Agenda - Economic Development Authority - 01/13/2022

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FIGURES I MINNEAPOLIS INDUSTRIAL 1032021 Economic Overview The summer of 2021 began with a surge, only to ease back as the Delta variant forced many consumers to rethink their holidays and restaurant visits. Consequently, we pared back our GDP growth outlook for this year by an entire percentage point, to 6%, followed by nearly 4% year -on -year growth in 2022. The labor market has also been volatile, primarily due to a reversal in hiring within the Accommodation & Food Services sector, reflecting uncertainty in the space. But demand for labor remains high and most signals suggest the key problem firms face is finding workers. Thus, employment employing growth should remain above 3% through 2022. Longer -term hiring in the U.S. will be restrained by a shrinking labor force. Shortages are not just limited to people. Key economic inputs ranging from raw materials to microchips pushed consumer prices up by 5% year -on -year. Some supply bottlenecks have proven transitory and annual price increases are stalling. Inflation should ultimately settle into the low-2% range next year. The Fed is responding to these labor market and price developments by announcing it might begin tapering its quantitative easing program as soon as this November. A plausible outlook is that waves of COVID-19 continue but the U.S. economy and health system learn to manage these disruptions. This will allow room for 5% GDP growth in 2022, as business investment and consumer activity normalize. Upside risks include the prospect of greater infrastructure spending, albeit the political dynamics are fluid. Also, the construction of more housing units to correct a historic shortage —estimated at 3.8 million units, per FreddieMac—would also be material tailwind for growth. 6 CBRE RESEARCH © 2021 CBRE, INC.