The construction industry has weathered the economic and health crises better than others, but the light at the tunnel could be a ways away according to the latest construction forecast. From February through April of 2020, the construction industry lost over a million jobs. Since then, about 70% of jobs in construction have been recovered. While construction operations have changed to accommodate public health guidelines, the flow of projects has remained relatively constant —even increasing in areas, like single family homes and class B office space.
When analyzing the current commercial construction market forecast, despite the rebound in jobs and projects under contract, Associated Builders and Contractors’ Chief Economic Anirban Basu warns that, “another recession may be on the horizon.” Forecasters predict that meaningful recovery is still several months away.
The Road to Recovery
The current recession was caused not by a loss of demand, but by a shock to the economy’s capacity to supply. Social distancing measures shuttered businesses and their suppliers. As businesses were able to resume operations, they found themselves dealing with supply difficulties. Another surge in case numbers paired with a lack of stimuli from congress, as well as supply difficulties will likely result in a “W” shaped recovery, says Basu.
While a stimulus package can stave off further economic downturn when looking at the overall commercial construction market forecast, Basu cautions that “[Another recession] could occur even if a further stimulus is passed. Stimulus supports the demand side of the economy, primarily. Another shutdown would compromise the economy’s ability to produce (supply side), presumably leading to another round of mass layoffs, job loss, crumbling consumer confidence, corporate bankruptcies and other negative outcomes. If the first recession is any indication, the next one will be sharp and short. Regardless, that would delay complete recovery, which is the ultimate aspiration.”
Richard Branch, chief economist for Dodge Data and Analytics, concurs. “The economy has noticeably slowed in the past couple of months,” following an initial rebound, says Branch. “We see that slow growth continuing into the first three months of 2021.” The first few months of 2021 are expected to be gloomy, but it is hoped that the economy will ramp up in the second half of 2021, especially as the vaccine becomes widely available.
Economic Bright SpotsHowever the construction forecast predicts that even amidst the chaos, certain segments of the construction industry have flourished — namely the industrial and residential markets. The boom of e-commerce has to an increased demand for warehouse space. And the increased time at home, has home improvement projects on the rise. Rather than spending money on travel and restaurants, many homeowners are deciding to invest in their homes and tackle long awaited projects. Furthermore, the flexibility to work from home has allowed people to rethink their living arrangements, with many moving away from cities and into single family homes. Therefore in accordance with the construction forecast, contractors are finding themselves booked and busy, bringing them one step closer to recovery.