NAFCU Journal January February 2022

18 THE NAFCU JOURNAL January–February 2022 Inflation is top of mind for many people, but the characterization of inflation seen in late 2021 as transitory can be misleading, said Curt Long, chief economist and vice president of research for NAFCU. “Transitory means different things to different people, but I believe high inflation will last longer than many people believe.” “There are two camps of thought about inflation, and I am more in the camp that inflation is NOT transitory, and we will see higher inflation going forward, even if we get back to a more normal economic environment, which is expected in 2022,” said Fred Eisel, chief investment officer for Vizo Financial Corporate Credit Union. Wages and supply cost increases have resulted in price increases by consumer goods companies, he pointed out. “I don’t think you see these prices come down even if raw materials get cheaper, as wages and other expenses remain high to produce a number of these goods.” Wage pressures, especially with lower- paid staff, have finally taken hold with the fight for $15 per hour and higher base hourly rates, and in the financial space, Bank of America and Wells Fargo have announced their minimum pay will be $20 per hour or $40,000 a year, said Eisel. “I have spoken to a number of credit unions who are seeing this wage pressure in their own markets and forcing them to try to remain competitive with wages, specifically for their frontline staff.” Employment Costs and Challenges Competition for employees is a real concern for credit unions. According to a 2021 NAFCU survey, 55% of respondents reported that attracting and retaining skilled staff is a significant challenge. This is a notable increase over 2020 survey results in which 36.4% named attracting and retaining staff as a significant challenge. Although it is hard to determine data from all sources, it appears the concern about COVID and lack of daycare for working mothers are the biggest obstacles to re-entry into the workplace right now, said Eisel. “The Atlanta Fed did a research piece on workers with young children during the pandemic and found women with children under six, who made up 10% of the workforce prior to the pandemic, account for almost a quarter of the workers missing from employment rolls.” It appears from the research, daycare closings and subsequent very slow re-openings are the major factor holding back employment for this cohort, rather than school closures, he said. “Other research suggests around 800,000 workers aged 55 years and older have left the workforce, with the major factors including continued concerns over the pandemic, childcare issues and folks deciding they are ready for retirement.” Another issue related to returning to a normal workplace is the comfort employees developed while working from home. “We’ve had a bit of a challenge calling our folks back from ‘Zoomland,’” says Paul Parrish, CEO of One Nevada Credit Union. “Some employees were thrilled to be able to return from the work-from-home schedule, while others had grown kind of fond of it.” There has been a bit of turnover as a result of calling employees back into the branches and offices, he said. The combination of employees wanting to work remotely, increased wage demands and competition for qualified employees will affect credit unions in the coming year, said Parrish. He does expect compensation and benefits costs to increase. “Not all of this is being caused by evolving demands of the available labor pool,” he said. “We now have close to 80% of our members actively using our remote and mobile products for their everyday, routine transactions, which means our branches become technical service and financial advice centers instead of manual transaction factories. As a result, we’re moving toward fewer but smarter and better-paid member- facing employees to ensure more valuable employee encounters for our members.” Housing and Auto Trends Housing costs, in terms of home purchases as well as rents, will also drive inflation into mid-2022, says Long. “This might be more of an issue in some regions than in others as the migration of There are two camps of thought about inflation, and I am more in the camp that inflation is NOT transitory, and we will see higher inflation going forward, even if we get back to a more normal economic environment, which is expected in 2022. FRED EISEL, CHIEF INVESTMENT OFFICER FOR VIZO FINANCIAL CORPORATE CREDIT UNION

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