Wouldn’t you love to have a crystal ball that tells you exactly what to expect for the next year? Attendees at Leaders Forum in Litibu, Nayarit, Mexico, got the next best thing on Jan. 18 as Taylor St. Germain, an economist with ITR Economics, shared various economic indicators and how landscape company owners can respond to the data he provided.
St. Germain says they are predicting a mild recession, but he notes it will not be near as extreme as the one experienced in 2008 and 2009.
GPD
In 2024, the U.S. GDP is expected to dip to -0.2%, but in 2025, it will come back up to 1.6%.
“Every 10 years, the U.S. goes through a recession,” St. Germain says. “That’s been true since World War II.”
St. Germain says that the dip will be very mild compared to the downturn in 2008 and that some regions may not even feel the recession.
“My concern isn’t how we’ll survive the 2024 downturn, but being prepared for the growth in 2025,” St. Germain says.
He says landscape professionals need to be preparing for the five years of consecutive growth after 2024.
He delved into some of the data behind the GDP numbers, including consumer spending, which makes up two-thirds of the GDP. He says that the narrative that consumers have less money is really just a sign of things returning to normal after the spike in COVID-related stimulus checks. While personal savings are down compared to during the pandemic, it is still better than before COVID-19.
“The biggest driver for GDP still finds itself in a healthy place,” St. Germain says.
He says the industrial production index is also about to enter negative territory. St. Germain says that businesses are currently less profitable and are pulling back on spending as they wait for interest rates to go back down.
He expects the election to help with interest rates, as the Federal Reserve is likely to lower interest rates before the election.
St. Germain is concerned about the stock market as the margin widens between corporate profit and valuations. He says this means that corrections will occur, and he encourages having a conversation with your financial advisor to be well-positioned.
Because the recession will be short-lived, St. Germain advises investing in your business in 2024 so you are well-positioned for good organic growth in 2025.
Labor Market
The labor shortage is an issue for the entire country. St. Germain says that for every job opening, there are 0.76 people available to fill it. This means there simply aren’t enough people in the workforce to fill every job.
He encourages landscape professionals to automate and innovate to overcome this challenge. St. Germain also cautions against laying off staff in 2024, as you’ll need these employees when things ramp up in 2025.
Millennials now make up the largest portion of the labor market, while only 19.2% are 65 or older. St. Germain says that the 16 to 24-year-old age group is just at 56.3%, which is lower than prior decades.
He encourages looking at Millennial employees favorably and investing in your company culture to retain your workforce.
Other Indicators
St. Germain also touched on state population growth. He advises companies looking to grow to consider targeting states with these strong growth rates. For instance, from 2018 to 2022, Texas had a growth rate of 4.9%.
As inflation trends downward during the recession, St. Germain says you can expect for challenging pricing conversations. Margins will more likely come from cost savings rather than from price increases. However, you can cite wage inflation for some price increases.
The residential construction market is expected to pick up, while the commercial construction segment will begin to decline. St. Germain says the worst of the housing market decline is over. The remodeling market is still going strong in pockets of the country but will slow down as new build activity picks up.
If you missed Leaders Forum, you can still stay on top of what’s coming next with NALP’s new Quarterly Economic Forecasts Report, which provides analysis of business cycles to NALP members.
This report includes specific market indicators:
- U.S. Landscaping Services Employment,
- U.S. Private Nonresidential Construction,
- U.S. Private Residential Construction (including home improvement),
- U.S. Lawn and Garden Equipment Production Index, and
- U.S. Architectural and Related Services Revenue (excluding engineering).
