1. When will there bean economic downturn?
Actually, we will probably experience a slow down before we hit the next recession. In terms of development activity, our “success” is hurtling us towards a regional inflationary period, with land costs and construction costs leading the way. Prices are accelerating with a relatively fixed construction labor pool, increasing demand by all the new development projects, and construction commodity prices rising, made worse with tariffs. Between a tariff on Canadian lumber and an overall reduction in supply, there has been a 36% increase in lumber prices. A 25% tariff on foreign steel is further increasing development costs. Rents just can’t keep up with these costs, with profitability for new buildings getting thinner.
2. Do we have a sufficient supply of skilled talent to sustain our growth?
For decades Massachusetts has had a net domestic loss of population. More workers have moved out of the state to other regions than moved into the Commonwealth. Our growth over this period has been aided by foreign workers immigrating into our market. With the flow of these workers beginning to slow, our problems are about to become much worse. A prime example of this problem is the lack of construction workers. Even with good paying jobs, readily available, new workers are not moving into our state. The main reason is the high cost of living, making a move unattractive. Although the state has seen a recent uptick in parts of the labor force, we are still at a serious risk of losing businesses that will be unable to grow due to a lack of sufficient qualified talent.
3. Amazon: boom or bust?
The national competition for the Amazon HQ2 was fierce and finally came to a conclusion, with New York and Virginia winning. But did we actually lose? The real question should always have been: where would the workers come from? Any headquarters move results in a “multiplier” effect, creating 3-4 times the number of jobs, due to other businesses moving to be near and service sector jobs growing to support the HQ. Conservatively, we would need 150,000 workers. Currently, we are at virtual full employment. If new workers aren’t coming from other states, we may have ended up cannibalizing our existing local businesses, forcing them out of the state. Was it appropriate to want Amazon? Certainly. But only if we were committed to resolve the underlying problems limiting the long-term expansion of our labor force. We need to do that even without Amazon.
4. Is there an affordable housing crisis?
If so, why isn’t anything dramatic happening to respond to the rapidly rising costs of housing? For the many homeowners experiencing record valuations for their homes, there is no crisis. That may provide an insight into why major political decisions are not being presented. Any policy that would slow or reduce home prices would be very unpopular. However, for our economy to continue to grow, we must have sufficient housing that is affordable to new workers and existing workers starting families. We need entry level housing in all communities, but especially those with good school systems. That is where these working families want to be.
5. Are we preparing for the accelerating impacts of employment disruption from new technologies?
We are already seeing the start of serious job loss from AI and robotics. In the very near future autonomous vehicles (especially trucks and mass transit) will cause an avalanche of workers being displaced. Government’s “social contract” is so outdated as to be years behind the unemployment trends we can now see coming down the road. The new contract must adapt and consider longer unemployment compensation periods, along with enhanced lifetime job retraining.
Hopefully, we can all wake up to the new realities and be proactive about the necessary solutions,rather that reactive and on the losing side of the economy.