The Economy In 2013

Can We Survive Another Recession?

Why does the economy feel so fragile even though it continues to be in the midst of a slow but steady expansion? It’s because we did not get the same bounce in growth that has typically followed previous recessions. After the downturn of the mid-1970s and early-1980s, the economy grew at close to 6 percent for two years — erasing all of the economic losses that had occurred. That surge never happened this time; we simply moved into a snail-paced, private sector expansion that has left us wanting more.

Despite Trouble Abroad, U.S. Reaches Tipping Point

Economic weakness in the euro zone is also not helping the U.S. economy. Problems in Europe have caused the value of the dollar to rise slightly, and weak European demand for imports is having a negative effect on the global economy.
The fundamentals of our economy, however, have been trending more favorably in recent months, in spite of what is happening in Europe, Japan, China and the rest of the world. The balance sheet of most U.S. households has improved considerably over the last year, and we appear to have finally reached a tipping point where spending can be more self-sustaining. Employment has picked up after a lull last summer. Wages are stagnant but appear to have bottomed after being cut during the height of the recession.

Deleveraging has accelerated, so overall debt loads have dropped. We are back to the levels of debt we saw in 2003, prior to the run-up during the housing market bubble. That isn’t perfect, but it may be enough to ease credit for many consumers. Net worth has recovered much of the ground that was lost to the recession.

The State Of The Housing Market

Refinancing has increased, reducing mortgage payments and leaving more for consumers to spend each month. Consumer sentiment has picked up and returned to levels not seen since before the recession. Assessments of current economic conditions, the largest determinant of current spending, have generally improved. This has made it easier for consumers to convert refinancing savings into spending for big-ticket purchases, hence the precipitous drop we saw in the savings rate last summer.

Home prices, in particular, have bottomed and are moving up again. With foreclosures and short sales accounting for a smaller proportion of overall sales, home prices have firmed up slightly more than expected. The median price of an existing home has risen approximately 11 percent over the past year, and the S&P/Case-Shiller 10-city home price index is now up almost 1 percent year over year. New home prices have also improved, reflecting less effective competition from distressed sales. Many of the best properties have already been sold, and what is left is either geographically or physically less attractive than new construction.

This, coupled with expectations that home prices will continue to rise, is important because the wealth effects tied to housing are much larger than those tied to equity holdings. It’s easier to repair and upgrade (i.e. landscape) a house that is appreciating than one that is depreciating in value. Rising home values are a game changer because they make it easier for consumers to decide to spend and invest in their homes and, ultimately, sell what they bought at a profit. Housing got us into this mess, and in fits and starts, will be the accelerant that eventually gets us out.

Initial forecasts for housing in 2013 are quite favorable. For example, economists at Goldman Sachs project housing starts to continue to rise, reaching an annual rate of 1 million by the end of 2013 and 1.5 million by the end of 2016. Fannie Mae Chief Economist Doug Duncan is forecasting an 18.4 percent increase in housing starts in 2013 to 888,000, and single-family starts increasing to 611,000. Other housing pundits are forecasting similarly. This is relatively good news for the green industry, which supplies many of the flowers, shrubs, trees and turf for these new homes.

A Possible Recession In 2013

Of course, the economic outlook for 2013 is directly dependent on how our government handled the fiscal cliff that began at the end of last year. Since I am writing this column well before the end of the year, I have no idea whether the fiscal cliff was diverted or not — whether the proverbial can was kicked further down the road or whether actual partisan compromises were made. If we indeed were allowed to go over the cliff, the good news is that we are making big strides in reducing the deficit. The bad news is that we are likely headed for another recession in 2013, though not as large as the last one.

If our legislators instead diverted going over the cliff and continued some of the Bush-era and Obama-era tax cuts and reduced some of the proposed mandatory spending cuts, the short-term effects on the economy will be mitigated, but the long-term implications of our already-too-large national debt still loom ahead of us. Either way, we are going to have to go through some economic pain — we can either endure it now or endure it later.

The need for our government to do something about reducing the long-term deficit is very important, though, because that is what will restore corporate confidence. That is necessary to get companies in the green industry to hire and invest more aggressively.

America also faces pressing questions about how changes to the population are and will be reshaping the economy. The first Baby Boomers turned 65 on Jan. 1, 2011. Since then, more than 10,000 Boomers turn 65 every day until 2030. This change should not come as a surprise. We have long known this crucial shift in population would one day come and could have better prepared for the day. Of course, the U.S. is not alone. Japan, China and Europe are also facing demographic challenges. While the aforementioned fiscal problems demand our attention, we can’t forget to look ahead to the future and see how demographic trends will change where, how and with whom we do business over the next few years. Successful firms in the green industry will pay attention to these trends and position themselves accordingly.

Leave a Reply

More From Finance/Operations...
Biocontrols in a Greenhouse

November 3, 2017

Take Greenhouse Grower’s 2018 State of the Industry Survey

Growers and others associated with the greenhouse business often ask the Greenhouse Grower editorial staff where we get ideas for stories. The Answer: You! That's why we're asking you to please take some time to answer our annual State of the Industry survey.

Read More

November 1, 2017

Technology Is Changing the Game for Growers

Technology is sexy. There’s a fervor associated with buying the latest go-go-gadget — and a fear of missing out if we don’t. We all want that latest, most advanced smartphone, home assistant, or wearable tech, no matter the cost. And jobs associated with technology? Google, Microsoft, Apple, Amazon, Facebook, Twitter — offer some of the most competitive and coveted positions on the planet. Just look at the stir Amazon made when it announced it would build a $50 billion second headquarters, with cities from all over North America clamoring to be the one chosen, considering the significant economic potential. Technology and tech jobs are it — and it’s no wonder growers don’t feel jobs in horticulture can compete. But what if they can? If tech jobs are the future and the future of horticulture depends on technology, then we have a real opportunity to seize. Millennials who have grown up […]

Read More

October 10, 2017

Sharpen Your Skills in Cost Management and Profitability With This Online Course

The University of Florida is offering a new online course on costing and profitability. The course will take growers through the process of how to accurately evaluate cost of production, labor efficiency, pricing, and equipment investment decisions.

Read More
Latest Stories

October 10, 2017

Sharpen Your Skills in Cost Management and Profitabilit…

The University of Florida is offering a new online course on costing and profitability. The course will take growers through the process of how to accurately evaluate cost of production, labor efficiency, pricing, and equipment investment decisions.

Read More
Willoway Nurseries Team

October 1, 2017

How Willoway Nurseries Gets Its Staff Engaged in The Co…

Willoway Nurseries in Avon, OH, is creating a culture with people who think, act, and feel like owners. Learn how its team is taking the business to the next level.

Read More

September 21, 2017

Horticulture Is All About Connections

The beauty of our industry is that we are more than willing to reach out and help those around us. What connections can you make today to help your business, and what can you offer to help another grower?

Read More
Worker taking cuttings at Vivero Internacional.

September 11, 2017

Vivero Internacional Elevates Clean Cuttings to New Hei…

One of the last independent cutting operations, this fast-growing company raises the standard for delivering clean, high-quality unrooted cuttings.

Read More
Selecta Sponsor bed at Raker trial gardens

September 5, 2017

C. Raker & Sons Acquired By Roberta’s Unique Garden…

Ownership will change hands in December, and Raker will supply young plants for the 2018 season. Beyond that, leadership of the two operations say they are excited to move forward with a partnership that will continue to supply the industry, and gardeners, with top-quality plants.

Read More

August 1, 2017

MPS Honors D.S. Cole Growers for 10 Years of Sustainabi…

At Cultivate’17, a ceremony to mark a 10-year milestone since D.S. Cole Growers became involved with More Profitable Sustainability (MPS), as the first U.S. grower to achieve MPS certification, took owner Doug Cole by surprise. Separate celebrations also recognized Metrolina Greenhouses and Dümmen Orange for achieving MPS certification.

Read More
Nexus greenhouse construction for Knox Cannabis Facility

July 27, 2017

Ornamental Growers Will Revolutionize Cannabis Industry…

Professional growers have much to offer the emerging cannabis market, according to the co-owner of Knox Medical, one of the licensed cannabis producers in Florida.

Read More
Ball ColorLink logo

July 11, 2017

Get Guidance on Running Your Business from Ball ColorLi…

Representatives from Ball ColorLink will be on-hand at Cultivate’17 to answer questions and present business-building tools and industry insights to growers.

Read More
Lean Consortium in Washington

July 10, 2017

Washington Growers Join New Horticulture Lean Consortiu…

The group of growers has committed to learning and applying the principles of Lean, a method for eliminating waste that results in more value to customers delivered at a lower cost, in a shorter time, with fewer defects and less human effort.

Read More

April 11, 2017

Jerry Halamuda of Color Spot Nurseries Retires

The co-founder of Color Spot Nurseries has retired, effective immediately, and has named a replacement.

Read More

March 21, 2017

How Greenhouse Vegetable Growers Can Prepare for a Prod…

The United Fresh Produce Association is holding a Recall Ready Workshop in April that is designed to help growers properly manage a recall, from liability to communications.

Read More

March 14, 2017

Expanded Customer Footprint, E-Commerce, Succession Key…

Costa Farms' acquisition of indoor foliage producer Delray Plants rocked the industry, but the story behind Delray Plants' sale is the same as for many growers struggling with succession planning. For Costa Farms, the strategic purchase expands its customer footprint and also fast tracks its foray into e-commerce.

Read More

March 10, 2017

Costa Farms Expands With Purchase of Indoor Houseplant …

Costa Farms annnounced March 10 that it has acquired Delray Plants, one of the leaders in the indoor houseplant industry. The two operations are committed to the same values, principles, and goals to grow the industry, and will fit well together to accomplish this, say Randy Gilde, CEO of Delray Plants, and Joche Smith, CEO of Costa Farms.

Read More
Ken and Deena Altman

March 7, 2017

Altman Plants in Escrow to Purchase EuroAmerican Propag…

Ken Altman, a co-owner of Altman Plants based in Vista, CA, has confirmed that the operation is currently in escrow to purchase EuroAmerican Propagators, the Bonsall, CA-based young plant and finished plant grower that filed Chapter 7 Bankruptcy on Jan. 23, 2017. Ken and Deena Altman are co-owners of Altman Plants and The Plug Connection, along with their son Matthew, who has recently bought into the family business. The 55 acres of land and all of the facilities on it, which were previously owned by Jerry Church, a partner in EuroAmerican Propagators, are part of the purchase agreement currently in escrow, Altman says. However, it would not be absorbed by Altman Plants, which in 2016 was number 3 on Greenhouse Grower’s Top 100 Growers list with more than 11 million square feet of environmentally controlled greenhouse production, 62 acres of shade production, and 400 acres of outdoor field production. Altman Plants’ property […]

Read More
EuroAmerican Propagators Greenhouses

February 14, 2017

Suppliers Comment on Plant Genetics’ Fate After EuroAme…

Since the operation’s bankruptcy filing on January 23, 2017, suppliers associated with EuroAmerican Propagators have updated Greenhouse Grower on what the operation’s bankruptcy means for them – and how it will impact grower customers.

Read More
Stephanie Whitehouse

January 17, 2017

Stephanie Whitehouse Takes Her Passion for Plants to Di…

Stephanie Whitehouse, who has spent the last seven years as the Sales and Marketing Director for Peace Tree Farm in Kintnersville, PA, recently joined Dickman Farms Greenhouse and Garden Center in Auburn, NY, as the company’s new Retail General Manager.

Read More
Laura Drotleff

December 6, 2016

Are You Driving Young Growers Away? [Opinion]

In a time when the industry is facing a critical shortage of both labor and skilled, educated growers, it's important that grower operations don't unwittingly turn candidates off to a career at their business or in the industry in general. Take a closer look at your hiring practices to ensure you are being inclusive and not breaking any laws.

Read More
Trays move on an overhead conveyor to the end of the production line, where workers carefully pack the cleaned, sized, graded, counted and sorted Calla tubers

November 29, 2016

Texas Judge Halts Overtime Rule; Here’s What It Means F…

According to Craig Regelbrugge at AmericanHort, the injunction against the overtime rule is welcome news for horticulture.

Read More