Corporate struggles are unlikely to ease soon, writes Josh Lehner with the Oregon Office of Economic Analysis. His assessment draws on something called the Corporate Misery Index, to which he introduces us (The search engine we use found the earliest mention of the CMI in 2002; there may be earlier mentions and the methodology may have evolved.) Here’s Lehner’s description:
The newly created Corporate Misery Index combines rising prices and the job opening rate to gauge the supply constraints firms are facing in the economy.
He applies it to Oregon. (It would be interesting to see a similar application to the Washington economy.)
In the scatterplot below, the horizontal axis shows the current job opening rate in Oregon. This gauges how many employees companies would like to hire, relative to the size of their existing workforce. The further an industry is to the right, the larger its current labor challenges. On the vertical axis is the increase in costs at the national level from various production and consumer price indices. Given available data the comparison is not perfectly aligned at the sector level but the results are intuitive and broadly in line with what firms in different sectors are saying.
Here’s the chart.
Click through for a discussion of the quadrants and sectors. Here’s his conclusion:
Looking forward, businesses are likely to continue to struggle with day-to-day operations given labor challenges and cost pressures. The outlook calls for corporate misery to ease some in the quarters ahead as labor supply returns some and price pressures abate. However, it is likely corporate misery will remain higher in the years ahead than during the previous couple of decades. The real corporate struggles still lie ahead and will be financial and operational in nature when they are no longer able to fully pass along their cost increases to consumers who at some point will be unwilling or unable to absorb them.
Our conclusion? With the cost pressures and labor challenges unlikely to abate soon, policymakers should be looking for ways to reduce obstacles to business investment, expansion, and job creation. One way would be to”seize opportunity to champion the economy.”