From Where I Stand

It’s that time of year, in offices all across the 2021 with the healthiest backlog they’ve had in a decade. Backlogs country, that professionals lock their doors, sharpen their pencils, are stretching from 6-8 weeks to deep into the summer. and begin crunching the numbers. No, I am not talking about This is when I leaned into Charlie’s presentation at iLandscape budgets or spring sales projections. Of course, I am talking about and turned up the volume knob. What do the economic indicators brackets for the NCAA tournament. The NCAA tournament is that tell us about the health of the landscape industry long-term? Did we one magical time of year where college basket- really not just survive the pandemic, but thrive? ball fanatics, compulsive gamblers, and office Charlie’s presentation is entitled, “Will Covid secretaries can all convince themselves, for one Spur Plants Sales Again in 2021?” It is available shining moment, that they are college basketball on the iLandscape365 along with 50+ other preexperts. College basketball fans watch entire sentations to get your team through the season. seasons, break down the numbers, listen to certi- iLandscape365 also includes all the content from fied bracketologists, and still come in 9th place to the Turf Education Day and Impact Conferences someone who went with the taller mascot or gave too. If you haven’t gotten your pass, what are you the bracket to her eight year old. waiting for? There is a lot of rainy day training

What makes completing a bracket so compel- opportunities as well as the ability to rack up landling is that, on one day, before the NCAA tourna- scape architect, arborist, and irrigation contractor ment starts people need to predict what will unfold CEUs. Details are at iLandscapeshow.com. over the next month. Anyone who has ever filled In 2020, gross retail garden center sales were up out an NCAA tournament bracket has that moment 20-40% nationwide. In the landscape sector, 75%, where they have convinced themselves they have and almost all of the landscape companies in states perfect bracket - something that will be talked about that were not shutdown, saw net profit increase by for decades, maybe even hung in a museum. That afterglow usually fades the second you lose 11 out Survive 5%-20%. This is even before PPP funds are added to the equation. In Illinois alone, that was an additional of the first 16 games. What makes sports wagering so difficult is that and $225 million into the landscape sector. The US lost 22 million jobs during the pandemic period. That is it is never an issue of having too little information. Sports information and statistics can send Advance simply staggering. However, those losses were almost exclusively in the brackets that do not represent the you down rabbit holes located within rabbit holes. client base for landscape and retail garden centers. All gamblers try to do is find some little Achilles’ heel in the point Annualized GDP drops in Q3 and Q4 were a spread, over/under, or straight-up pick. Anyone who has ever yo-yo. There was a 31.4% drop in Q3 that was then followed by a gambled on sports knows the intense pride that comes with picking 33.1% rise in Q4. In real terms, that means there was a 9% decline a winner. Anyone who has ever won an NCAA pool walks around in Q3 and a 7.4% rise in Q4 compared to the previous year. Charlie like Yoda for a week laughing at the problems of inferior beings. refers to 2020 as “The Great Shutdown” and economic activity

Charlie Hall’s presentation at iLandscape365 is required view- rebounded sharply and a lot of that was tied to the direct stimulus ing. Whenever Charlie speaks I make it a point to pay attention. payments and unemployment checks. Removing politics from the He’s the guy who never fills out his NCAA bracket based on mascot discussion, the amount of stimulus money earmarked to low earners height. He’s also the first to admit prognostication is an imperfect means that money was almost immediately returned via consumption. science. Charlie is a Professor & Ellison Chair in the Horticulture There are still a shade under 1 million unemployment claims per Department at Texas A&M University. Charlie grew up on a nurs- week. This is down from a high of 4.5 million claims per week durery in North Carolina. He is an economist by training and that what ing the earliest parts of the pandemic. The reason this is concerning makes his research so compelling. He is usually the green industry’s to the overall economy is that 70% of the US economy comes from resident soothsayer, entrails reader, and bracketologist. consumer spending. The question is, does that impact the landscape

For the last year, he has been given the awesome task of trying industry? Lower wage workers employment levels are down 19%. to figure out what the impact of Covid-19 will be on the landscape, Higher wage workers employment levels are actually up 1.2%. nursery, and garden center retail industries. Obviously, most landscape Not to be craven, but it is very likely that the current rates of unemcompanies were shocked by the record profits reaped in 2020. The ployment will not impact landscape companies in the short term. If you economy and labor markets were bipolar. Certain industries crested take the 70% chunk of the US economy that is related to consumer while others saw unimaginable despair. Certain segments of the labor spending, 60% of that amount is spent by the top 20% of households. market saw job losses not seen since the great depression while others To do the math, that means 42% of the US economy is driven by the saw salaries rise and unemployment rates drop. Some professionals consumer spending of 20% of the population. That 20% also happens were able to adapt to a working-at-home environment while others to represent the bulk of the landscape industry’s client base. were legally prohibited from even opening their business doors. The four major product areas that suffered the most during the

Everyone just rode the rollercoaster, white knuckled in 2020. pandemic were gasoline, restaurants, clothing, and electronics. Now, the lap bar has been raised, everyone rested, some plowed a Almost every other consumer expense category went up, dramatilot of snow, and now we take our seats for another ride. Of course, cally. There is also a major housing boom with high wage workers with any prosperous year in the landscape industry there is a spill- driving demand. That is coupled with mortgage rates being low over effect. Weather dictates the working calendar. Backlogs and and millennials finally coming into the housing market. The bulk exhaustion grow. Finally, the ground freezes and everyone slinks of millennials are coming into the housing market in the next five away for a long overdue nap. Most companies are about to start years. The housing boom may be just beginning. Obviously, that The Landscape Contractor April 2021

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has a direct impact on the landscape market, especially residential design-build and maintenance.

Charlie also spends a few minutes discussing the stock market and how untethered it is from the current economic reality facing most of the country. He also is quick to point out, as an economist, that the stock market is an untrustworthy marker because it is speculative. Investors look at how the economy is going to perform in the future, not the present. Given the economy was surging, and the pandemic proved not to be a global killer, investors returned as soon as they saw that money could be had. Also, high income speculators had lots of unspent money sitting on the sidelines. The spring dip in 2020 was the perfect recipe for savvy investors to flood the market with capital.

It is tough not to be excited. With that said, every party needs a pooper. The only dark shadows being cast on the landscape industry is a delinquent mortgage bubble that is about to pop. Further, many businesses simply did not survive covid. Whether or not they were teetering or were impacted extra hard by the pandemic, these businesses are gone for good. Of course, the final concern is some type of resurgence of Covid and a return to shutdowns or closures.

There does not seem to be fundamental market shifts that will negatively impact the landscape industry. With that said, the biggest threat to the landscape industry will be the renewed fight for consumers’ dollars and time. All of the industries most impacted by The Great Shutdown are sleeping giants. Vacations, road trips, and hanging out at sports bars watching the NCAA tournament are high on the list of activities people can’t wait to return to. Landscaping will compete with overstretched dollars returning to overstretched lives.

With that said, at some point, high earning professionals are going to start saying the quiet part out loud - they have fallen in love with the freedom and flexibility of working at home. Most white collar businesses have been slow to return. Sure, some may blame commutes, sanitation costs, and getting 5,000 people up an elevator bank safely in a skyscraper. The fact of the matter is that working from home and homing from work have now been blurred beyond recognition. Landscape clients are going to be slow to return to the daily grind and that’s a great sign for residential landscape companies. Having professionals choose to continue to work from home, even partially, is a benefit to all tradespersons who beautify living spaces. Years from now, any reference to 2020 will likely send shivers down our backs. Charlie points out that this was the 9th worst pandemic ever to fall upon the world in terms of total death. We all had to figure it out in our own way. Some baked bread. Some got fit. Some drank wine at 9 in the morning. Some had record sales years. Some faced the unemployment line. As America heals literally, figuratively, and economically, the key question is how big do you want to bet on the landscape industry? Is this the year we make that deep run at a title? Does some unforeseen challenge expose a weakness we never knew we had? We are highly seeded with huge expectations. With that said, in life, like the NCAA tournament, the only predictable bet is unpredictability.

Scott Grams, Executive Director March 19, 2021