COEUR d’ALENE — Dr. John Mitchell addressed what everyone wanted to know about the U.S. economy.

Where is it going?

His answer might not have been what they wanted to hear.

“At least a slowdown, perhaps a recession,” he said Wednesday.

The key question, Mitchell said, is can inflation be brought down without causing a recession?

“We don’t know the answer to that,” he told about 200 people Wednesday morning at the Best Western Plus Coeur d’Alene Inn.

Mitchell, who taught economics at Boise State University, and the Idaho Department of Labor's Sam Wolkenhauer talked economics before the Coeur d’Alene Regional Chamber.

Both provided plenty of humorous stories in their presentations, but also expressed concerns about the country's economy and where it's headed.

Mitchell cited positives such as a strong labor market, better-than-expected January retail sales, job growth in every state and leveling off of wage hikes.

He said balance sheets are generally sound, the country is not in a financial crisis, and the supply chain is better.

That makes it “very difficult” to understand there’s a threat of recession, Mitchell said, but there is one.

He said existing home sales have fallen for 12 months, financial assets, including stocks and bonds, were down $7.8 trillion in the second quarter and $1.84 trillion in the third quarter, a tight labor market is keeping pressure on wages and prices, and interest rates were up.

Trade barriers and subsidy wars are a growing threat as the relationship between Russia and China grows.

“That’s a lot of cross current coming from different directions,” he said.

Inflation, initially described as “transitory” by many government officials, proved otherwise and will likely stick around, Mitchell said, but at a slower rate than in 2022.

But he said the situation is not like previous economic slowdowns, such as recessions of the 1970s and '80s, and in 2007 to 2009, when banks were closing.

Regarding federal interest rate hikes, he said, “They are not done yet.”

"I believe what they're saying," he said.

Wolkenhauer said the labor market is “tight in a way it has not been for decades" and will remain that way as there are not enough workers to fill the jobs, nationally and in Idaho.

While supply chains have been fixed, inflation will be difficult to bring down, he said, due to higher wages that kicked in as employers tried to attract people back into the workforce following the pandemic.

It’s difficult to give back wage growth, Wolkenhauer said.

"It's kind of interesting that workers tend to resist cuts in their wages,” he said. “People like it when their income goes up, and they don't like it when their income goes down."

While commodity prices can rise and fall, wages tend to only go up.

“So for that reason, I’m a little bit more on the pessimistic side that inflation be more stubborn," he said.

Idaho faces a labor shortage due to its aging population, Wolkenhauer said.

He said baby boomers are reaching retirement age and older people are moving to Idaho. Younger generations are not growing fast enough to fill those jobs and are not quite motivated to do so, anyway.

He said if all unemployed people in Idaho got a job today, that would only fill half of the openings.

“Idaho is aging rapidly compared to other states,” he said.

Wolkenhauer said the labor supply is affected by education and training gaps, disabilities and addictions, child care availability and teen work rates.

But those issues “pale in comparison to the aging population.”

He said more than 75% of the decline in labor availability is due to aging and retirements.

"This becomes the predominant, driving force of labor shortages and shifting labor markets," Wolkenhauer said.

He expects labor force issues to continue through 2040.

Wolkenhauer said people should become accustomed to slower growth. The days of low interest rates and high returns are over.

“These changes are going to shake the economy for the coming decade. You can try to steer it for a little bit, but ultimately, you’re steering within ruts,” Wolkenhauer said. "All you can try to do is stabilize it and make the best of it.”