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The Construction Economy Yearbook

2024 Year-In-Review

By Sebastien Tillett, Economist, Oxford Economics

Check out the 2025 forecast 

Look Ahead

The US Economy in 2024

T2-Economy

The US economy once again outperformed its peers and posted a strong year of growth.

Annualized GDP growth was well above 2% throughout the year, ending up with growth of 2.8% in 2024. Inflation has proven to be somewhat sticky, with personal consumption expenditure (PCE) inflation ending the year at 2.4%, only slightly down from the 2023 end-of-year reading of 2.6%. While remaining above the Fed’s 2% target, it has been close enough to target for the Fed to begin its rate-cutting cycle. The 100bps of cuts seen over 2024 have left the target range between 4.25% and 4.5% but will have more of an effect in 2025 as the impact has a lagged effect on economic activity. The rate cuts have not had the intended effect on mortgage borrowing costs: the 30-year fixed rate ended the year around 6.7%, essentially the same place as in 2023.

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The US consumer has continued to spend, and households have been boosted by the sustained strength in the labor market.

The unemployment rate has remained low and outperformed expectations, currently sitting just above 4%. This is despite some wobbles over the course of the year, with downward revisions to nonfarm payroll employment being a theme of 2024 job reports. The economy added an average of 186,000 non-farm jobs per month through the year, marginally down on the 251,000 monthly average achieved in 2023. Average earnings have performed well and largely matched what we saw in 2023, with average hourly earnings rising by 4.4% and weekly earnings by 3.9% for construction workers.

2024: Construction Starts in Perspective

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Essential Insights

  • US Construction Starts contracted by 3.5% in 2024 to a value of $943 billion.
  • Megaprojects (those over $1 billion), on the other hand, had another good year, eclipsing the highs of 2022 and 2023, growing by 4.9%.
  • Nonresidential Building fell 8.5% as the subsector struggled to match the peaks of 2022.
  • New Residential Building fell 8.9% as Multi-family saw large declines while Single-family also struggled, essentially remaining flat.
  • Heavy Engineering construction continues to outperform the other subsectors with 12.1% growth over 2023.
  • Construction Starts declined in all major regions, with the Northeast performing the best, declining by only 0.1%. The largest declines were seen in the West, with Starts falling 9.1%. 

2024 Rainbow SubCategory Bar Chart_v2025-02-04-2

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Total Construction Starts 2024 

While total US Construction Starts fell 3.5% in 2024 to a value of $943 billion, this follows 1.3% growth in 2023 and signals that construction has come back down to earth after the bumper two years in 2021 and 2022. Total new construction remains well above its pre-pandemic level. 2024 was another strong year for megaprojects valued over $1 billion. There were 46 such projects last year for a total value of $110 billion, similar to the total value of $104.9 billion for 41 megaprojects in 2023.

Total-Starts

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Construction Costs

Construction material and labor costs continued to be a key theme since the end of the pandemic. Over the course of 2024, costs across the sector remained mostly flat as the inflationary pressure experienced in 2021 and 2022 has been left behind. While it is evident that the increases have subsided, prices have settled at a much higher level and look set to stay there. Construction input costs, excluding capital, labor, and imports, rose by 0.5% YoY in 2024. On the other hand, construction material costs, a less comprehensive input cost index, fell 0.6% YoY in 2024. In a continued trend from 2023, steel and energy costs were deflationary, although concrete and lumber costs increasingly rose.

Construction output costs also exhibited mild growth, up 1.7% year-on-year, further confirming that while the inflationary period may be over, costs are unlikely to fall back to where they were before.

Output prices generally lag input costs as it takes time for firms to adjust prices in response to changing input costs and underlying demand conditions. Job openings across construction are still high but have come down from the near-record levels at the beginning of 2023. Labor shortages continue to remain a constraint in the sector.

Consult ConstructConnect's interactive guide, "Attracting, Hiring, and Retaining Construction Professionals," for strategies on how employers can respond to ongoing labor challenges.

 

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The Construction Economy Yearbook 2024-2025
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Keys Sectors in Construction Starts

 T2_Construction Sector

Civil Construction

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Heavy Engineering—also referred to as Civil Construction—was the sole subsector to show growth in Starts over 2024. Total Engineering starts grew 12.1% as all sectors, with the exception of Dams & Canals and Marine infrastructure, exhibited growth. The Airport civil construction sector (taxiways, runways, and airport infrastructure) led the pack, growing 62%, while Bridges and Water & Sewage treatment saw over 20% growth. Miscellaneous Civil construction, the segment which includes oil, gas, and other power projects, only grew by 0.5%, but this was after 82% growth the previous year, indicating sustained high levels of spending. Within this, new Power Infrastructure expanded by 40%, while the rest of the sector declined by 20%. Power Infrastructure remains a strategic sector for green investment and the continued spending is highlighted by some of the megaprojects commenced last year, with a nuclear power plant in Wyoming accounting for $4 billion and multiple wind projects totaling over $10 billion. The Airports Civil and Bridges subsector starts were supported this year with an airline megaproject in Texas adding $2.6 billion in Q2, and megaprojects totaling $3.5 billion across Washington and Maryland on bridges.

Nonresidential Building Construction

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Nonresidential Building starts fell 8.5% after a 6.2% gain in 2023. The largest declines in 2024 were in the Military and Nursing Home subcategories, dropping 45.5% and 19.4% respectively. The larger gains were found in Hospital, Police & Fire Stations, and Educational facilities. Hospital and Clinics were supported by megaproject starts with over $10.7 billion worth across five projects, while Sports Arenas also had a strong year with 30.2% growth coming off the back of two megaprojects totaling $3.8 billion. Private Office continues to be an interesting subsector: overall, the subsector has been posting growth, but this is in large part due to the boom in data center starts. Without growth in data centers, the sector would have posted year-on-year declines since the pandemic. This is highlighted by over $10.4 billion worth of data center megaprojects started by major tech companies in 2024.

There are more data centers to come. In Louisiana alone, Meta has announced a $10 billion project in Richland Parish, while energy infrastructure firm Hut 8 plans to invest $2.5 billion in a data center complex in Baton Rouge.

 

Industrial Construction

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New Industrial construction continues to be a large story in US construction as multibillion-dollar projects in energy, semiconductor fabs, and electric vehicle factories have driven total new construction to record levels. However, 2024 saw starts push up against the reality that the heady pace of growth cannot go on forever, with new Manufacturing construction experiencing a 51.3% fall.

Manufacturing starts were massively boosted in 2022 from the passage of the Inflation Reduction Act and CHIPS Act, growing by 229% in that year, meaning that while the sector has now experienced back-to-back years of decline, the spending amounts are still extraordinarily high in a historical context.

The fall over the past two years is largely due to several large projects dropping out of the annual calculation, but there are still multiple megaprojects coming through the pipeline. 2024 saw $32.1 billion worth of spending on 12 megaprojects, with multiple EV battery plants and chemical manufacturing plants breaking ground. The decline in new factory construction during the forecast period does not indicate fundamental weakness; rather, it reflects the sector's surge in the recent past, with new industrial construction levels still near record highs.

Residential Construction Starts

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Residential construction has continued its torrid run as starts fell again in 2024, down 8.9%. Housing is among the most sensitive sectors to interest rates, and although they have begun to come down, there is often a lag between rate cuts and an increase in starts. This is especially true in 2024, as even with the Fed cutting interest rates, long-term mortgage rates have not followed that path and continue to remain high. New Single-family construction grew by only 0.4% in 2024 and new Multi-family building fell sharply, dropping 24.7%. Commercial real estate firms are particularly sensitive to rising financing costs, and concerns around oversupply in apartments and rising rental vacancy rates have continued to weigh heavily on new Multi-family construction in 2024.

Regional Starts Trends

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At the regional level, construction starts fell in all major regions, with the Northeast being the best-performing region as it only contracted by 0.1%. The South and the West may have led the regions in terms of GDP and population growth, but they were also the worst performing for construction starts, declining by 2.3% and 9.1%, respectively. All major regions saw both GDP and population growth, but this did not translate well into construction starts.

Broad weakness across the Residential and Nonresidential subsectors was too large to overcome the increased spend in Civil Engineering which was visible in every region. Megaprojects were visible across the regions as well, but California and Texas led the country with eight megaprojects for $15.5 billion and five for $13.3 billion, respectively.

Our monthly Construction Economy Snapshot reports compile regional starts data, trend graphs, and more. We keep an archive of these reports dating back to March 2016.

Oxford Economics 2024 Year-end review table Click image to enlarge

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2025 Construction Forecast

Michael Guckes, Chief Economist, ConstructConnect

Swift and dramatic changes to US immigration and trade policies, stubborn inflation, and ongoing challenges in the construction labor market – these are only a few of the factors that make the path ahead for construction unclear in 2025. Chief Economist Michael Guckes unpacks these challenges and uncovers the opportunities that can propel your business through uncertain times.

Look Ahead

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Construction Economy Yearbook 2024-2025

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The Yearbook is designed to deliver actionable insights in a “year-in-review/year-ahead” format. Each year as bidding season begins, ConstructConnect will publish this report so that contractors, manufacturers, developers, distributors and investors can strategically plan for the year ahead.

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