One of the top construction industry economists says 2019 should be another positive annum for our business, with a caveat about “wage inflation.”
Associated Builders and Contractors Chief Economist Anirban Basu released his 2019 forecast December 4th, in the association’s magazine Construction Executive magazine.
Job growth, high backlog and healthy infrastructure investment all spell good news for the industry, according to Basu. 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,” Basu reported. “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.”
“Nowhere is this more evident than the U.S. labor market,” said Basu. 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 to the workforce shortage.
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.
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 busy in 2019, but beyond that, the outlook is quite murky.”