January 1, 2018

Six economic trends to watch in 2018


Dr. Charlie Hall is a leading voice on the economic forces affecting the green profession. An economist by training, Hall grew up on a nursery in North Carolina, and his passion for green business shines through his teaching and international speaking engagements. He is a professor in the horticultural sciences department at Texas A&M University and holds the Ellison Chair in International Floriculture.  Landscape Trades recently connected with Hall from his office at Texas A&M to get some insights into trends as we enter the New Year.

Gradual recovery continues
“We’re not quite back yet, believe it or not,” says Hall. “Since the recession of 2008, the U.S. lost about 14 per cent of its growers, though capacity didn’t fall nearly that much, because many overleveraged firms were purchased by competitors. The retail sector is still down a bit as well, while there has actually been significant growth in the number of landscape firms entering the marketplace. Overall economic growth in both Canada and the U.S. has been steady over the last few years, says Hall, but we could see a slight slowdown (from three per cent to 2.25 per cent) as we move into 2018. The reason, Hall explains, is that household spending is projected to dip, as well as what people are spending on houses.

The housing connection
“The green industry is strongly correlated with the housing market; whenever we build a house or a condominium or a duplex, we landscape them in some fashion,” says Hall. “You get more bang for the buck when a single family home is built versus an apartment complex, because each and every home is going to have plants around it. That’s why we like to see new housing developments.” As economic indicators and figures come in at the close of 2017, Hall expects to develop a detailed outlook for the 2018 housing market in Canada and the U.S. which he will include in his keynote at Landscape Ontario’s Congress on Jan. 11, 2018.  

Boomers are retiring; it’s a good thing
As Boomers (people born between 1945 and 1965) get older, they often look towards professional help for landscaping and gardening. “Boomers are retiring to the tune of about 10,000 a day here in the States,” he said. “That means you have a bunch of folks from about 53 years of age up to about 72, and of course as people get into their 70s they garden a little less on their own, but they still want those landscape services. They don’t love plants and gardens any less, they just might not have the ability to get out there like they used to.” That’s a big plus for the green profession.

Sell more than aesthetics to the younger crowd
Hall is also bullish about economic opportunities on the flip side of the age spectrum. “Millennials have a much greater appreciation for the work-life balance and quality of life dimension than the boomers did,” he explains. Horticulture can pitch a compelling message to the younger generation because its products and services really do improve the environment and enhance lives. The key going forward will be to market that message effectively. “We can’t just rely on plants being pretty anymore. We need to talk about all of the environmental, economic and health benefits,” says Hall. 

Minimum wage increase hasn’t been rosy 
Having studied the impact of significant minimum wage increases in California and cities like Seattle in the U.S., Hall has insight into its potential impact on the Canadian market in the years ahead. “It hasn’t all been positive,” he explains. “The net effect on those lower wage-earners the policy is trying to help, is they often see their hours cut back. That leaves them scrambling to try to find a second job to get their hours back up, and actually see an increase in their incomes.” For business owners, “Obviously, the cost of doing business increases,” says Hall. “In California it works out to about a $10,000 tax per full-time equivalent.” He adds, “It can also have an impact on inflation. In our industry, labour is about 35-40 per cent of total cost, and wage pressures would have an inflationary impact. And so we could see the central banks in both Canada and the U.S. manipulating interest rates accordingly, so the cost of capital may increase in addition to that.”

Ripple effects of cannabis legalization 
Hall has also examined the impact of cannabis legalization in numerous American jurisdictions, and has seen some unexpected ripple effects. “The cannabis industry is growing dramatically in both countries and there is a lot of investment going on,” says Hall. “There are spillover effects, including on the availability of peat moss, and of greenhouses. As the demand goes up, we could very well see prices jump as well, which would make things a bit tougher for growers in our industry.” 

Landscape Trades, January 2018