We may already be a quarter of the way through the new year but it is never to late to try and plan for what lies ahead. This is no different for the construction industry in 2019. However, a report released in late 2018 may, in fact, show a very minimal change in construction activity, only increasing in revenue by about $2 million from the previous year. So what does this mean?
In short, this could simply mean that while record growth within the construction industry is starting to plateau, spending and activity related to projects are most likely going to stay constant through 2019 with very minimal increases in overall spending. However, there are still some key factors that indicate a change is on the horizon. Based on past events with a similarly strong economy, this level of growth and spending is simply not sustainable over a long period of time.
Chief Economist and VP of Dodge Data & Analytics, Robert Murray, believes that a even if the construction industry sees a decrease in activity that doesn’t necessarily mean that the overall state will suffer a decline. It is his belief that overall value and spending on construction starts will achieve a “deceleration…the enhanced level of activity that has been achieved over the past several years.” In essence, the construction industry may fall back to where spending and activity was at its most profitable and sustainable over the past few years; a decline but not drastic.
However, according to Cristian deRitis, the Senior Director of Moody’s Analytics, the biggest red flag indicating an economic decline is the steady but low unemployment rate. Cristian argues that, historically, “any time unemployment hovers around 4.5%, recession comes about three years later.” And, in fact, ever since March of 2018, the unemployment rate has been steadily dropping. With this information in mind, according to Moody’s Analytics and the Bureau of Labor Statistics, this could mean that the economy is due for a recession next summer.
In addition, it is no surprise that the desperate demand for a skilled workforce is effecting the overall health of the construction industry. In a recent survey performed by the Associated General Contractors of America and Autodesk, 81% of those surveyed said they are having a hard time filling craft positions and 56% said the same thing about salaried positions. Where a small number of contractors are attempting to sustain through the labor shortage, the overall problem is that economists agree that is a problem that isn’t going away overnight. Only time will tell how much the construction industry will be able to retain this level of productivity through a long-term labor shortage and consistent low unemployment rates. However, all signs seem to point to 2019 remaining steady and profitable.
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