Systems Integration

Economist Advises Integrators to Refocus on Optimism

Alan Beaulieu projects U.S. economy will drive worldwide growth, and counsels integrators at CSIA conference to spend on people and processes.

By Jim Montague, executive editor, Control

Control system integrators should invest more in their companies because there's a lot more business to be had, and it's going to last for years to come.

"The U.S. will continue to drive the world economy, and its performance will be strong in 2016," says economist and author Alan Beaulieu, president of ITR Economics. "If you're worried, it's because you're focusing on negative things that will have minimal negative impact on your lives. About 65% of U.S. residents think we're still in recession, but we actually have a vibrant economy that's going to keep on growing and drive growth worldwide."

This was the bottom line Beaulieu delivered at the Control System Integrators Association's recent conference in Washington, D.C. He reported that U.S. gross domestic product is about $16 trillion and is continuing to increase, even though that growth rate is slowing slightly, while job growth will swell during 2016-17 as the shift to consumer services from industry continues. He reports that ITR's projections have close to 100% accuracy.

Beaulieu added that oil prices will pick up in 2015-16; job openings are up more than 19%; and food production, fabricated metal products, chemical production, pharmaceuticals, electrical components and semiconductors are all experiencing single-digit percentage increases.

"Revenues will be greater by the end of 2015, but profit levels will be squeezed," says Beaulieu. "History shows we have a recession just about every 10 years, so another will come in 2019, but then the economy will begin to take off again in 2020.

"System integrators just need to find out where they are in the business cycle of the right industry for them, and plug themselves in by investing in their people and processes. Different phases of business cycle have different psychologies, and so like any other business people, system integrators must also fly by their instruments and not by feelings, implement growth strategies, find and eliminate bottlenecks, and plant for higher wages."

Beaulieu adds the economic growth of particular business, industries or regions can slow due to "black swan" events like company leaders leaving, shifts in industries or mistakes by management. However, because these kinds of events are typically limited to individual companies or areas, they don't tend to affect the performance of overall economies.

"Leading indicators are pointing up, and the world as a whole is relatively calm," adds Beaulieu. "Employment is increasing. Banks are lending.  Retail sales are growing. Non-residential construction is improving. Deficit spending is continuing, which also means there's less fear of austerity, and U.S. legislators aren't going to get anything done about it anyway. So, overall, we're in a good place, so let's enjoy the good times.

"Even whoever is the new U.S. president in 2016 isn't going to be able to get much legislation done until 2018-19, so I don't see much change in government. But, we're still handling our debt very well lately, so it's a good time to invest in business and get excited."

Beaulieu adds, with job openings are up 19.4% and manufacturing coming back to the U.S., there are about 5 million jobs that employers can't seem to fill yet. As a result, it's going to cost more to train new hires, and give them the skill sets they'll need in many areas. This also means that wages and incomes are going to increase, and so companies need to plan for it.

"Real personal income is going up, and so the middle class is stabilizing and perhaps increasing a bit, overall poverty is going down, and those earning more than $200,000 are stabvle at 4.2%" adds Beaulieu. "Our kids have every opportunity to do well if they're willing to work, can get an education and learn the right skills."