Ag Sector Likely to Support Economy Through Possible Recession

Though concern exists about impending recession in the U.S., the traditional economic indicators of recession aren’t yet apparent. This is especially true in the agricultural sector, says Georgia’s State Fiscal Economist Jeffrey Dorfman, a professor of agricultural and applied economics in the University of Georgia College of Agricultural and Environmental Sciences.   

The current factors disrupting the economy are not the same as those normally seen in a pre-recessionary period, said State Fiscal Economist Jeffrey Dorfman. “There may be bumps and economic growth may slow down, but if there is a recession, it will not be a normal one. The economy is not going to lose a lot of jobs.” (Photo by Dorothy Kozlowski/UGA)

“The interesting question is, if I run a business in agriculture, do I care about a recession? During a recession, we don’t cut back on food. Theoretically, we may cut back on restaurants, so if I were a grower who grew fancy vegetables for expensive restaurants or who raised specialized beef, I might be worried about a recession,” Dorfman said. “But if I am growing peanuts, soybeans, blueberries, chickens or whatever else, I don’t think it matters.”

Extraordinary conditions

While a recession typically happens because the economy “got too excited somewhere,” the current factors disrupting the economy are different from those normally seen in a pre-recessionary period, Dorfman said.

“Whatever happens recession-wise, we need to understand that this is not a normal time. We have had an economy that was, in some sense, artificially good because the federal government gave out so much money in COVID relief and the economy artificially skewed toward stuff,” Dorfman explained. “Normally, people spend about 70% of their money on services — travel, entertainment, etc. — but during the pandemic we reduced the amount we spent on services, and we started spending all this extra money on stuff that we bought online.”

Now that spending patterns have primarily reverted toward services, businesses producing consumer goods are “feeling the pinch.”

“There may be bumps and economic growth may slow down, but if there is a recession, it will not be a normal one. The economy is not going to lose a lot of jobs,” Dorfman said.

Job security

Both during and after the COVID pandemic, the employment market has remained strong for job seekers.

“Normally one of the major characteristics of a recession is rising unemployment and the inability to get jobs,” Dorman said. “I am struggling to believe that a lot of businesses want to fire a lot of workers. They’ve just spent two years trying to desperately hire new workers and they are busy making projects to keep those workers busy for a while. If you used to work on an assembly line, they will keep paying you, but you’ll do other things for a while — because if the company fires people, they may never be able to hire replacements.”

For industries struggling to find enough workers to fill jobs, such as the retail and hospitality industries, Dorfman said they will have to get creative to find ways to make those jobs attractive.

“In agriculture, we are very familiar with this problem. For years it has been impossible to find anyone willing to do the jobs we need done. We need the guest worker program to bring in people willing to do these jobs. I could see the same thing happening in hospitality and retail eventually or they will have to find some way to reimagine those jobs,” he said.

Capitalism and war

Dorfman said there are many factors that have led to current fears of recession.

“The thing about capitalism and free enterprise is that there is no central coordination mechanism. For example, if Athens needs a new hotel, there is nothing stopping three different people from building a hotel. Now we have three hotels when we only needed one,” he explained. “If you have too much investment in anything — home building, auto manufacturing, growing cotton — the people in that industry start to lose money, and some go out of business. If that happens on a large enough scale, you have a recession.”

Source: UGA CAES News