Experts see a merry 2019

Economists see momentum carrying into 2019.

But much depends on Congress passing a new infrastructure bill

By Mike Lewis
mlewis@crossroadsbizjournal.com

Some economists and business leaders see a mostly rosy 2019 for the Crossroads Business Journal region.

At various presentations in Maryland, Pennsylvania and West Virginia, those tasked with peering into economic crystal balls have forecast continued growth for the region, driven largely by commerce along Interstate 81 and I-70 and a strong national economy.

A few of them said the picture could be even brighter if Congress passes an infrastructure bill.

“It doesn’t appear that the new Congress is going to agree on a lot with the (Trump) administration, but one thing upon which they might be able to agree is infrastructure. We know the nation’s roads and bridges are crumbling, the airports are not in great shape, neither are many of the seaports. So you put all that together, if they’re going to legislate anything, it might be infrastructure,” economist Anirban Basu of the Sage Policy Group said during an appearance in Hagerstown, Md.

While Basu’s talk focused on Maryland and Washington County, he indicated an infrastructure bill would particularly benefit places like the Crossroads region.

“Washington County is very different from the balance of Maryland’s economy. A lot of Maryland’s economy is about government employment and about government procurement, federal contracting in particular,” Basu said.

“But Washington County is not so much about that. It’s more a meat-and-potatoes-type economy, manufacturing, distribution, construction, old-fashioned kinds of industries in some sense, although of course done in a modern way.”

Basu said the country in the past few years has seen surges in industrial production, which is good for Washington County since there aren’t many other places in Maryland with such businesses.

“Again, you won’t find this kind of dynamic in Montgomery County, Prince George’s County, which is more about government spending,” he said. “But Washington County (is) much more an industrially oriented economy, much more about distribution, I-81, I-70, I think people around here know what’s going on, Volvo and so on and so forth.”

In short, things could get even better in Washington County, he said.

“Therefore, this is the kind of county that might disproportionally benefit from an infrastructure package,” he said.

In recent presentations, L. Michael Ross, president of the Franklin County (Pa.) Area Development Corp., has lobbied for an infrastructure bill.

It would bring a double benefit, according to Ross. First, improving things like broadband access, roads, bridges, water service and sewer lines is essential for continued business and residential development.

“If you can’t flush a toilet, you’re not building,” he said during a talk in Greencastle, Pa.

Second, Ross has pointed to companies such as the Volvo Group, Manitowoc and JLG Industries. Workers in this region produce the kinds of equipment that is used in infrastructure work, he said.

In West Virginia, infrastructure work and construction is expected to buoy the Eastern Panhandle’s growing economy.

In a recent report, West Virginia University economists didn’t focus on a federal bill. But they said the construction sector will grow in the next few years “as P&G’s Tabler Station site (including any associated infrastructure developments) is built out over the next several quarters.”

‘Major source of uncertainty’

“Well, first, the economy is good. And when I say that, I mean the national economy and I mean the Hagerstown and Washington County economy. Good. Low unemployment, lots of job growth, stronger housing market, exactly what people would want, and that’s what we have seen in 2018. It’s been a good year for the economy nationally and locally,” Basu said during his annual talk in Hagerstown.

As for 2019?

“That’s not as easy to say,” he said. “I think that the next few months are going to be good. There are a couple of threats looming to the economy. No. 1 is inflation and rising interest rates. We’ve seen the impact rising interest rates can have on market volatility. Certainly, that was the story in October. And then we’ve got the issue of tariffs and trade wars, particularly with the world’s second-largest economy, China. That’s going to be a major source of uncertainly next year.

“China’s responsible for half the world’s manufactured output. So if you put tariffs on Chinese goods, that’s inflationary. And we already have lots of inflation in the economy, or at least inflationary pressure in rising wages, health care costs, apartment rents, tuitions and so on.

“So, that’s the big risk for 2019,” he said of inflation. “I don’t see that as toppling the economy, certainly not in the first half of the year. But the second half of the year could be a bit more interesting.”

He’s also a little concerned about the pace of growth and the amount of capital in the economy.

“Confidence sometimes translates into recklessness,” he said.

When the next economic downturn comes, he said, it “will not be nearly as bad as 2008-09.”

‘Remain healthy’

John Deskins and Brian Lego, economists with the West Virginia University Bureau of Business and Economic Research, also painted a mostly rosy picture during a presentation in Martinsburg, W.Va. They focused on the Eastern Panhandle, which includes Berkeley, Jefferson and Morgan counties.

Like Basu and Ross, they pointed to transportation facilities such as I-81 as important factors in economic growth.

“The forecast calls for local economic growth to remain healthy over the next five years, thanks to a combination of continued growth in the D.C.-area economy and rising job growth prospects from within the three-county region. Additional hiring over the next several quarters by Procter & Gamble and several supporting companies will account for a large proportion of area job growth during the outlook period,” their report states.

‘You have to compete’

All of the speakers stressed the need to develop people with the talents and skills needed in today’s workforce. Companies through the region have reported problems in finding skilled employees, they said, and workforce development has become a familiar topic.

Basu told the audience in Maryland that “workers are going to get more expensive faster” as companies vie for employees. And that’s particularly complicated in a border region.

“You have to compete with the Pennsylvanias and the West Virginias and the Virginias,” he said.

Ross said a review of statistics in August translated the issue into numbers. At that time, he said, there were 3,588 job openings in Franklin County, Pa.

“Statistically, there were 2,700 people unemployed,” he said.