The construction market seems to be holding strong—for now, as ABC’s chief economist Anirban Basu exhibited in “Construction Executive’s 2023 Q3 Economic Update and Forecast.” While America has not seen the predicted recession—certainly something to celebrate—there is still reason to remain wary.

The national job market is strong, recording 8.8 million job openings in July 2023. There has been growth in construction wages and construction projects.

Residential construction jobs are dominating the market right now with a 10.4% increase over 2020, with overall construction jobs increasing 5.1% and nonresidential increasing 1.6%.

Construction and construction adjacent categories—trade, transportation, utilities—recovered 385,000 and 1,102,000 jobs respectively, a total of nearly 1.5 million.

Office vacancy—or lack thereof—is also recovering as people are returning to the office as well as the jobsite.

Inputs to the construction PPI are down significantly from the pandemic—reading above 25% in 2021 and 2022, and now down to -5% in 2023.

Specific construction materials PPI is down for natural gas (-77.7%), crude energy (-40.6%), softwood lumber (-18.0%), steel mill products (-14.8), crude petroleum (-12.5%), iron and steel (-10.3%) and fabricated structural metal products (-1.5%). The materials PPI that has risen has only gone up slightly for nonferrous wire and cable (0.8%), plumbing fixtures and fittings (2.3%),prepared asphalt and and tar roofing/siding product (3.2%) and concrete products (8.7%).

While the worker shortage, project financing and supply-chain issues still loom, the construction sector is proving it can remain robust despite these concerns.

Regarding residential building, multi-family building permits are reading above 400,000—which is below the pandemic level, but is still above average. Single family building permits have rocketed back up to their prepandemic levels sitting just under 1 million. 

Another indicator of stability is the construction backlog, which remains consistent with Q2’s forecast and ABC’s construction backlog indicator.

Total nonresidential construction spending is at an all-time high and on a steady incline, surpassing 2015 dollars by nearly 200 billion. Nonresidential construction spending is up for all sectors except power (-6.8%), religious (-14.7%), public safety (-25.1%) and lodging (-30.8%), which is not surprising considering certain pandemic-related effects remain like those on the supply chain. As well, the US GDP nonresidential fixed investment in equipment is just now rising back into the black above 0% following the pandemic.

Considering this growth, it is prudent to remain wary—we have not yet avoided a recession.

Credit card debt skyrocketed to $1.03trillion nationally between 2003-2023. ABC’s Construction Confidence Index is not high, but it is not necessarily low either—polling steady at the national average for sales, profit margins and staffing levels, but it has not recovered to prepandemic levels. own from Feb 2020: Sales levels dropped from 68-58, profit margins from 61-55, and staffing levels from 69-60.

Of those polled in “Construction Executive‘s Q3 Construction Economic Update and Forecast,” most expect profit margins to remain relatively the same one year from now, with several outliers anticipating levels of slight or dramatic increase or decrease; the bottom line is people don’t really know what to expect.

Basu urges things will continue to get worse before they get better while borrowing costs are high and inflation persists. Will interest rates stop rising? Eventually, but it is hard to tell when; maybe we will know more by the 2024 forecast. Watch the Q3 recording here and register for the 2024 forecast here.