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State of the Industry

State of the Industry

By Diane M. Calabrese / Published December 2020

Photo by iStockphoto.com/smshoot

Unprecedented? Upending? No and no. There have been much tougher years and much more complicated periods. Carrying on and continuing to do were the norms.

     The Endurance, a three-masted barquentine, was set to depart for Antarctica just as England entered World War I in 1914. Ernest Shackleton, commander and expedition leader, volunteered his ship and crew of 27 to the war effort. Winston Churchill, then lord of the admiralty, told Shackleton to proceed with the expedition.

     On their return to England in 1917, Shackleton and uninjured members of the crew joined the military to fight in a war still in progress. Their exquisite vessel, built by expert shipwrights in Norway, had long since been crushed by Antarctic ice.

     While the Civil War was being fought in the United States, members of the U.S. Congress were sparring about all sorts of other things, such as whether to fund or continue funding for laying a cable across the Atlantic. A good try at a cable had been made in 1857. There were many players, prominent among them Cyrus West Field. And congressmen even had props—pieces of cable—to hold up as they bellowed (literally) for or against funding.


  

     Life does not just stop. Or at least it never has in the past. It could not stop. No wood chopping, no heat. No growing and hunting, no food. No fetching, no water.

     Stopping life and its activities is a luxury for many living in the 21st century and a perverse one. Someone must accomplish tasks that must be done. Infrastructure does not maintain itself and food does not materialize on a wish.

     (Full disclosure, a second time: This writer’s view is that no shutdown or lockdown or forced cessation of activity should have been implemented. Our humanness called for us to keep going, be calm, deal with the difficulties, and set a good example for one another by acknowledging our mortality.)

     We are where we are, though, and we must begin there. Shutdowns have taken a toll. Some industries—recreation and hospitality (accommodation and food services)—have fallen to heretofore unfathomable levels of inactivity.

     On October 2, 2020, the Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce released real gross domestic product (GDP) figures for second quarter 2020. GDP decreased in the nation at an annual rate of 31.4 percent.

     Every state and the District of Columbia registered a loss in economic activity. Some, such as Hawaii and Nevada, registered horrid declines at 42.2 percent each. Tennessee was close at more than 40 percent.

     Among the states that came in with a decline in GDP less than the national average rate were Arizona, Arkansas, Colorado, Georgia, and North Dakota. Arizona had the smallest negative change in GDP at just over one-quarter (a 25.3 percent decline).

     What happened in Tennessee? Healthcare and social assistance were big employers that made enormous cuts in the second quarter.

     In fact, in 18 states the drops in healthcare and social assistance sectors contributed the most to the decline in economic activity. For those without links to the healthcare industry, the drop may seem counterintuitive, but even as hospitals were increasing the number of beds for patients who fell ill in the pandemic, they were cutting units and beds and staff in other areas and cutting hard.


  

     What does it mean for our industry when transit (air, rail, and mass) ridership declines, schools do not open, recreational venues (from arts to sports) shutter, and travelers stay home? Contractors need fewer tools and supplies.

     Some offset to declines in activity might be balanced out by the need for more cleaning or cleaning with a disinfectant among places still open, but the possibility of balancing out is limited when one third—or more—of the economy disappears.

     At the beginning of October, the unemployment rate stood at 7.9 percent, which looks good given the complexity of the situation in the United States. However, some big hospitality and recreation layoffs (e.g., Marriott, Disney) had not been recorded. And state and local governments, as well as colleges and universities, were beginning to do more than hint that they could not continue with their current employee rosters.

     On October 14, the Washington Metropolitan Transit Authority that serves Washington, D.C., and its Virginia and Maryland suburbs was taking public input about how to further curtail service. The system is losing more than $2 million each day. Ridership is low because of service cuts implemented in March, when federal workers no longer had to go to their offices, a verifiably vicious cycle.

     What will break the cycle?

Try Optimism

     An innkeeper who sank his entire savings into a Vermont ski resort has an empty inn in a snowless and warm December. The character, Major General Waverly (Dean Jagger), is asked by two soldiers he had led in Europe in World War II about the absence of snow. Is he worried?

     The movie is White Christmas (1954), and Waverly assures the men there will be snow. Is he really sure? “No,” he says. But he explains the one thing he learned in the Army was to be positive. Optimism goes a long way. It buoys us, giving us energy.

     “Be ready for anything,” says Scott Hansen, president of Alkota Cleaning systems. “Everyone in the industry had to adapt quickly in 2020 to the ever-changing business environment.” Adapt they did. That’s a positive outcome, and it’s a cause for optimism.

     As for the changing landscape, it is unlikely at an end. “I expect more of the same as we move into next year,” says Hansen.

     But now we know how adaptable we can be. Another positive in some strengths has been identified.

     Count Roy G. Chappell, CEO of Chappell Supply and Equipment, among the optimists, too. He advises everyone to look to the possibilities and then get busy actualizing them.

     “Water recycle and reuse in the United States was estimated at $17 billion in the year 2020,” says Chappell. “It is projected to reach a revised size of $38.3 billion in the United States by 2027.”

     Chappell gives us the water recycling example to illustrate an important aspect of industrial activity. “Some parts of the U.S. economy are a little soft, other parts are very strong,” he explains.

     Opportunities for companies in our industry are emerging in new sectors of the economy. “Cannabis cultivation is one,” says Chappell. “Inside growers all need water filtration.”

     And water filtration is a necessity that involves several components. It begins with the fact that many growers do not tap water from public systems.

     “It is a complex job as many growers run off well water,” says Chappell. “Getting the correct pH and nutrient levels requires some planning. Bio-systems, tanks, and spraying systems need to be sized for the type of grower.”

     There are other expanding sectors that should interest our industry. “Other fields showing a high
demand in the area of industrial wastewater are new construction in food processing and general construction for service centers of new equipment biosystems as well as pressure washer and parts washers.”

     Chappell reminds us the business planning that companies do from year to year has value. It can sustain them and give them opportunities to enter new sectors and refine direction. “A lot of companies 10 years and older have funds set aside for capital equipment this year,” he explains.

     On October 6, the BEA released data for U.S. international trade in goods and services in August. There is positive news therein. Exports were up $3.6 billion over July.

     In August, the United States also recorded trade surpluses with OPEC, South and Central America, Hong Kong, Brazil, the United Kingdom, Saudi Arabia, and Singapore. Data change month-to-month, yet it’s significant that many parts of the nation are moving.

     In July, the Congressional Budget Office (CBO) published “An Update to the Economic Outlook: 2020 to 2030,” in which the disruption to economic activity is factored into an earlier report. The report predicted an increase in unemployment to 14 percent in the third quarter (very accurately) and then a quick drop. (At 7.9 percent in October, the trend is good.)

     CBO expects the GDP to grow at a 12.4 percent annual rate through December 2020. It anticipates GDP will recover to the level prior to the crisis by the middle of 2022. The CBO estimates hinge on current expenditures and federal taxes.

     The CBO report is available via this link at https://www.cbo.gov/system/files/2020-07/56442-CBO-update-economic-outlook.pdf.

     The CBO report addresses the effect of physical distancing. In a nation of more than 330 million people, the directive to not get too close limits the number of people who can occupy any given space. Transit, schools, workplaces, places of worship, etc., are all affected.

     Is there a way to get people together and resume life?  Yes, say the epidemiologists and public health officials who wrote and signed the Great Barrington Declaration at https://gbdeclaration.org in October. It can be done, and it should be done now.

     Perhaps by December the nation will be all about healthy interaction, and everyone will be anticipating a snow-filled and happy Christmas.