation was 5.6% compared to February’s rate of 5.5%. As a normal consumer I am a little taken back by the higher readings. For those that are out and about it would appear that things like housing, new and used cars, groceries, vacations and rent are slowly starting to pull back. While we’re not back to 2020 or 2021 levels, it would appear that we have stabilized in most aspects of pricing on everyday goods and services. I’m not optimistic that we won’t regress to where we were, but I’m thinking we have a good look at prices today as the new near-term benchmark. 

Given the global connectedness, other countries are feeling the same stress of higher prices of goods and services and, more than likely, wage growth. A chaotic situation over the last few years with monetary interest rates and manufacturing capacities have begun to normalize. The “just in time” versus “just enough services” components may have stabilized enough along with the intended shock of higher rates. Given the accelerated trend of increasing rates, manufacturing coming back online and a more stabilized workforce, we may be finding a new balance. Think about how many conversations you’ve had about automation and how many of those investments have taken place to balance the workforce deficit many of you have experienced. 


What a perfect segue off my last sentence. Employment seems to be the other topic that, while better, continues to lack the need that’s out there from both a service and manufacturing standpoint. A simple summary is that labor resources may not get better. Like any basic economic lesson, it’s supply versus demand. It could be assumed that part of the potential pool would be filled given an increase in wages, but that hasn’t been the case. At the end of March 2023, there were roughly 11 million job openings waiting to be filled. Per the Committee for Economic Development’s (CED) March 2023 release, the number of unemployed is roughly six million, leaving a shortage of five million openings. That’s a big number to fill.

Immigration reform is likely to have an impact on the number of workers we depend on to help support the United States labor pool. The CED addressed examining efficient labor reform for two main reasons: the U.S. population is aging and birth rates are declining. They also suggest reskilling, diversifying talent pools and supporting older workers. The last three may help, but the larger solution would include a more reasonable system of legally bringing in foreign workers. When taking the labor shortage to the next level it’s important to consider the impact higher wages have had on inflation. Fewer workers mean retaining them with compensation and that has had a direct impact in areas like agriculture, hospitality and manufacturing. A bipartisan approach to coming up with a common-sense immigration solution would go a long way in solving a lot of challenges and easing the inflationary story. 

What’s Next:

As we get through the current earnings season the numbers appear to be neutral and signal the economy is still performing at a satisfactory level. This is a bit of a surprise given most economists say that the inverted yield curve environment that we’re in is typically a recession indicator. We haven’t seen that yet and we may not. It’s been a new normal with historical indicators not necessarily correlating with the current state we’re in.   

Here’s what I’m paying attention to as I believe it has a larger impact on economic health, exports and other considerations in the near future:

Federal Reserve Federal Open Market Committee Meetings – May 2-3 and June 13-14

Job Openings and Turnover Survey (JOLTS) – March data release on May 2, 2023

Consumer Price Index Release – April Data – May 10, 2023

International Monetary Fund – World Economic Outlook April 2023 Report

Check out various articles and resources regarding the Food and Ag Industry by visiting



Senior Food and Agribusiness Lending Specialist
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