The predicted downturn in 2023 will test Rhode Island’s business owners in a state that has yet to adequately prepare its labor force with the professional and technical skills needed for a modern economy.
In addition, the state needs better infrastructure, more housing and more effort to foster emerging industries.
These were the takeaways from the discussion by panelists at Providence Business News’ Economic Trends Summit held on Jan. 26, some of whom argued that even with a mild recession sometime in 2023, there must be better cooperation between business and government to recruit and match the labor force with new and growing sectors.
Panelist Peter Phillips, chief investment officer at Washington Trust Wealth Management, said that while Rhode Island has made some progress toward cooperation, more is needed. Local companies continue to struggle with the lack of retraining initiatives available in both the public and private sector.
“These are huge issues,” he said. “If you look at job growth pre-COVID until now, one of the few areas where we have more jobs is in those professional [and] technical jobs. But we still lag [behind] the rest of the country.”
Julietta Georgakis, chief of staff for the R.I. Executive Office of Commerce, highlighted some of the elements of Gov. Daniel J. McKee’s $13.8 billion state budget proposal that she says can help the private sector, citing tax cuts and increased investments in education and job training.
“States … can certainly do things so that their citizens are fortified against the severe shocks of recession,” she said. “Technology is making some positions very redundant. It’s very important that state and federal governments understand this mismatch.”
However, Thomas Tzitzouris, head of fixed income research at New York City-based Strategas Research Partners and the summit’s keynote speaker, said that he has observed a lack of urgency from Rhode Island officials to help get needed housing and commercial development projects off the ground, such as the hotly debated Fane tower proposal in Providence.
“Good luck if you can’t build 30-story towers,” said Tzitzouris, who is based in Rhode Island. “That tells me the state had not made progress in managing developers’ and businesses’ time.”
This lack of uncertainty hampers business, said Karl Wadensten, CEO and president of Richmond-based VIBCO Inc. The supply chain issues leftover from the pandemic have yet to subside and could worsen this year.
Before the pandemic, Wadensten said, his company could move products “like nobody’s business.”
But now, “[it] takes me half a year and I can’t get to the right people,” he said. “And I have a clock ticking. That’s costing me a lot more.”
Kevin Casey, vice president of sales at Sweeney Real Estate & Appraisal, said most residential and commercial projects in Rhode Island take up to three years to be planned and constructed.
“We do see a slowdown of timing in getting things built,” he said.
As for the recession on the horizon, Tzitzouris said those hoping for a “soft landing” will likely be disappointed. Equity markets will plunge as the economy undergoes its correction. And costs for energy and inventory may continue to rise until the Federal Reserve makes its final rate hike sometime in the second half of the new year.
Nationally, politics will also play a larger role, as progressives argue for wider social safety nets and taxes on the highest earners, Tzitzouris said.
“There is going to be political pressure for more tax increases at the federal level to pay for this growing deficit,” he said.
And the consumer spending that has shored up the economy is set for a reversal, leading to a drag on consumption.
“We are going to shift from an influencer economy to one that is going to have to produce goods here and redirect consumption to areas that we need and areas that we want,” Tzitzouris said.
Asked what institutional shifts must be made by producers searching for a way to recruit the available talent and keep them, Wadensten said that traditional management paradigms may need to shift with the times.
And more “lean thinking” is required.
“If you don’t do that … [employees] can go anywhere they want,” Wadensten said. “Do more with less. Get your people thinking, and let those people tell you what’s getting in the way of revenue.”
As a business owner, if you build an attractive work-life culture, you will have buy-in from workers, he said.
“Employees have tons of choices. They have really reconsidered what their lives are going to look like,” Wadensten said. “If we are not smart as developers and trying to figure out what people want and value, you are going to be left in the dust.”