Construction Economic News

The headline number for U.S. jobs growth in August, from today’s release of the Employment Situation report, authored by the Bureau of Labor Statistics (BLS), is +187,000, which sounds pretty good at first reading. Upon closer examination, however, it loses some luster.

This year, the jobs market has frequently been cited as a cause for economic optimism; however, recent jobs data suggest this most important pillar of the economy may be faltering.

Data for the week ending August 26th continues to signal that the transition of nonresidential and civil projects from concept to physical completion remains high. All three measures of project stress remain at or below comparable levels of recent years. Historically the third quarter of each year marks the seasonal apex in on hold and abandoned project levels; however, this year’s results are thus far on track to be their lowest since 2020. These encouraging results have come notwithstanding the headwinds caused by an eroding credit market for construction developers and owners.

Data released for the week ending August 19th provided further evidence of a strong construction industry as fewer projects reported faltering in their transition from concept to physical completion. All three measures of project stress declined in the latest weekly results. Historically the third quarter of the year marks the seasonal apex in on hold and abandoned project levels; however, 2023 levels thus far are on track to be their lowest since 2020. These encouraging results have come notwithstanding the rising precariousness of financial markets.

It Starts with Government Spending Public spending and infrastructure have a long and extensive relationship. The Public Works Administration, part of the New Deal in 1933 and a response to the Great Depression of 1928, formalized the modern-day large-scale public works that have changed America for the better. Every day, Americans enjoy arguably the world’s largest public works project in recorded history when they use the Interstate Highway System.

Stress readings in the week ending August 12th provided further encouraging news for the industry. Delayed and On hold project levels both fell during the latest week. Historically the third quarter of the year marks the seasonal apex in on hold and abandoned project levels; however, 2023 levels thus far are on track to be their lowest since 2020. These encouraging results have come notwithstanding rising bank standards for CRE loans and higher financing costs.

The Construction Economics Brief, produced by ConstructConnect’s economics team, is a monthly video series whose aim is to provide the latest and most pertinent economic information to construction industry leaders in a concise video format.

Try thinking like a central banker. Your main goal at the moment is to bring down inflation to around +2.0% year over year. Your primary weapon to achieve that end is high interest rates. They’ll slow consumer spending and housing starts but will also cause collateral damage in labor markets. Signs of kinks in job creation will be greeted with a smile.

Challenging economic conditions in China will have ramifications for U.S. prices, and certainly within the construction industry. In its latest GDP data release, China’s economy grew at an annualized rate of 6.3%, marking one of the slowest pre-COVID-19 growth readings since at least the 1990s.

As my colleague, Michael Guckes is wont to say, every economic cycle is different. The study of ‘the dismal science’ (as economics has sometimes been labeled) in school lecture halls pretends otherwise.