How is the short-term economic outlook for the green industry shaping up? That was the theme of the “Mid-Year Economic Outlook” webinar presented on Tuesday, Aug. 30, by Charlie Hall, an economist and Ellison Chair in International Floriculture at Texas A&M University.
“An election year always makes things interesting,” Hall noted in kicking off his presentation. “Usually the economy is at its most stable during an election year.”
This year might be a little different, however, as Hall notes in the first of these 10 highlights from the presentation.
1. What is the one word that best depicts the current situation? According to Hall, it’s “uncertainty,” thanks to the current leading presidential candidates. Because of this, Hall says many businesses are going status quo and holding back on investments, not just in the green industry but for others, as well.
However, the best strategy may be the opposite of this, says Hall.
“I see this as a time for opportunity,” Hall says. “If we wanted certainty, we’d live in a different country.”
2. Baby boomers are in the early stages of retiring over what will eventually be a 19-year time period, which equates to around 10,000 people retiring every day.
“They built our industry to where it is today,” Hall says. “Generation X is taking their place buying homes and adding landscapes, but there are fewer of them, so the size of our market is naturally decreasing.”
3. Just because the economy is moving along slowly doesn’t mean we are performing badly, Hall notes.
“We are still producing more goods and services today than we were prior to the recession, and the statistics show we are creating more jobs while unemployment numbers are dropping.”
4. So what does the rest of the year look like? Hall points to the Confidence Board’s Leading Economic Index, which is slightly increasing.
“The chances of a recession occurring in the near future are very low,” Hall says. “We’ve had some close calls such as Brexit, but the effects weren’t as bad as they could have been.”
Usually big events such as Brexit will cause a recessions, but Hall also says “we’ve never seen something happen out of our country to cause a recession.”
5. Housing trends are another important economic indicator to consider, and in this area, Hall says housing starts are indeed increasing, and many of them are single-family starts, which means more people are taking on mortgage debt.
“Of those people who are buying houses, we’re seeing a lot of remodeling activity,” Hall says. “The numbers for building equipment and gardening equipment are growing.”
6. What about the effect of fuel prices?
“We are driving fewer miles today than we were before the recession, even with gas prices dropping,” Hall says. “Millennials don’t have the same need or desire to drive as their parents did. Plus, with higher urban populations, more people are working from home.”
7. Going back to the election, Hall says one of the main areas of real influence for the presidential candidates is immigration.
“Immigration is especially significant because our overall population growth is slowing,” Hall says. He also notes that the strongest growth in the economy is likely to take place with comprehensive immigration reform. It’s simply a numbers game, as adding more people leads to more home buying.
However, Hall also notes that on a broader scale, the President only has limited power to influence things, while Congress has a big role, as well.
“Look at how long we’ve been debating immigration, with no results,” he says.
8. If you choose to make investments in your business this year, should these investments be in improving efficiencies, or expanding the business? This was a question raised by one audience member during the webinar.
“We’ve seen too many businesses grow without a good strategy, including knowing whether your profit margin is generating sales,” Hall says. “I would start by improving efficiency.”
9. How is the green industry doing this year so far in sales? Because of weather-related concerns, Hall says it depends on the region you’re in.
“The Southwest has been down, while the Northeast has been up.”
10. What about the potential effects of a minimum wage increase?
“We’ve seen that a higher minimum wage can impact the very people you are trying to help,” Hall says. “Businesses will buy less of a product if a price increases, and a minimum wage increase effect on labor reflects this.”
In California, for example, Hall says the slow increase will mean a higher tax on businesses, which will lead many companies to move more toward automation.