More from Mexico

Lawn & Landscape magazine traveled to Mexico this January for the National Association of Landscape Professionals Leaders Forum. Between networking events and some time spent at the beach, the attendees also heard from two key speakers — Taylor St. Germain and Andrew Bray. We covered both of those sessions if you couldn’t make it to the event.

Why a recession won’t crush landscapers in 2024

To some, there’s no word in the English language more frightening than “recession.”

Yes, Taylor St. Germain told NALP Leaders Forum attendees that a recession is coming. St. Germain would know: He’s an economist and speaker at ITR Economics, which offers business management consulting based on the latest economic trends in the U.S. The Leaders Forum took place in January in Mexico.

So, St. Germain admits that using the "recession" buzzword — the one that preceded an awful economy in 2008 — likely gives landscapers some PTSD. But he reassured attendees that the affect will be minimal: He projects a reduction in U.S. GDP of just 0.2% in 2024.

He tried to put that figure in perspective, adding that the U.S. economy goes into some sort of a recession every 10 years dating all the way back to World War II. Here, he’s not so concerned with how businesses may struggle in 2024; he’s more concerned

they won’t be able to handle all the new business that may come their way in 2025.

After this slight dip in GDP in 2024, he’s projecting growth each year until 2030.

“My concern is that we’re not prepared for how quickly we’re coming back in 2025,” he says. “(This year’s) a time to invest in efficiencies because we have five consecutive years of GDP growth coming in the U.S.”

St. Germain shared consumer data with the forum attendees, demonstrating the narrative about consumers being in an awful position to spend is wrong. Sure, the current data shows a slight decrease in how much they can spend, but that’s only because they received stimulus checks during the COVID-19 pandemic. Those same consumers are now just returning back to the steadily growing strong position they were in beforehand.

St. Germain also suggested the labor shortage isn’t going anywhere.

“The only takeaway you need: For every open job, we have 0.7 people,” he says.

He believes there’s two ways the U.S. can approach this shortage: changes to the immigration policies or automation. The latter seems far more likely than the other to him, as even the mild recession in 2024 won’t fix the labor shortage.

“Everyone’s afraid of robots, but we’re going to need them,” St. Germain says. “Even through an economic downturn, you’re going to need employees. Be cautious about layoffs in 2024 because that activity is coming back in 2025 and 2026.”

There’s a narrative that people don’t want to work anymore, which St. Germain says he doesn’t believe. “We just had a record-high labor participation rate,” he says, “so I don’t buy that.” He does add that labor participation in people aged 16-24 has dwindled significantly.

He says there’s lots of different theories on that, but he encourages companies to engage those employees differently than they might with their older generations. St. Germain points to one of his clients that let their youngest employees lead a website redesign, which he directly attributes now to millions of dollars in growth.

Ballooning material costs and employee wages became an industry-wide story since COVID-19. St. Germain says that while wage inflation is certainly still a reality, material costs are starting to go down. With that, means less pricing power than before, where companies could pass price increases down to the consumer under the idea that things cost more money than before.

St. Germain says 59 of his 60 clients are already being asked to keep their current prices steady or, in some cases, drop their prices. He advises companies to brace for tougher conversations by citing wage inflation rather than increased material costs if they decide to increase their prices.

“If you’re part of a sales team, prepare for challenging pricing conversations this year,” he says. “Margin benefit is going to come from the cost savings side rather than the price increase side.”

St. Germain’s also details an outlook where residential construction is about to rise while commercial construction will taper off. They’re counter-cyclical, and St. Germain says that after the Federal Reserve increased interest rates, the housing market plummeted. He also points out that housing market data traditionally beats the commercial market by two full years.

He says the building permit process is still a huge pain, but the improvement in the market itself is still demonstrable. Housing unit permits by state data show that Nebraska, New Hampshire and Alaska are the only states not recovering. And there’s some positive growth rates in remodeling construction nationwide, though there’s less overall than there was during the pandemic.

“The worst of the housing decline is behind us,” St. Germain says. “We have growth in the next three years.”

Rumblings from Capitol Hill

From H-2B updates to the latest legislation circulating on battery-powered equipment, Andrew Bray had lots to cover at the NALP Leader’s Forum.

Thousands of miles removed from his usual post in Washington D.C., Bray — NALP’s senior vice president of government relations — told forum attendees that it could be “silly season” ahead of this year’s presidential election. The Senate could flip its majority, there could be a lame duck Congress and there could be a new president residing in the White House this time next year.

Even still, Bray says there are some encouraging signs for the industry regardless of what happens at the ballot boxes in November. These include progress made on the H-2B work visas program, where there was an all-time high in supplemental cap visas approved this year at 64,716.

This includes 20,716 visas for the first-half cap, then 19,000 in the second half. There’s also 5,000 for post-May 14 and 20,000 for the Northern Central American H-2B program, which Bray says is really worth considering as long as President Joe Biden is in office. Bray says Biden has aimed to solve chain migration by prioritizing the NCA program.

“If you’re willing to (pull from) Northern or Central America, it’s worth trying,” he says.

Bray also promoted the Seasonal Employment Protection Act (SEPA), which he says will provide unprecedented cap relief. The bill aims to raise the cap floor of 70,000 and ceiling to 150,000. For reference, that ceiling is currently at 125,000 for FY2024.

He adds that this floor and ceiling are going to be based on .5% of the national employment, and it exempts the seafood, outdoor amusement, and remote/rural industries.

The only problem? SEPA hasn’t been introduced, as Bray says it still needs five more Republican Senators to endorse it.

Elsewhere in the legislative process, Bray says the green industry is losing the pesticides battle and pointed specifically to the Farm Bill. Every five years, a massive farm bill must pass in Congress, but it’s a significant battle because Bray says nobody wants to touch pesticide usage otherwise.

Bray says they want to achieve pesticide preemption at the state level by codifying state lead agency authority of the sale and use of pesticides. In other words, he hopes the Farm Bill will give state and local government the decision-making power on any pesticide bans on public properties.

Bray reiterated this is a losing battle, but it’s not quite over. As Congress “punted the ball” to this year (the bill was supposed to pass in 2023), Bray says they’ve flipped the dialogue a bit on opponents to this bill. Sure, there are some states discussing pesticide bans, but Bray believes the opposition is being anti-choice by trying to pass this law federally.

Then there’s the gas-to-electric transition in the industry. Bray says it’s clear that the green industry wants to transition to electric, but they want to do so responsibly, giving landscapers enough time to make that switch. Bray points to a tax credit they tried to get for large electric mowers, which they defined as mobile machinery, which already has a tax credit in the electric vehicle segment.

“Here’s the problem: The IRS so far is not recognizing that, and they’re requiring you to put a VIN number,” Bray says. “We still don’t have answers. If you guys were told that you could use this tax credit, you need to immediately go to who you purchased this from and confirm.”

Bray clarifies that it’s on manufacturers to validate what qualifies as a tax credit, which is for a max of $7,500. “It is not a slam dunk that you can be eligible for this tax credit as of right now,” he says.

Bray also added that he’s supporting H-R 6013, or the Promoting Reduction of Emissions through Landscaping Equipment Act. It was introduced by Rep. Lou Correa (D-CA), and it would give a federal tax credit for zero-emission electric lawn, garden and landscaping equipment. The bill would provide a 40% credit on anything from mowers, blowers, hedgers and other accessories.

In all, Bray supports the transition to electric equipment, but he points to litigation around a blower ban in Montclair, New Jersey, as part of the industry’s problem they face. In late July, they put out a bill that would’ve banned all gas-powered equipment by that October.

“We’ve never seen anything that quickly,” Bray says. “We’re not trying to say we shouldn’t transition, but telling the entire industry they can’t use their equipment one month later? That’s ridiculous.” L&L

The author is an associate editor with Lawn & Landscape magazine.