James M. Berklan

DALLAS — You would have been granted a smile and slight nod of optimism if you were wondering whether you needed to attend the early session Thursday at the National Investment Center for Senior Housing & Care’s spring meeting. 

An economist for a builder’s association? What does that have to do with what you do? 

A lot, as it turns out.

Had you attended, you would have quickly found yourself intrigued by the numbers and connections thrown around by some guy who knows the labor, material, political and financing worlds like few others. 

Ken Simonson, the aforementioned well-connected economist, delivered both the big picture and some tighter conclusions senior care providers should care about.

Among the numerous nuggets he and moderator Beth Mace, chief economist for the host group, tossed around were these:

* There are parallels between the construction and senior care industries. For one, both field’s workers have to be on-site during things like a pandemic. Hello, labor stress. Another? They both need immigrants to help fill out the workforce. Thus, restrictive immigration and public health policies have been a friend to neither lately.

“I claim to be an optimist, but I’m not on this,” Simonson said, referring to U.S. immigration policy. President Biden’s announcement that the U.S. would be accepting 100,000 Ukrainian war refugees is “great,” he said, but not nearly enough to relieve European countries from their much larger refugee burdens, nor to make much of a dent in labor challenges here.

Immigrant flow has been curtailed so much, it’s hurt both construction and senior care, he noted without optimism, and “neither party is budging” from its political positions in Washington.

* Earlier, despite their doing a good job of an economist’s core task of “finding negatives,” as Mace quipped, Simonson said he was “quite optimistic for the outlook of the economy.” That, despite numerous smoldering factors such as inflation, pandemic worries and domestic political fighting. Among other positives, he said savings levels are up and a lot of buying power is temporarily pent up.

* Inflation, of course, was one of the gargantuan red flags that did not draw optimism. It began to rise in March 2021, Mace said, and ”at least for now I would say it’s permanent.” Earlier, she wondered if at least some of the concern about inflation would “be self-fulfilling.”

That means higher food, fuel, construction materials and labor prices. It’s a spiral that is tough to stop once it starts, as all good economists like Mace and Simonson know too well. Others realizing, and without optimism, included the owners, operators and investors filling the NIC conference hall at the Omni hotel.

* Other threats Mace and Simonson fretted over included geopolitical influences such as Russia’s invasion of the Ukraine, China and North Korea. That has sent prices for Ukrainian-based clay and certain construction materials soaring, of course. It also has had, and will have, a negative effect on commodity and food prices “for a while.”

* Normally, it’s fun to envision being a Federal Reserve board member, Simonson said with a chuckle whose affection might elude most people. But not now, he admitted. 

He noted that after having interest rates at 0% for so long, forecasters now predict the Fed will raise them as many as seven times this year. That could get them to 1.88% in 2022 and 2.75% in 2023 and 2024 before settling back to around 2.35%. The next two hikes could be as much as 0.5% each, he noted, saying the board apparently agreed to pick up the pace more than first intended.

“I’d say ‘hang on,’” Simonson said before advising attendees to pursue their projects quickly so they don’t become even more costly.

The outlook of most economists on the Fed’s recent action, or inaction, Mace asked?

“They’ve missed the bus and they have to catch up,” Simonson responded. “There’s definitely a risk of stagflation,” he added, referring to the uncomfortable condition when there is high inflation and recession conditions.

This, all because the economy has been roaring too well, he reminded.

“It’s difficult to get the economy down without triggering a recession,” he said. “The market thinks the Fed is not able to respond quickly enough.”

* For Mace, there are three main things she is tracking for senior care operators: pressure on return on investment (expenses rising while rent growth slows); staffing shortages; and lagging occupancy.

Skilled nursing employment remains 14.7% below February 2020 levels, she noted. It’s a slide that’s actually a decade long, she explained, pointing out that there have been at least 300,000 jobs lost since 2011. (Some groups have that loss figure much higher.)

Independent living and assisted living job rolls, meanwhile, remain “only” 2.4% and 6.8% below pre-pandemic levels.

* To that end, Mace brought up marketing plans, of all things, as being vital to the future of senior living operators. Before entering any market, feasibility studies will be needed to ascertain the potential for attracting residents, of course.

But, she also cautioned, don’t forget to conduct a study to consider what sources of labor will be available to keep any new enterprise afloat.

Hang on, indeed, as Simonson says. There’s opportunity for optimism ahead, but it’s liable to be a wild ride.

James M. Berklan is McKnight’s Long-Term Care News Executive Editor.

Opinions expressed in McKnight’s columns are not necessarily those of McKnight’s.