Economic headwinds could impact veterinary practices, says economic futurist

Updated December 8, 2023

In a post-COVID world, Economic Futurist Andrew Busch says the veterinary industry needs to adapt. For the past few years, the profession grew rapidly because people were staying home because of the pandemic and the government issued $14 trillion in stimulus funds.

“That’s no longer the case now. You’re still well above where you were in 2020, so now you need to adjust,” Busch said. “You can’t think that growth will continue going forward,” especially because of the rise in inflation and labor costs. He was a keynote speaker at the 2023 AVMA Veterinary Business and Economic Forum, held virtually October 24-25.

Busch was the first chief market intelligence officer for the U.S. government at the Commodity Futures Trading Commission, responsible for improving and enhancing the government's understanding of markets. Now he’s a consultant and speaker with clients in a range of fields, including financial services, energy, manufacturing, and construction.

Macroeconomy

Busch acknowledged the economic uncertainty in the current climate. “From turmoil in the Middle East, high interest rates, and the rise of artificial intelligence, it seems like the world is coming at you hard and fast,” he said.

Part of the economic uncertainty is fueled by a decrease in disposable income due to inflation. Not to mention, the savings consumers gained during the pandemic with stimulus money have since run out. At the same time, credit card debt and educational debt levels continue to increase. With student loan payments resuming in October after a pause by the government, this will further create a drag on the U.S. economy, he said. The Federal Reserve's rapid increase in interest rates over the past 14 months—from 2.5% in July 2022 to 5.5% in July 2023—is also a cause for concern.

The gross domestic product (GDP) projected growth rate for 2024 is 1.3%, indicating a slowdown in the economy. Interest rates will likely stay elevated as inflation remains sticky. Busch says it will be 3.5% by the end of the year.

Labor, housing, and other factors

Other economic factors that could impact veterinary medicine range from supply chain issues to labor supply. Busch said there are currently around 9 million job openings in the country, with 1.75 jobs available for each worker. But as Charlotte McKay, AVMA associate director for statistical and geospatial analysis and senior economist, pointed out in her session at the meeting, the job market is cooling. The national unemployment rate remains low at 3.8%, but projections say the unemployment rate will reach 4.7% by the end of 2024.

Busch noted that labor costs have increased. According to the Bureau of Labor Statistics, wages and salaries increased 4.5% for the 12-month period ending in September 2023 and increased 5.2% in September 2022. However, after adjusting for inflation, wages and salaries increased only 0.8% for the 12 months ending September 2023.

The work-from-home trend that started during the pandemic remains stable at 1.4 days per week. This has potential positive implications for the pet industry, especially as people are staying in suburbs and not going into the city, he added.

Troubles in the housing market continue to impact consumers, emphasizing the negative consequences of rising interest rates and housing affordability issues, especially for millennials, who are 27 to 42. He expects a shortage in new houses will be a significant problem that affects both demand for homes and, consequently, pet ownership.

The 2021 Pet Inclusive Housing Report found that the scarcity of pet-inclusive rental housing continues to be a barrier for pet owners throughout the United States. Despite the high volume of residents seeking homes that accept pets, many rental properties significantly restrict residents from keeping pets in their homes. This scarcity is particularly acute for lower-income pet owners.

Finally, another noteworthy trend, according to Busch, is the U.S. census data on migration habits. From July 2021 to July 2022, the top states people left were California, New York, Illinois, New Jersey, and Massachusetts while the top states people moved to were Florida, Texas, North Carolina, South Carolina, and Tennessee.

This demographic shift, he said, shows that people are moving away from expensive states to more affordable ones. This has potential implications for businesses, including those in the pet services industry, as more people mean more potential customers and employees.

At the same time, Busch encouraged practice owners to consider the impact of climate-related risks on business operations, such as supply chain vulnerabilities and insurance concerns, especially in flood-prone areas such as Florida.

Looking to the future

Busch suggests using venture capital (VC) investments as a crystal ball for predicting industry trends. This type of financing in areas such as biosafety surveillance, reproductive technology, telehealth services, and agricultural robots provide insights into potential growth areas.

Data is going to be another important consideration for practices, he noted, from how it is collected and tracked to how it can be used to inform and aid business decisions. 

“Your data has a lot of value. You want it to stay in house and learn what clients are telling you about their animals, the drugs they want, when they want, where they are located, and more. This can help you deploy capital and work schedules,” Busch said.

He concluded his presentation with a discussion of artificial intelligence (AI), suggesting the audience approach the emerging technology sensibly, by considering AI’s impact on efficiency, business improvement, and its potential for job displacement.

“Does it make sense for us to engage in AI to become more efficient, to do more to help the business or is it really just going to marginally improve things while causing people to lose jobs?” Busch asked. “That's the question for the future.”