By Tom Ballard, Chief Alliance Officer, PYA
“Real estate has reached a peak, unemployment has reached a low, and we have a little bit of a problem,” Bradley Migdal told attendees at yesterday’s annual site selection luncheon hosted by the East Tennessee Economic Development Agency.
The Senior Managing Director at Cushman & Wakefield in Chicago predicted rosy economic times for the next couple of years, but also noted that the tight labor market is going to require employers to pay more to compete for a scarce workforce. It’s the old supply and demand question.
“We believe the expansion still has legs,” Migdal said. “Our economists don’t see any slowdown in industrial growth. We don’t see any slowdown through 2018-19.”
In a humorous, dry-witted delivery style, he offered some insights on how we got to the supply and demand challenge and a few thoughts on ways to address it. Migdal attributed much of it to unwillingness to invest in the year before the 2016 Presidential election and for the last year as corporations awaited details of tax reform that were released yesterday.
“We haven’t done anything in almost 24 months,” he said in reference to both significant industrial construction and the hiring more workers. To illustrate the point, Migdal cited a two-thirds decline in available industrial space in Tennessee in the past two years as an indicator of the very tight space market.
“You’re going to get passed over” if you don’t create more capacity, he warned a room that included many developers.
Regarding hiring, Migdal said most corporations have been relying on more overtime, but that is in part due to the inability to find workers who can pass drug tests, something that is clearly demonstrated by the country’s serious opioid challenge.
“The biggest problem manufacturers are facing is the gap between people who want to work and the jobs,” he said. “If you really want an employee, you are going to have to pay them. It’s a balance sheet problem.”
Noting that the hiring challenge has been exacerbated by parents who don’t understand the nature of today’s modern manufacturing plants, Migdal said what many have been saying – everyone does not need a four-year degree, noting that his Bachelor of Arts in International Relations has little to do with his work today.
“Innovation is disrupting our economy, and we need workers to be innovative,” he observed.
Most of the economic indicators are positive in his view – consumer confidence is stable, retail sales are up albeit mostly online, home sales are up, and so is manufacturing. Yet, Migdal urged the audience to watch some emerging trends such as autonomous vehicles and the increasing level of retail store closings.
Observing that the Turkey Creek area of West Knoxville seems to be bucking the national trend when it comes to the robustness of retail storefronts, Migdal characterized rapidly declining retailer Sears as the Amazon of years ago. “They didn’t innovate; they just stayed in their lane,” he explained, adding that “we are now in a new economy as a result of the e-commerce juggernaut.”
Another trend that really bothers Migdal is what has happened with social media, email and other mobile device-enabled capabilities.
“We’re going away from human interaction,” he said, noting that it is clearly affecting Cushman & Wakefield’s hiring of consultants in the site selection and economic development area.
Describing Nashville as the current king of the sunbelt, Migdal urged the attendees to keep an eye on Florida. The state currently does not manufacture products, so trucks carrying goods into the state frequently return empty. However, with many people relocating from Puerto Rico after the recent hurricane and all of them finding jobs, things could change in Florida.