The Fastest-Growing Jobs and Industries of the Next Five Years
Jim Patterson, managing editor of The Kiplinger Letter, reveals the best opportunities for workers, businesses and investors in the next half-decade. Our podcast hosts also share their financial New Year’s resolutions and wrap up with a game of Deal or No Deal.
Ryan: Imagine having a financial crystal ball. Daydreaming about yachts already? Not so fast. No one knows for certain how the market or the economy will behave, of course. But the Kiplinger Letter is in the business of forecasting the years ahead so that executives and investors can make sold decisions. The Letter's managing editor Jim Patterson joins us with five predictions for the next five years in our main segment.
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Ryan: On today's show, Sandy and I will share some financial resolutions for the new year and play a brand new game of Deal or No Deal. That's all ahead on this episode of Your Money's Worth. Stick around.
Ryan: Welcome to Your Money's Worth. I'm Kiplinger staff writer Ryan Ermey joined as always by senior editor Sandy Block. And, Sandy, we finally made it to the new year. Do you usually make New Year's resolutions?
Sandy: I do, and I usually break them. But I'm going to try to do better this year.
Ryan: Well, I think a lot of people, the resolution is to like get back to the gym or whatever, but you and I both have bodies like Greek gods. So we're not going to have to do that.
Sandy: Thank god for radio.
Ryan: So instead, we've come up with some financial resolutions.
Sandy: That's right. And actually mine aren't that ambitious. But I think could be useful. One is to check my online bank account and credit card account every day, maybe take weekends off. And the reason I'm saying this is I interviewed an ID theft expert years ago who said that's one of the most effective way to protect yourself against identity theft because then you can see problems before they get worse. And that's free. It takes a couple of minutes every day, and it's also a good idea to keep track of your spending. You look at your credit card statement to make sure someone else isn't using your credit card. You also get a good idea of how you're using it and maybe pull back a little bit.
Ryan: Yeah. That's only ever happened to me once where I was looking at my credit account, and I actually shouldn't say I was looking at it. They sent me an alert, and it was still in my wallet. But someone had charged like $6 at a convenience store and then went to a convenience store like a quarter mile away from the first one and bought $600 worth of ... I mean, I can only assume like Cheetos and stuff. At which point, Citi very kindly flagged the expense and told me about it and sent me a new card.
Ryan: So one of mine is to improve my cashflow because I feel like every month my paycheck comes in and all of it immediately evaporates, whether it's to my 401(k), to my insurance, to my gym membership, to my student loans. So I just want a little bit more cash coming in. So one of the things I'm going to do is refinance my student loans, which we've covered extensively on Kiplinger's. I'm going to have hopefully ... Dad, if you're listening. I'm going to have my dad cosign it so that I can get an even better rate, and I have excellent credit but it always helps to have a little bit of extra fire power on there. And I play on adjusting my withholding. You may be wondering how do I know if I'm going to withdraw my withholding if I haven't paid my taxes yet. I don't. But I've gotten a pretty substantial refund the last couple years, and so I always do my taxes like the second my W2 gets to my mailbox. So if I see that I have a big refund, I'm going to withdraw my withholding. This is sort of our typical Kiplinger advice that you should adjust your withholding's so that you're not going to be owing a lot and you're not going to have a big refund come tax time.
Sandy: That's right. Particularly someone like you, Ryan, who has student loan debt. Why give the government an interest free loan when you could be using that money to pay off your own loans, and I think a lot of people, not everyone, but a lot of people are going to be getting a very large refund this year because of the tax overhaul, which increased the standard deduction and lowered rates across the board. So certainly if you get a really large refund, I think adjusting your withholding is a very good resolution that costs you nothing, takes a few minutes, and pays off all year.
Ryan: Exactly. So do you have another resolution?
Sandy: Yeah, and this one is harder than my first one. I have resolved that I do want to up my fashion game, but I don't want to spend a lot of money. I don't want to add more refuse to the environment. So I am going to resolve to buy all my clothes used, and that doesn't mean I'm going to be hanging out at the Goodwill. There are many websites. I use one called TheRealReal.com. I'm checking out another one called ThredUp where you can buy very good or excellent condition, used clothing for a fraction of the cost of new. As I said, it saves you money, and I've been listening to some podcasts about just how much energy it takes to make clothes and how hard fast fashion is on the environment. So I feel like this is kind of a win-win.
Ryan: Plus you buy nice stuff. It doesn't fall apart. You can have it for a while, and you had mentioned fast fashion. I mean, I can't tell you how many like H&M's sweaters and t-shirts and stuff that are just completely falling a part on me.
Ryan: So we've said that I'm going for some extra cash. So what am I going to use it for? One big resolution is to build up my emergency fund, and that's something that we recommend everyone should have at least three months worth of expenses because you never know what's going to crop up. I, myself, just had an unexpected medical expense. It ruins your debt. So it will be nice to have a more robust emergency refund. This is what I have an emergency fund for.
Ryan: And the other one is an investing one, and I want to keep a little bit of dry powder so that in case stocks that I like go down, I can invest in them at a discount price that I'm comfortable with.
Sandy: And those are great resolutions, and I think one that everyone should make is wherever you have your emergency fund or your cash account, make sure you're getting the best interest rate that you can. We're working on that right now. We're working on a story about that right now. A lot of people just leave money in their big banks and are getting nothing. Even though the fed has just raised rates again, banks are not following, big banks are not following. But you can get really good rates at online banks, at credit union, lots of different places. We're going to be writing about this. So yes, it's a great idea to have an emergency fund, and you'll have even more money if you invest it in an account, an insured account that will pay you higher than average interest rates.
Ryan: No doubt, and just to circle back to the investment thing a little bit. Companies that get in the doghouse, the way that they can get out is if they have a lot of free cashflow, meaning cashflow left over after they've spent money to maintain or grow the business and if they have little debt. So when you're evaluating companies for your watch list, focus on companies that can get out of whatever trouble the market puts them in. And those are likely to be companies that are going to appreciate over time.
Sandy: So it sounds like, Ryan, you want to improve your cashflow and you want to invest in companies that have good cashflow in the coming year.
Ryan: Couldn't have put it better myself.
Ryan: When we return, the Kiplinger Letter's Jim Patterson shares his five year financial forecast. Don't go anywhere.
Ryan: All right, and we're back. And we're here with managing editor of the Kiplinger Letter, Jim Patterson. The Kiplinger Letter provides forecasts for executives and investors and covers everything from politics to new technologies, and we're coming up on the new year here. Jim has some forecast.
Ryan: Jim, why don't you sort of give us an idea of a framework for what we're looking at here with the forecasts?
Jim: Sure. What we wanted to do for our year end special issue was look at parts of the economy that are going to outperform and grow faster than the broad average over the next five years. So sort of a longer look ahead into the future.
Sandy: And, Jim, it looks like you actually have a fairly conservative estimate for economic growth over the next five years.
Jim: We do. We're expecting about 2% annual average GDP growth, and that's when you factor in recession along the way, some good years along the way, and that's not bad but it's not as good as the long post-war, 3% average that a lot of people grew up with.
Ryan: I've never even known what my father does for work. Officially. I've really never known.
Sandy: And what are the factors that caused you to come up with this estimate, which is certainly lower than what we've seen this year.
Jim: Right. Where there are two components to economic growth. There's how fast the workforce is growing, and then there's how much more productive workers are over time. We know demographically there aren't going to be a whole lot more people entering the workforce. You can look at unemployment, it's really low right now. There just aren't a whole lot more bodies to join the workforce, and for a number of years now, productivity hasn't really been growing very fast and economists aren't really sure why. But the important thing is that it's just not really growing very strongly. So yeah, those two forces together and you get kind of a lackluster GDP forecast.
Ryan: So yeah, within that economic framework, you've brought some bold predictions for the next five years. One of them you just sort of outlined, which is that we don't think that the economy as a whole will do especially well over the coming five years. What about at a sort of industry level?
Jim: Right. We think there are two major industries that are really going to outperform. That is healthcare and technology. That's partly because of the aging of America. People are getting older and they're naturally going to spend more on their health. And tech, you can't just assume all high tech is going to do well, but a lot of high tech sectors are going to grow much faster.
Ryan: So when you talk about maybe capitalizing as an investor on those growing parts of the economy, what kind of companies should people maybe be homing in on.
Jim: Well, when it comes to healthcare, we're really bullish on gene therapy, that is using new technology to manipulate people's individual DNA to fight disease or to prevent future health problems. We're very bullish on things like 5G cellular service, commercial drones, which are going to grow like crazy over the next five years, commercial satellite, especially small satellites are going to be doing a lot more things than satellites do right now. That's a sampling of some of the things we think are going to really do well.
Ryan: And are these industries ... I mean, looking over the next five years, are these industries really where a lot of the jobs are going to be created?
Jim: Yeah, absolutely, especially in healthcare. Healthcare's going to be the biggest job generated over the next five years, and that's everything from obviously doctors, high skilled sort of positions, down to home healthcare aids, nurse practitioners, physician's aids. We're talking probably over a million new jobs in healthcare.
Ryan: And could this be a way that if someone's looking for a second career, a second act or whatever, I mean, are there ways to get into this without going to say medical school?
Jim: Right. A lot of these healthcare related jobs don't require an MD, for instance. There's going to be a lot of jobs working in assisted living facilities and retirement centers, physical therapists. Obviously these are still skilled jobs, but yeah, you don't have to go to medical school for years and years to do this.
Sandy: And, Jim, you also talked about the parts of the country that might perform better than others. And I guess that is an interest to people who are pursuing a career as well. What parts of the country do you think will outperform over the next five years?
Jim: Well the short answer is the South and the West. There's this ongoing demographic shift from the Northeast, the Midwest, to the Sun Belt, to the western parts of the country. That's not a new story, but that's going to continue over the next five years. So especially the bigger metro areas of the south and the west. Denver, Colorado, pretty much all of Florida, the big Texas cities, California. That's where the population shift is moving toward.
Sandy: And moving away from say the rust belt in New England. How are they looking?
Jim: Right, exactly. They're going to be some states that actually lose population. For instance, Illinois probably, maybe West Virginia, Wyoming. The northeast is looking a little better. There are people moving out of the northeast, but the northeast is also getting a lot of immigrants moving in. So they'll probably hold steady in terms of population. Illinois's looking like the worst state at this point in terms of losing people.
Sandy: Why is that?
Jim: Gosh. Well, the fiscal climate there is not so good. If you're a taxpayer in Illinois, I think you might want to think about relocating across the state line. I won't go into that too much.
Sandy: We have a retirement tax map on our website and Illinois does not look good.
Jim: Yeah, I wouldn't be making long term plans in Illinois personally.
Ryan: So what are the state implicate ... You talk about demographic shifts, certainly there are upshots for real estate, right?
Jim: Absolutely. Places where the population is growing, there's going to be higher demand for housing. That's good news for home builders. It's also means that on average home prices are going to grow faster in those parts of the country where people are moving in.
Ryan: So tech and healthcare aside, are there other sectors that are poised to outperform with the framework of the economy that we've sort of outlined?
Jim: Yeah, absolutely, and we go into just a few of them in our special year end issue. One that I really like is the oil and gas sector. Probably most people know already that U.S. energy production is going gangbusters. That's going to continue for the next five years, and that's especially good news for pipeline companies because those are the companies that move this bounty of more oil and more gas where it needs to go. And even if commodity prices go down a lot, the pipeline still get paid the same to move that stuff. So that's a really good business to be in, for instance.
Ryan: Are there companies within those sectors that we like in particular?
Jim: So some pipeline companies that we like, Enterprise Product Partners, Magellan Midstream Partners, Plains All American Pipeline. These are some of the really well established pipeline businesses that are going to thrive as oil and gas production go up.
Ryan: So we've been talking about kind of major industries, but I know the letter gets down to nittier, grittier stuff, right?
Jim: Right, absolutely. We look under every stone to see which businesses are going to do well over the long term. One that we think has tremendous growth potential, pardon the pun here, is the legal marijuana business. A number of states have legalized marijuana for recreational use in the U.S. In Canada, they're ahead of us. It's nation-wide legalization. There's a number of Canadian pot businesses that are doing pretty well, and they're attracting a lot of interest from big investors like major brewers who are looking to make pot infused drinks, some of which don't actually get you high. But there's a lot of money to be made, for instance, in the cannabis industry.
Jim: We think online groceries are going to be really big. That could be a $100 billion industry by next decade. And here's one of my favorites, air conditioning, and this sounds really mundane. But around the world, the global middle class is growing, a lot more people can afford these sort of basic comforts that Americans take for granted, and here's a stat I love. Over the next 30 years, there's going to be 10 air conditioners sold every second around the world in places like India, places with very hot climates, places that are getting hotter, and a lot of people are finally able to afford something like air conditioning.
Ryan: And then you'll need to pay to get them services too. Like my air conditioner every single summer.
Ryan: Alright, Jim, this has been really enlightening, of course. We're familiar with the whole legal pot thing because I have a story coming out in the February issue on legal cannabis. Where can people find all your excellent letter content?
Jim: Well, go to Kiplinger.com, click on store and you can read all about the Kiplinger Letter. You can get a free trial. You can see what we're all about.
Ryan: Fantastic, Jim. Thanks so much for coming on.
Jim: My pleasure.
Ryan: After the break, Sandy and I make like better looking Howie Mandel's. It's Deal or No Deal up next.
Ryan: All right. We are back, and before we leave, we're going to play a quick game of Deal or No Deal. And, Sandy, I'll go first. I was watching CNBC the other night and this commercial came on for an organization called EarnIn, which is earning without the G. I guess that's what makes it a millennial company. So the commercial is a guy behind the camera and he's going up to people. I don't know if they're supposed to be his friends or strangers or what, but they're buying gas or they're buying groceries. And he says, "Hey, you don't get paid til Friday. How are you buying groceries now?" And then someone politely explains, "I use the EarnIn app to get my paycheck now. There's no catch, no fees, no interest. Just a community of people paying it forward."
Ryan: So, Sandy, does that sound like a deal or no?
Sandy: I have a lot of questions about this deal. Maybe they're stealing the groceries.
Ryan: Yeah. Get off my back, the cameras are watching me. I'm using an app.
Ryan: So it is a deal, but it's not true that there's no catch. There are several catches. So we're going to go over them very quickly. First of all, you can only use it if you're a salaried, hourly or on demand employee who receives direct deposit to a debit account. So no freelancers, no remote workers, and you'll have to keep track of your hours, and when you verify to EarnIn that you've worked those hours, then and only then can you receive what is essentially an advance on your paycheck. And that goes up to $500, depending on your habits. You can generally take out it seems $100 at a time, and depending on your bank, you can get it same day. But it seems to mostly be next day. So already there's two catches, right? Not everyone can use it, and you can only take out certain amounts.
Ryan: So, Sandy, what do you got for us?
Sandy: I got a deal with a caveat.
Sandy: This is a new service the the United States Postal Service is providing called Informed Delivery. Now, I don't know if you saw this, Ryan, but yesterday there was this hugely viral video of a guy who set up a package so that when people stole it and opened it, they were covered with glitter and then sprayed with this really smelly stuff. And this was all recorded. Basically he went through this huge, elaborate efforts to deter porch pirates, and this is a guy who I think designed the Mars Rover. So most of us don't have the technology to do this.
Ryan: I mean, I saw one that was a little bit more low tech, which was that someone scooped out his cat's litter box for a number of, it seemed like days, and wrapped that up to look like an Amazon package.
Sandy: So USPS Informed Delivery is basically designed to prevent you from having to take such drastic steps. Among the other things that it will do for you is it will give you, email you a delivery status of a package, provide delivery instructions, and allow you to set up a redelivery. So it seems like a good way to prevent people from stealing stuff on your porch. The other thing it will do is give you an email with scanned images of your unopened letter, such as credit card statements and utility bills before they arrive in the mail, and that's a really useful thing too because say you're expecting a big check, you're going to know when it's going to land. So this sounds like a really good service, but there's a problem. ID thieves have figured out a way to exploit this. Basically if they sign up for it in your name, they can get your packages. They can find out when your packages are going to land. They can divert your mail to them, or show up early and steal your credit card statements. So already there's been some red flags raised about how this service, which sounds so great and a lot of people love could be misused.
Sandy: The best way to thort this is to sign up for it because once you've signed up for Informed Delivery, it only allows one email per account. Once you signed up for it, then someone else can't do it. So I think it is a deal, but it is a deal that you have to be aware of. Make sure that somebody else isn't taking advantage of it. The Postal Service is said that they are taking steps to make it harder for identity thieves to misuse this service. But I think overall, to the extent that you still get mail and certainly get packages, getting alert, getting more information before they arrive is a good deal.
Ryan: Yeah, and that sort of reminds me of our advice about paying your taxes, right? Because there's any number of tax scams that people can use, and if you file immediately when you get your W2, like myself, that deters scammers, too, right?
Sandy: That's right. Someone can't steal your refund if you already have it.
Ryan: That's it for this episode of Your Money's Worth. For show notes and more great Kiplinger content on the topics we discussed on today's show, visit kiplinger.com/links/podcasts. You can stay connected with us on Twitter, on Facebook or by emailing us at email@example.com. And if you like the show, please remember to rate, review, and subscribe to Your Money's Worth wherever you get your podcasts. Thanks for listening.
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