2018 Prognostications

Arturo-Santiago-Blog

It’s hard getting back to work after the holidays. At least I feel out of sync for the first couple of days. And I admit some of it has to do with the uncertainty I feel when I look forward to the upcoming year. How will 2018 pan out? Will it be better than 2017? Will it be worse? How much better will it be? How much worse could it get?

Well, I offer you this good news via the Associated Builders and Contractors, Inc. (ABC). Their chief economist, Anirban Basu, is predicting that the construction industry’s economy will be stable in the coming year. Don’t get complacent, though; there are still some things to keep an eye on. Those being the most important are employment, wages, and inflation.

In ABC’s online newsletter Basu says, “With wage pressures building, healthcare costs surging, and fuel prices edging higher, inflation is becoming more apparent. That could translate into some meaningful interest rate increases in 2018, which all things being equal, is not good for construction spending. The stock market’s performance has been simply brilliant. But what goes up can go down.”

He went on to say, “For now, there is plentiful momentum. A recent reading of the Conference Board’s Index of Leading Economic Indicators suggests that the US economy will enter 2018 with substantial momentum. Corporate earnings remain healthy. Global growth is accelerating. Consumers are upbeat. Tax cuts could fuel faster business spending. All of this suggests that the construction recovery that began in earnest in 2011 may have a few more birthdays ahead.”

Wages are expected to rise, albeit at a continued slow pace. One explanation may be the persistent skills gap. Badu says, “Because many younger members of the US labor force have not focused on the acquisition of construction-relevant skills, firms are often hiring on the basis of potential. This process results in enormous training costs and lower industry productivity. It also results in what appears to be smaller wage increases as established, well-compensated talent is replaced by hopefully trainable people entering the industry at lower levels of pay.” 

You can read Basu’s entire report at the Construction Executive website.

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