When it comes to the economy, Arizona’s business outlook for 2020 looks good. But how long can it last?
“The economy looks really promising right now,” said Elliott D. Pollack, CEO of Elliott D. Pollack & Company. “It’s late in the game, though. That’s good for economic consulting and it’s good for real estate.”
Consumer spending is up and economic growth in Arizona and the rest of the U.S. is on the rise, but investor caution is one sign pointing to a potential recession in 2020, global economist Bernard Baumohl told Valley business leaders at the annual SRP Economic Forecast.
“There is an undercurrent of alarm in this country that a recession is not only possible, but probable in the next year,” Baumohl said, adding that business-capital investors are not buying at their normal rates and are being more cautious. “We have the trade war, which has fluctuated between escalation and rising tensions, and some moments of cautious optimism.”
Baumohl said the uncertainty about Brexit and other economic factors could push Europe toward recession. Also, it’s unclear if the U.S. will ratify NAFTA 2.0 – the United States-Mexico–Canada Agreement, “which is very important for the state of Arizona.”
While presidential election years generally bring a lot of questions to the business world, Arizona business leaders carry an air of confidence as we embark on the new year.
“2020 will be a renaissance year in Arizona real estate,” said Brian North, CEO and founder of North&Co. “With the strong growth of the housing market for nearly 10 years, low interest rates, and a strong economy, the conversations of pessimism will continue to transition to optimism. Most of us will have all but forgotten the pain of the mega recession of 2008 and 2009, and we will likely lead the country in growth.”
Thankfully, it’s not just the real estate sector that is driving Arizona’s economy into 2020.
IN HEALTHCARE: “In healthcare, cosmetics, and MedTech we are seeing a huge reliance on independent startups as the new research and development labs of the giants,” said Ben Smith, CEO of Xcellerate Biomedical Technologies. “Gone are the days of mass funding big corporate R&D. Instead they are shifting dollars to fund managers to seek out new and innovative platforms, treatments and research. You can see more conferences and trade shows geared to highlight startups and share their data, as well as private equity and venture capital firms looking farther down the revenue stream to even now consider pre-revenue companies for potential minor stakes. 2020 on will be an exciting time to be in the research phase for many startups.”
IN LAW: “Exceeding client expectations while assisting clients with managing their legal spend will continue to be critical,” said Coree Neumeyer, parter at Quarles & Brady. “As such, smart firms — including ours — will be continuously researching, investing in and leveraging emerging technologies to increase efficiency, improve client communication, and provide a more client-personalized service. Firms like these will be well-positioned for significant growth in 2020 and beyond.”
IN TECHNOLOGY: “One trend that will have the biggest impact in intellectual property protection in 2020 and beyond is the boom in artificial intelligence (AI),” said Cindy Villanueva, intellectual property partner at Lewis Roca Rothgerber Christie. “With AI becoming ever more widespread, it is revolutionizing every aspect of life and work, including how AI is protected under intellectual property law. AI has widespread repercussions in regards to how innovations created by AI will be, or can be, protected, including issues related to authorship and ethical concerns.”
“This is the best job market we’ve seen in over 20 years and Arizona is leading the way,” said Travis Laird, regional vice president for Robert Half. “During this cycle, it has been tremendous to see many organizations relocating to Arizona and the talented professionals who have followed. We’re also seeing worker confidence at its peak.”
Laird said the historically low unemployment rate is giving local workers increased confidence to explore career moves and managers are taking notice, moving faster than ever to attract and retain top talent.
“Compared with other markets, we still have room to see unemployment decline and wage growth accelerate,” Laird said. “Look for both to continue to happen through 2020.”
In terms of the hottest sectors for growth in 2020, Laird said to watch healthcare, financial services, manufacturing, technology and bioscience industries.
“These industries are fueling job growth and pulling in a talented, innovative workforce,” Laird said. “To land this top talent, companies will need to present more attractive offers in the way of compensation, and attractive perks and incentives such as remote possibilities and benefits in order to compete in this competitive market.”
Baumohl cautioned that some signs of optimism can be misread – including rapid growth, low unemployment, consumer spending. He said it’s better to pay attention to businesses’ reluctance to invest as a symptom of an economy that appears about to peak and then plunge.
“We are really at a pivotal moment in U.S. economic history,” Baumohl said. “We’re now well into our 11th year of uninterrupted economic growth, and we have never seen that before. It’s absolutely unprecedented. The average number of years an economy usually experiences uninterrupted growth is less than five before it gets in trouble again.”
Business outlook for healthcare
The one thing that never changes about healthcare is that there are constant changes.
“This is the most exciting and challenging time in healthcare, perhaps ever,” says David A. Dexter, president and CEO of Sonora Quest Laboratories. “Leaders have the power to reshape and significantly improve the industry.”
There are new innovations to care and new treatments being developed that change patients’ outcomes. But one thing that healthcare leaders have not been able to reshape is the upward trajectory of healthcare costs, which experts say will continue throughout 2020. PwC’s Health Research Institute (HRI), which projects the growth of medical costs in the employer insurance market each year, says medical costs are expected to increase six percent in 2020, which is a slight increase from 2018 and 2019, when costs rose
To drive medical cost trend down, experts say employers are taking a more active role in managing healthcare costs. For example, they’re negotiating contract prices themselves, setting up provider networks and even building a parallel health system to take care of employees at more manageable costs.
“The healthcare industry is in the throes of a disruptive reinvention,” says Peter S. Fine, president and CEO of Banner Health, the state’s largest employer. “I fully expect that disruption and its demands for lower cost, better access, higher quality and enhanced customer responsiveness will aggressively continue into 2020.”
So what else can we expect in 2020? Here’s what other healthcare experts say to look for this year.
Andrew S. Kraft, MD, director; The University of Arizona Cancer Center: “For cancer research, I think we are going to find new cures and make an impact for patients as we head into 2020. These impacts will be gradual, but progressive.”
David J. Jacofsky, MD, chairman and CEO, The CORE Institute: “We’re seeing a fundamental transformation in how care is delivered and how stakeholders are incentivized to deliver care. This shift away from volume-based reimbursement to value-based reimbursement will require scale and investment that will drive continued consolidation and will shift care to lower cost, integrated, outpatient care networks.”
Todd LaPorte, CEO, HonorHealth: “HonorHealth is pivoting from being just a hospital system that treats patients when they are very sick, to being a healthcare system that promotes the health and well-being of its community: before, during and after hospital visits … I believe the healthcare forecast for individual patients and our general community will improve as we move into the next decade, specifically with high quality demonstrated through effective outcomes directed by evidence-based practices, satisfying ‘consumer experience’ journeys facilitated by a more coordinated hub of healthcare providers, and effective use of continuously advancing automation and technology that allows care to be more accessible and affordable.”
Christina Oh, CEO, Abrazo West Campus: “I look for technology to redefine the way patients interact with healthcare providers in much same way that it has changed our approach to other areas of our lives like transportation and takeout. I also believe that health systems will be challenged to find more ways to deliver care in the outpatient setting.”
Kathleen H. Goeppinger, PhD, president and CEO, Midwestern University: “Because of the dynamic nature of today’s higher education landscape, the financial stability of colleges and universities will be a deciding factor as to where students choose to invest in their education. Accordingly, higher education institutions have a responsibility to work with their students as they navigate financial aid options available to them. Midwestern University has programs in financial literacy in place that work with its students so they understand the importance of being fiscally responsible and can make sound decisions when determining the number of loans needed to conservatively finance their chosen degrees. Because of our proactive efforts, our Federal Cohort Default rates have consistently been under 1 percent.”
Robert L. Meyer, president and CEO, Phoenix Children’s Hospital: “The demand for comprehensive pediatric services continues to grow. Much of our industry’s efforts center on developing exceptional pediatric talent to meet these needs. We will continue to offer new and improved training programs that expose physician and nursing students to more clinical time at the patient bedside, and give them ability to conduct critical research to improve processes across the system. Our aim is to educate the next generation of pediatric experts and create a pipeline of talent to our organization.”
Steve Purves, president and CEO, Valleywise Health (formerly Maricopa Integrated Health System): “I see great opportunities to reinvent our healthcare industry. Technology and innovation is creating possibilities to deliver better healthcare, at less cost and to better address the social determinants of health.”
Devinder Singh, MD, founder, Arizona Center for Cancer Care: “In 2020 and beyond, there will be a shortage of oncologists because of the aging Baby Boomer population and the fact that cancer patients are living longer with the advent of newer targeted therapies and immunotherapies.”
Frank Molinaro, market CEO, Abrazo Community Health Network: “The industry continues to see drastic changes but I’m an optimist and think hospitals as a whole have reacted very well to the challenges. I believe our hospitals are safer, more efficient and more patient-centered than ever before and I’m grateful to be a part of that.”
MaryAnn Guerra, CEO, Aesthetics Biomedical: “Our product line focuses on noninvasive RF Microneedling, a segment of noninvasive fractional resurfacing. This category grew 99.5 percent from 2016 to 2017, with annual expenditures exceeding $73 million. Growth since 2012 was a whopping 420 percent. Nonsurgical procedures were up 4 percent. Injectables were up 5.1 percent, with a massive 40.6 percent increase in the past five years. Business is booming.”
Laura Robertson, CEO, Banner Desert Medical Center and Cardon Children’s Medical Center: “We’ll continue to see the added pressures and high expectations to deliver an improved and easier healthcare delivery system that produces strong, consistent clinical outcomes and experiences in a consumer-centric (versus provider-centric) model. We’ll continue seeing a focus on making healthcare easier, better and less expensive for our consumers. There will also be increased use of technology to supporting consumer access and creating new methods for care.”
Lamont Yoder, CEO, Banner MD Anderson Cancer Center: “Our industry has never been more exciting as consumers demand greater affordability and value. Although disrupters joining our industry and artificial intelligence will create new discoveries, our people will remain our key differentiators as human caring, touch, and compassion cannot be replaced or underestimated. People and purpose are our future.”
Jeffrey M. Trent, PhD, president and research director, Translational Genomics Research Institute (TGen): “In the coming year, there will be two key drivers in the practice of genomic-based precision medicine — immunotherapies and Big Data. Immunotherapies are those that re-engage the body’s own immune system to fight cancer. At TGen, and our affiliate City of Hope, we are developing immunotherapies that essentially retrain the immune system and uncloak the tumors so that the body’s own protective systems can come to bear, in concert with chemotherapies and other medical interventions, to defeat cancer.”
Joan M. Koerber-Walker, president and CEO, Arizona BioIndustry:
“2020 will bring new cures and new discoveries. As researchers, innovators, healthcare providers and payors, we need to work together to find new ways and new models that will drive health innovation forward faster and ensure that the people who need these innovations can get them. Patients and their families are depending on us.”
Outlook for law
The legal industry is in the midst of a makeover.
“Technology and the Internet are certainly catalysts, but the legal services industry itself is transforming as lawyers and third-party service providers, such as CPAs, appraiser, brokers, and engineers, are able to better coordinate their respective tasks and responsibilities and communicate with clients on a coordinated basis,” says Sonia M. Phanse, partner at Shein Phanse Adkins. “The client and professional synergies these new capabilities create improves quality and lowers cost — with no real end or limitation in sight … The opportunities are transformative.”
While the legal industry is filled with opportunities heading into 2020, those who follow the industry closely see that aging and retiring Baby Boomers, global expansion, and the adoption of artificial intelligence and new technologies and will continue to play an important role in the lives of lawyers and their clients. Change will undoubtedly the only constant in this industry.
“The legal industry needs to more aggressively embrace change — in technology, in practice management, and in meeting the demands of our clients,” says Kenneth Van Winkle Jr., managing partner at Lewis Roca Rothgerber Christie. “To be truly successful, we must also embrace and understand the changes our clients are facing, so we can more thoughtfully help them address their legal needs.”
With those law industry opportunities come some obstacles to overcome in 2020.
“I see several persistent challenges,” says Judith K. Weiss, partner at Perkins Coie. “How are firms able to satisfy clients’ demands for more inclusive and diverse teams? What value-adds will firms provide to inspire and reward client loyalty? Will firms develop more innovative, less complex pricing models so clients can see the real value a law firm provides?”
So what other questions will need to be answered in 2020 and what other changes can we expect?
“We will continue to boom our way right through 2020, says Grady Gammage, Jr., partner at Gammage & Burnham. “Employment growth will continue to be strong and that is great. Growing a diverse economy beyond just construction and migrants coming for the Arizona sunshine is the most important thing we can continue to cultivate.”
Here’s what other legal experts say to look for this year.
Mark S. Bosco, shareholder, Tiffany & Bosco: “Looking forward at the legal industry, we remain optimistic heading toward 2020 and beyond. The current regulatory changes generally make the industry an easier environment for our clients to operate. The current robust economy generally results in increased activity and investment by our clients into their businesses, thus resulting in their increased need for our legal services. Cybersecurity remains a significant threat and must not be minimized or ignored.”
William A. Clarke, chair of the Estate Planning and Probate Department, Jennings Strouss & Salmon: “The current changes in estate tax law have reduced the percentage of taxpayers that are subject to estate taxes to less than 0.1 percent of the overall population. Given the current taxpayer favorable rules, the vast majority of estate planning clients need to focus on doing what is right to secure their families’ future, which is particularly important with ‘blended’ families.”
Joseph T. Clees, shareholder, Ogletree Deakins: “Our employment practice will continue to be robust — regrettably, for employers. Employment and labor law is increasingly high-stakes, collectivized, counterintuitive and inconsistent. And workers are increasingly aware of their rights and willing to assert claims, as the #MeToo movement has demonstrated.”
Maria Crimi Speth, shareholder, Jaburg | Wilk: “E-discovery and AI are changing the way that we litigate cases. I believe that lawyers who do not keep up with technology will be at a great disadvantage and those of us who do keep up with technology will need to continue to use it to become more efficient for our clients.”
John Alan Doran, member, Sherman & Howard: “In the labor and employment law space, I expect continued litigation growth, notwithstanding the current conservative administration. I suspect there will be lots of new opportunities for attorneys, and the robots aren’t quite ready to replace us just yet.”
Richard A. Friedlander, member, Dickinson Wright: “Continued consolidation of law firms and more legal work will be moved in-house. Cybersecurity has and will become critical for law firms to adopt policies to implement defenses to protect stored data from cyberattacks. I expect key growth areas to relate to infrastructure projects, mergers and acquisitions, project finance and cybersecurity.”
G. James Goodnow, III, president and managing partner, Fennemore Craig: “Change will continue to be the only constant in the legal field. Forces like artificial intelligence will continue to perform tasks in hours that it took teams of lawyers months to complete, and alternative service providers will continue to make inroads, so law firms better start adapting.”
Stacey F. Gottlieb, of counsel, Cohen Dowd Quigley: “My hope heading into 2020 is that the courts will stand strong under the rule of law and not be swayed by political pressures, thereby helping the nation regain healthy respect for truth and justice.”
Angela K. Hallier, partner, Hallier Lawrence: “The divorce industry stays fairly steady during both economic booms and busts. We are as busy as we’ve ever been with a rush of cases coming in given the good economy. We expect that to continue.”
Randy Nussbaum, shareholder, Sacks Tierney: “My practice focuses on assisting professionals and certain industries facing financial distress. Because Americans have an unfortunate tendency to forget the mistakes of the past, I suspect I may be much more busy in the foreseeable future.”
Wendy Riddell, managing member, Berry Riddell: “I have a positive for 2020, of course. It is amazing to see the types of projects coming down the pipeline that we are seeing, and the investment coming into the Valley on a daily basis. People are attracted to the Phoenix metro area because of our incredible quality of life. I think you are going to see more companies choosing to relocate to the Valley, and more continued economic growth.”
Kristen B. Rosati, partner, Coppersmith Brockelman: “Healthcare continues to change at breakneck speed. Healthcare law is in flux, with healthcare reform, regulatory updates and new federal and state laws. But healthcare technology evolves even more quickly, posing real challenges for the law to keep up with it.”
Lawrence J. Rosenfeld, senior counsel, Squire Patton Boggs: “I expect there to be lots of activity in the labor and employment law practice. We are experiencing sea changes due mainly to two developments — the dramatic shift we have already experienced (and will continue to experience) as a result of the 2016 election; and the rise of the #MeToo movement. While these developments are at the polar opposite ends of our political discourse, each will likely contribute to the vibrancy of our field, and should continue to keep us very busy.”
Bahar Schippel, partner, Snell & Wilmer: “Congress recently enacted the most sweeping set of tax law changes in 30 years. So far, these changes have helped many businesses reduce their tax liability. But tax law is complicated and businesses need capable tax advisors to help them optimize their tax benefits. I anticipate 2020 to be another busy year with me assisting clients with how to reduce their tax burdens through proper planning.”
Sandra Sheridan Reguerin, partner, Fragomen, Del Rey, Bernsen & Loewy: “Immigration reform is a major focus of the Trump administration. Several proposed changes could fundamentally alter the current employment-based immigration system. It is critical for companies to stay informed and to engage with lawmakers and agencies regarding the impact of such changes to their businesses.”
Wendi A. Sorensen, partner, Burch & Cracchiolo: “Value for service is key. Clients continue to become more knowledgeable and (rightfully) expect excellent service and work quality for their legal dollars. Litigation needn’t be endless or unduly expensive. Attorneys should always develop their litigation plans in a way that emphasizes opportunities for early resolution for an appropriate result.”
Michelle Swann, Lang & Klain: “We will continue to see non-competition and non-solicitation be a focus in employment law as employees move from job to job. The rising minimum wage will continue to be an issue for small to mid-sized with unskilled labor and how they deal with it will be a potentially new area for increased legal involvement.”