The Economic Forecast delivered in January at the Phoenix Club in Anaheim was only mildly encouraging for the construction industry. The presenter, John Husing PhD, is an economist and commentator based in Redlands and is in the thick of a segment he predicts will be hot going forward: commercial construction in the Inland Empire for the logistics industries. He made the point that the ever-expanding e-commerce is putting pressure on warehousing and the movement of freight, with the logistics and construction sector accounting for significant growth in jobs for Southern California.
This is being bolstered by the activity at the Southern California ports where the latest figures show an annual throughput today of 9 million 20-foot equivalent containers, a number that is predicted to continue to grow. Husing said the San Pedro ports handle 38 percent of the nation’s inbound container traffic and the nearest competitor is insignificant.
Another bright spot, said Husing, is the healthcare industry that has seen an explosion of activity and office construction largely driven by the Affordable Healthcare Act. With significantly more people buying health insurance, there has been a major increase in people seeking healthcare and in the office space needed to provide that care.
But the logistics boom driven by e-commerce and the Internet has been a disaster for the retail sector. Similarly, the decentralizing of a workforce that can deal with clients over the Internet is reducing the demand for office space, so that sector is pretty much flat.
Husing was less bullish about the general economy of the nation, saying that long-term interest rates are so low, it’s leading into a reversal of the yield curve. It’s a slightly obscure statistic but economists say it’s a danger signal that the economy could be heading for trouble. In fact, the last four such reversals have all led to a recession, he said. The last one led to the Great Recession of 2008-2009.
“So,” said Husing, “some economists are looking at 2020 as a recession year. As you do your business planning, be prepared for things to be running not as fast as they are right now.”
So, to quote author Lee Child’s character Jack Reacher: “Hope for the best, plan for the worst.”
By SCCA President, Stanley Howard, Howard Contracting Inc.