NCCI Releases Q2 Economics Briefing

Jobs are up, wages are up, inflation is up, and recession is unlikely in the short term.

National Council on Compensation Insurance’s (NCCI) newly released Quarterly Economics Briefing – Q2 2022 examines these factors and their potential impact on workers compensation.

Economic slowdown

Although several indicators show that the US economy is beginning to slow down, data through midyear do not point to an imminent recession. The US Federal Reserve plans a soft landing: gradual inflation subsidence and real economic growth settling at 2% per year by 2024.

Inflation hits high

Consumer price inflation reached a new high at 9.1% for the year ending in June. Increased prices for food, energy and housing are major contributors. Medical price inflation is running at 3.1% annualized for 2022 through June, a much smaller increase of about one percentage point for the three years since 2019.

So far inflation is not adversely impacting workers compensation. Payroll as an exposure base adjusts automatically for wage inflation and wage-related benefit increases; and medical price increases have not jumped along with general inflation. A potential downturn or recession could negatively impact employment numbers and cause a decline in workers compensation premium and benefit payments.

Jobs and wages

Job creation stayed strong through the second quarter and jumped in July, with nearly half a million new jobs added in that month alone. Several indicators point to slowing hiring demand, but a slowdown is not evident yet.

Wage growth for production and nonsupervisory workers slowed to a 4.9% annualized rate for the month of July, down from 6.2% over the previous 12 months but still much higher than pre-COVID wage increases under 3.5% per year.