Associated Builders and Contractors Chief Economist Anirban Basu forecasts another strong year for construction sector performance, yet warns about inflationary pressures, according to a 2019 economic outlook.
Job growth, high backlog and healthy infrastructure investment all spell good news for the industry. However, historically low unemployment has created a construction workforce shortage of an estimated 500,000 positions, which is leading to increased compensation costs.
“U.S. economic performance has been brilliant of late. Sure, there has been a considerable volume of negativity regarding the propriety of tariffs, shifting immigration policy, etc., but the headline statistics make it clear that domestic economic performance is solid,” said Basu. “Nowhere is this more evident than the U.S. labor market. As of July, there were a record-setting 6.94 million job openings in the United States, and construction unemployment reached a low of 3.6 percent in October.”
While the U.S. economy is thriving, Basu cited the potential long-term impact of rising interest rates and materials prices—up 7.9 percent on a year-over-year basis in October—on the U.S. construction market. In addition, the workforce shortage will continue to influence the market in the coming year.
That said, Basu stressed that a recession is unlikely in 2019, even with recent financial market volatility. Indicators such as the Conference Board’s Leading Economic Index, which often signals an economic downturn, have continued to tick higher, implying current momentum will continue for at least two to three more quarters. In addition, ABC’s Construction Backlog Indicator, which reflects the amount of work that will be performed by commercial and industrial contractors in the months ahead, reported a record backlog of 9.9 months in the second quarter of 2018.
While optimistic for next year, Basu warned that, “Contractors should be aware that recessions often follow within two years of peak confidence. The average contractor is likely to be quite busy in 2019, but beyond that, the outlook is quite murky.”
Related Stories
Market Data | Jul 8, 2020
North America’s construction output to fall by 6.5% in 2020, says GlobalData
Even though all construction activities have been allowed to continue in most parts of the US and Canada since the start of the COVID-19 pandemic, many projects in the bidding or final planning stages have been delayed or canceled.
Market Data | Jul 8, 2020
5 must reads for the AEC industry today: July 8, 2020
AEMSEN develops concept for sustainable urban living and nonresidential construction has recovered 56% of jobs lost since March.
Market Data | Jul 7, 2020
Nonresidential construction has recovered 56% of jobs lost since March employment report
Nonresidential construction employment added 74,700 jobs on net in June.
Market Data | Jul 7, 2020
7 must reads for the AEC industry today: July 7, 2020
Construction industry adds 158,000 workers in June and mall owners open micro distribution hubs for e-commerce fulfillment.
Market Data | Jul 6, 2020
Nonresidential construction spending falls modestly in May
Private nonresidential spending declined 2.4% in May and public nonresidential construction spending increased 1.2%.
Market Data | Jul 6, 2020
Construction industry adds 158,000 workers in June but infrastructure jobs decline
Gains in June are concentrated in homebuilding as state and local governments postpone or cancel roads and other projects in face of looming budget deficits.
Market Data | Jul 6, 2020
5 must reads for the AEC industry today: July 6, 2020
Demand growth for mass timber components and office demand has increased as workers return.
Market Data | Jul 2, 2020
Fall in US construction spending in May shows weakness of country’s construction industry, says GlobalData
Dariana Tani, Economist at GlobalData, a leading data and analytics company, offers her view on the situation
Market Data | Jul 2, 2020
6 must reads for the AEC industry today: July 2, 2020
Construction spending declines 2.1% in May and how physical spaces may adapt to a post-COVID world.
Market Data | Jul 1, 2020
Construction spending declines 2.1% in May as drop in private work outweighs public pickup
Federal infrastructure measure can help offset private-sector demand that is likely to remain below pre-coronavirus levels amid economic uncertainty.