What’s Philadelphia’s economic outlook for 2022? Inflation, higher wages and vying for top talent

Inflation, higher wages and vying for top talent: It’s what’s on view for 2022, in Philadelphia and beyond.

The Chamber of Commerce for Greater Philadelphia’s annual Economic Outlook event held this month again focused on the COVID-19 pandemic.

Last January, experts gathered virtually to talk about the bright spot on the horizon: the newly available vaccines that could allow residents to feel safer heading into offices, bars, stores and restaurants again. But a full year later, as we enter chapter three of the pandemic, it still has a stronghold on the local and national economy.

What business leaders expect for hiring in 2022

At the 2022 Chamber event, Federal Reserve Bank of Philadelphia President Patrick Harker shared results from the org’s annual survey, which show improving conditions. Nearly 70% of respondents said they feel 2022 would hold better business conditions than in 2021. When it came to their own companies, slightly fewer than last year — 72.3% compared to 2021’s 75.4% — felt the same.

Survey respondents said they predict sales or revenues would be about the same this year, but they expect to pay and receive higher prices for business services. Wages and benefits are also expected to go up, with 91% of people said they expect to pay more this year. And when it comes to employment, survey respondents expect a lot more full-time hires in 2022 — nearly 20% more than last year.

The survey also pointed to some major trends in hiring. Respondents said they’re struggling to find qualified applicants, for a number of reasons: Some candidates turned down offers that weren’t fully remote, others weren’t willing to accept the compensation companies were offering, and some respondents said they aren’t finding enough applicants in general. Availability of labor, labor costs and supply chain issues were the most prevalent business issue in 2022, but an overwhelming amount of respondents said that they are already at or above their pre-pandemic employment levels.

“Going forward, employers are going to have to think creatively about how to attract and retain talent,” Harker said. “In the end, I believe we will all benefit from that.”

There are fundamental labor problems that the country saw pre-pandemic, Harker said, like a lack of skilled mechanics, plumbers, electricians and other in-demand blue collar jobs. Those labor shortages are still pertinent today, and the pandemic has only accelerated some of the trends seen coming in the years leading up to it.

Economic signs of life

The stock market hasn’t reacted much to the Omicron variant, said Phil Mackintosh, a chief economist at Nasdaq. People are still traveling and eating out, although not at the same volume as certain points in 2021. The data around the stimulus that was pumped into the economy last year shows that it was indeed spent, and mostly on “stuff,” Mackintosh said.

The supply chain issues right now are definitely contributing to inflation, with recent numbers around 7% inflation (though slightly lower in Philadelphia, notes a recent Economy League of Greater Philadelphia report). But that’s starting to calm already, Mackintosh said. And although unemployment is lower than other points in the pandemic, the workforce has been dramatically changed. Many people retired early, some families decided to become one-income households, and others have become gig economy workers.

All of this is contributing to a demand for labor and in increase in wages. But data show that companies are still at multi-decade highs — they’re raising their prices in reaction, which is contributing to inflation.

“Companies have actually found it pretty easy to raise prices,” Macintosh said.

Impact on air travel

A trio of local business leaders also spoke about what 2021 brought their organizations and how they’re thinking about 2022. Philadelphia International Airport CEO Chellie Cameron said while the airport has lost some of its business travel, which accounted for 45% of traffic pre-pandemic, it has seen an uptick overall, boosted by last summer’s activity and the recent holidays.

It’s also expanding its cargo offerings, Cameron said. The airport has been working on the service for a few years, aiming to serve highly specialized facilities for the pharma industry. It’s an opportunity to establish the city as a logistics center.

The airport’s 2019 economic impact study showed it was responsible for almost $17 billion in annual impact and 106,000 jobs, she said.

“It’s difficult for business community to thrive without having great air service and connectivity, not just domestically, but to the rest of the world,” Chellie said. “And so it’s something that we take very seriously.”

Impact on local gov support

David Davis, managing director of health and the public sector for Accenture, said one of his biggest efforts has been attracting and retaining people. The professional services firm recently partnered with the City of Philadelphia Department of Commerce to study how the department can better support city residents and business owners during the pandemic.

And, he said, “I do think Philadelphia is on the right track.”

With Commerce, Accenture outlined six objectives aimed at building equitable wealth opportunities through strategic investments, resources and ecosystem partnerships. The orgs benchmarked against other cities and looked at building wealth within communities of color. Those findings and strategies will be released soon, Davis said.

Impact on the life sciences

Steven Nichtberger, president and CEO of Cabaletta Bio, said he felt the past year further solidified Philadelphia’s position in the life sciences industry. The work done by University of Pennsylvania and other academic institutions in the region have spawned cell and gene therapies research and progress around the world, and he noted Philadelphia is an incredibly attractive and still affordable city to do business.

“The Philadelphia area has become a selling point,” Nichtberger said. “It used to be an albatross. It used to be, ‘Why Philadelphia?’ Now it’s, ‘Why would you start a cell therapy or gene therapy anywhere else?’”

New talent strategies

When it came to retaining talent, all of the business leaders acknowledged they needed to reevaluate their compensation strategy, especially with the talent that they know can easily be pulled to work elsewhere.

At Accenture, Davis said they’re leaning on an apprenticeship model that relies more on the job requirements than a four-year degree. Prioritizing nontraditional backgrounds has brought more people into the fold, he said.

And for Nichtberger, who said demand for skills within his industry is at an all-time high, it took making some mid-year adjustments to keep the needed talent on board.

“It’s my administrative assistant, my basic lab scientist — everybody in this industry is now highly sought after,” Nichtberger said. “So we actually went back and reviewed and then made modifications to compensation across the entire company six months into the year, because the fight for talent is so critical.”