Last fall, industrial consultant Eli Lustgarten told attendees of the National Truck Equipment Association’s executive summit that good news was on the horizon — so long as the president and his allies in Congress were able to overhaul the U.S. tax system.
A few months later, with a new year underway and a tax bill passed and signed into law, Lustgarten was feeling even more optimistic. Looking ahead to a presentation he was scheduled to deliver at the Independent Equipment Dealers Association’s annual meeting in Orlando in February, Lustgarten said he remains bullish on the shifting winds in Washington, D.C., and their likely impacts on industry.
“The underlying fundamentals as we look toward 2018 are strong,” he said. “We’re going to have a very strong first half, if not the entire year, subject to how the politics get in the way.”
Lustgarten, president of ESL Consultants, said 2017 ended “with a lot of momentum,” but cautions that some economic data from the last quarter of the year is a bit misleading. As news — and questions — swirled around the tax debate on Capitol Hill, Lustgarten said some businesses began moving their inventory.
Regulation slashing cheered
That uncertainty wasn’t unusual in 2017. While many industry watchers, including Lustgarten, cheered President Donald Trump’s pledges to slash regulations and pump new life into industry, they knew the timeline for any major changes remained unclear. Entering into the first months of 2018, however, Lustgarten said he sees an environment in which industry leaders are feeling more secure about what to expect.
“A lot of that has waned,” he said of earlier uncertainty around tax, regulatory and other changes. “The deregulation was tremendously successful and substantial.”
Lustgarten is confident that Trump and Congress will soon move on to tackle a major infrastructure spending bill. He said successful passage of that legislation would certainly spur industrial activity and leave both businesses and consumers with more money to spend.
Meanwhile, the run of natural disasters that hit the U.S. and surrounding areas in 2017 — including a particularly devastating hurricane season and massive wildfires in the West — prompted major losses for some regions and industries. But the longer-term rebuilding may actually continue to spur more growth for years to come, Lustgarten said.
“The damage done was so severe that it creates multiple years of work,” he said. “These natural tragedies impact short-term activity on a negative basis but are creating pockets of demand that will last for years.”
Energy efficiencies still expected
Lustgarten predicted some industries will thrive under a more lenient regulatory climate than the one that characterized the years President Barack Obama was in office. He said he expects some changes that were previously spurred by regulations — like a greater emphasis on energy efficiency — may continue because of private-market competition, rather than government intervention.
“Overall, industries will be competing with each other for resources and people,” he said.
That’s in part because of continued gaps between available jobs and a workforce ready and willing to take them. Lustgarten said many industries’ years-long struggle to find qualified workers is likely to persist. In his presentation last fall, he pointed to demographic shifts — notably, an aging workforce — as one of the key drivers of that trend.
“It’s a perennial problem, and it’s not going to get better,” he said. “It’s going to get more difficult.”
He expects unemployment rates to remain low over the next few years, and companies to be scrambling for ways to find and keep the best and brightest. His advice: employers need to invest more in training, and strike a better balance between investments in people and in equipment.
Automation and tight labor
“As labor gets tight, capital expenditures will go up as they automate to try to offset the problem,” Lustgarten said. “That creates different types of jobs and a balancing act that’s not going to get easier.”
Those gaps will continue to be a factor in the debate over immigration. Lustgarten said the shortage of workers across industries — including those linked to service trucks — underscores the need for looking to outside countries for more workers.
“We can step up and help growth rates for a while (with increased productivity), but as a part of the equation we need to have an increased source of workers,” he said. “That’s always been historically filled by the immigration program.”
Despite those challenges, Lustgarten said he’s sending the message that 2018 could be a “goldilocks” kind of year —one with just the right blend of growth and change to keep industry running smoothly.
“Things are beginning to gel, and we just hope it can continue,” he said. “The issue will become: what’s next?”
— Erin Golden
Erin Golden is a writer based in Minnesota.