Dr. Chris Kuehl, Chief Economist for Armada Corporate Intelligence, a firm of strategic advisors to business executives, said that there are lots of moving parts and lots up in the air regarding the nation’s economy moving into 2023.

“Some economists are more upbeat and some are more ‘doom and gloom’, and I am somewhere in the middle,” he said. “There is a mild recession that is predicted to turn in Q2 or Q3. There are signs that global inflation is starting to ease and that interest rates may vary.

“The number one concern is labor,” Kuehl said. “In North Carolina, that need is more acute. The state is growing so fast that the growth exacerbates the problem. Industries are expanding and businesses are dying for workers. Sometimes the necessary training isn’t available, and that increases the difficulty of recruitment.”

The state’s location puts it in a unique position in relation to other states in the Southeast, according to Kuehl.

“Northerners are still moving south and industries are relocating south, driven by big decisions and the movement of major company players,” he said. “North Carolina is attractive because of relatively low taxes as well as the southeastern location with one foot still in the Mid-Atlantic corridor. Although there are labor market concerns, the costs of transportation and living are relatively low.” 

Reshoring is a major influence on the number of companies relocating to North Carolina as well as to the US in general, according to Kuehl.

“Companies are coming back from China, and they are looking for supportive communities with reasonable zoning and regulation,” he said. “This reshoring trend brought $1 trillion to the nation’s economy in 2022, and will do the same for the next seven years.”

Kuehl said that North Carolina has the ability to draw the companies and attract the right demographic to staff the workforce population for them.

“About 73 million baby boomers will leave the workforce by 2023,” he said. “The battle to attract young workers is paramount, and these young workers tend to favor Southern states.”

Kuehl used the phrase “cautious optimism” to describe what businesses should be wary of in 2023. “There are so many unknowns – how far will interest rates go up? Will there be major layoffs? Will there be a general downturn in corporate spending?” he said. “Global bankers are seeing more nervousness and watched 2022’s holiday retail trends closely. There is also a lot of attention paid to geopolitical issues as well as energy and food costs.”

For Western North Carolina specifically, Kuehl said that the area is somewhat insulated from major swings. “The area is reliant on internal drivers such as tourism and its agricultural influence and still benefits from the state’s growth,” he said.

While there is no ‘recession-proofing’ for a business nor a region, Kuehl said that the Asheville area may dodge the worst of the recession. “There is still $3.5 trillion in excess savings, mostly in the accounts of people earning $100,000 or more annually,” he said. “Since Asheville is appealing to the well-off consumer, businesses with this customer base may have more financial wiggle room.”

If a business’ customer base is not that of the above, Kuehl has some suggestions for maintaining success through tough times.

“The company can help maintain its own success by trying to cut costs,” he said. “Letting employees go is a tough call. Since it may have been difficult to hire them in the first place, it may be even more difficult to rehire them later. Reducing inventory is also risky due to the current supply chain issues. Companies may have to narrow their profit margin to stay operationally sound while things are down, and mind the little things that add up – logistics, energy usage, and facility costs.”

Not all industries will be affected by a recession in the same way. “Depending on the circumstances, manufacturers of high-quality and fast-shipped products may still thrive, though this is not universal,” Kuehl said. “Manufacturing may also be able to use technology to automate processes. Companies and industries that are more people-oriented may not have that luxury. For example, if there are no people to offer amenities for tourism and hospitality companies, the business can’t charge as much and the people won’t come.”

Data does suggest that the recession will be short and shallow, according to Kuehl, although it will be more pronounced in industries sensitive to supply chain issues and labor shortages. “We saw off-the-charts growth in 2021 – around 6 percent,” he said. “In 2022 there was still growth, but compared to the previous year, it felt like a dramatic slow-down.” He said that the predictions for 2023 include a slightly negative beginning with the third quarter increasing to a growth rate of around three percent average across the country.

Kuehl said that companies should keep open lines of communication with their employees through tough times and try to connect them to the future of the company. “Internal workforce development is imperative,” he said. “Make employees aware that there are opportunities to develop more skills within the company, giving them more longevity, more security, and higher wages. Those already working for you may be more amenable to learning.

“People just have to be realistic when it comes to momentum and positivity,” Kuehl said. “You have to level with them. The workforce and leadership all want honesty, and this is the world we live in right now. Prices and inflation are up but there have been much worse situations in the past. As a country, we’ve worked through them and we can do it again. Staying focused on what we all need to do to survive and staying oriented toward realism may take some extra effort. Employees like to honestly know and understand what is happening now, and it’s also important to let them know that they will be rewarded when things get better because they stuck with you.”