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Business 36 December | 2022 produced in a country in a given period of time] to increase by 0.7 percent in 2023," says Bernard Yaros Jr., assistant director and economist at Moody's Analytics. " e projection for 2022 is 1.7 percent. Both fi gures represent much slower activity than the 5.9 percent increase of 2021." (GDP, the total of the nation's goods and services, is the most commonly accepted measure of economic growth. "Real" GDP adjusts for infl ation.) e slowdown in the overall economy should have a depressing eff ect on corporate profi ts, projected by Moody's Analytics to increase at a 5.2 percent clip in 2023. at represents a decline from the 7.9 percent fi gure anticipated for 2022. Both estimates are much lower than the 25 percent increase of 2021. HEALTHY EMPLOYMENT Reports from the fi eld support the analysis of economists. "In the fi rst half of 2022, many of our members were still experiencing high demand," says Tom Palisin, executive director of e Manufacturers' Association, a York, Pa.,-based regional organization with more than 390 member companies. "But as the year progressed, there was a signifi cant slowdown caused by the labor shortage, infl ationary issues and global events." With its diverse membership in food processing, defense, fabrication and machinery building, Palisin's association is something of a proxy for all American industry. e good news is that strong employment conditions at the association's members—as well as at companies elsewhere in the nation—is helping alleviate the negative impact of the economy's headwinds. Moody's Analytics expects a continuation of that favorable condition, forecasting an unemployment rate of 4.1 percent by the end of 2023. at's not much higher than the 3.7 percent rate of late 2022. (Many economists peg an unemployment rate of between 3.5 percent and 4.5 percent as the "sweet spot" that balances the risks of wage escalation and economic recession). High employment levels tend to spark wage increases that fi ll workers' pockets with cash to spend at retailers. "Wage rates, as measured by the Employment Cost Index (ECI), remain very high by the standards of the last couple of decades," says Hoyt. Increases in 2023 are expected to come in at 3.7 percent, a healthy level that refl ects the strong growth of a tight labor market. "While we've had growth greater than 3 percent for the last three years, prior to 2020, the last time we had growth in the ECI of greater than 3 percent was 2007." On the fl ip side, higher wages increase operating costs that can dampen profi ts. WORKER SHORTAGE e tight labor market hits profi tability not only in the form of higher wages but also in a scarcity Wage rates, as measured by the Employment Cost Index (ECI), remain very high by the standards of the last couple of decades.

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