Plan ahead for downturns and even tighter labor market, economist says
SPOKANE -- -Washington employers will face many challenges in the coming years, including the risk of recession and major changes to the country’s labor market. But these risks include many opportunities, and employers that plan ahead will come out better in the end.
There’s a 26 percent risk of recession in the next twelve months, the most recent Wall Street Journal survey of economists shows.
“This is a big risk that not too many businesses are thinking about,” Conerly told more than 200 guests at the Davenport Grand Hotel.
That means now is the time to plan for the next downturn, Conerly said. He shared several practical steps that provide a clear path, including:
· Identifying the dollars at risk
· Cash flow projections
· Creating action steps
· Clarifying trigger points for when to stop expanding, for example
· Re-calculating cash flow
To illustrate the value in preparing for a downturn, Conerly shared an example involving the heavy equipment manufacturer Caterpillar. The company’s leadership planned ahead during booming economic times prior to the Great Recession by projecting what it would take to stay profitable in case their sales fell by 40 percent, for example.
When the recession hit, Caterpillar was in better shape than many.
“Because they had sketched out the plans in advance, they executed much faster,” Conerly said.
Conerly also said that he knows many smart, hardworking people from various companies that failed. Their fatal mistake was taking too long to make a move.
“Why did these companies fail? Typically, because they were slow to respond,” Conerly said.
Conerly also identified likely culprits for the next recession, including a tightening of federal monetary policy, an international slowdown, a drop in consumer confidence or a big hit to one of Washington’s big employers, like technology or aerospace.
For Washington, Conerly showed projections of more than 2 percent job growth in 2019, with population growth closer to 1 percent. These projections are somewhat smaller than previous years.
“The state’s still going to be growing faster than the rest of the country, even at the slower pace, but the caution I would present is don’t look at the strong growth of the last couple of years and say it’s going to continue so I can take a lot of risk to serve all those people,” Conerly said.
Another big takeaway from Conerly’s presentation was that competition for workers will become fierce in the coming decades. Baby boomers are retiring from the workforce.
The decade from 2020 to 2030 will see the lowest growth in terms of the number of people added to the working age population since the Civil War, he said.
“This is going to be the defining issue for the next decade,” Conerly told business leaders.
But the opportunity exists for employers to create workplaces with long-term, engaged employees, which equates to high productivity.
The first-level supervisor is key to employee retention, he said. And there are many action steps employers can take to outshine the competition and thrive, include assessing employee engagement and productivity; training managers, and setting clear expectations; creating time for managers to coach; and evaluating the performance of managers.
Conerly closed his remarks with a story about an employer that cancelled expansion plans because he bet against the American economy.
“Friends, the American economy is resilient, the American people are resilient, the American nation is resilient,” he said. “And that is your economics lesson.”