HR
Unemployment insurance rate hikes won’t sting quite so much this year. They’ll climb just 10% on average, a welcome reprieve after a two-year increase averaging 50% in 2003-2004. Employers in Oklahoma, New Hampshire, Oregon, Tennessee, and Texas have even more to celebrate...2005 decreases.
One more legal pitfall for employers: Anti-body-piercing rules. Employee suits charging discrimination based on personal appearance... tattoos, dreadlocks or other hairstyles and items of religious dress, as well as piercings...are on the rise. So far, courts have mostly ruled that employers have the right to set standards for employee appearance. But compromising is safer. Costco Wholesale’s offer to let a cashier cover her pierced eyebrows with bandages won its case. Domino’s Pizza allows a Sikh to substitute a turban with a logo for the standard cap.

Who selects the health care plan for your company? Increasingly, it’ll be finance officers, not personnel managers, who make the decisions. That’s another sign of how critical health costs
have become to firms’ bottom lines and means even more fiscal discipline.

Health care
A home health care boom is in the works. The aging population and tremendous pressure to trim hospital and nursing home costs spell at least 10% annual growth for the industry for five years or so. States, including New Hampshire, Tennessee, and Wisconsin, as well as private health plans, are turning to home care as a cheaper alternative to institutional care. But there are clouds on the horizon, too: Home health care companies can’t find enough workers, and some states want to trim Medicaid payments.
Look for more specialty hospitals to crop up. Members of Congress will let a ban on them expire in June. A federal study says that hospitals that specialize in lucrative fields such as cardiac care and orthopedics don’t have a lasting impact on the health of full-service facilities.

The economy
Office vacancy rates inching lower and rents creeping higher offer another sign of an economy that’s leaving the vestiges of the 2001 recession behind. With employment picking up steam,
particularly in service jobs, the number of empty offices is dwindling.

Markets ready to turn the corner, giving landlords more leverage: Four Florida cities...Fort Lauderdale, Miami, Orlando, Tampa. Plus Baltimore and Westchester County, N.Y. Not far behind are Indianapolis, Las Vegas, and Houston. New York City and Washington, D.C., already have vacancy rates of 10% or less, usually the tipping point in the supply/demand balance.
Act soon for the best deals, locking in multiyear leases. As the second half of the year nears, landlords will be less generous.
Some cities remain awash in premium space, though. Among them: Dallas, Boston, Detroit, Denver, Chicago, St. Louis, Philadelphia, and Atlanta. Renters there should enjoy another year or two of bargains.

Also pointing upward: Big-rig sales, which are likely to climb by 30% or so this year to around 300,000. Brisk demand for shipping is one reason, but haulers are also replacing old rigs kept in service during the downturn the freight industry suffered from 2001 to 2003.
Sales would be even stronger if more drivers were available. Expansion at trucking firms is stymied by the eye-popping 100% turnover in drivers each year, as workers ditch the road for jobs that pay better and give them more time at home: Construction, retailing, car sales, etc.
That shortage will accelerate freight rate hikes to about 10% this year. Also adding to the upward pressure on rates: New regulations requiring background checks on all drivers hauling hazardous materials. Plus diesel fuel that remains pricey and is at risk of going even higher.

A wrenching shakeout in the auto parts industry is coming as high materials costs squeeze suppliers while Detroit production cuts shrink demand. By year end, many companies, particularly small ones with less than $50 million in annual sales, will disappear...bankrupt or gobbled up by bigger, healthier rivals. Fueling mergers and buyouts: Ample financing, including the reemergence of a second-lien market.
Even some healthy companies are likely to take the plunge, opting to get out while the getting is good. By 2010...only about half of the 8000 U.S. auto parts firms will have survived. Truck-part makers...a different breed altogether...should continue to thrive, however.

© 2005 The Kiplinger Washington Editors, Inc.