United States Construction Market Trends

Executive Summary

The Current Situation

• According to the US Bureau of Labor and Statistics, the construction industry labor force increased by 2% in Q1 2023 while construction unemployment remains very low at 3.5%.
• As provided by the St. Louis FRED, the construction employment cost index is now up 5.8% from this time last year and had an increase of 1.8% compared to last quarter. Historically, this index has increased approximately 3.5% year-over-year since 2017.
• Finding skilled labor continues to remain a major challenge for all aspects of the industry inclusive of shipping and trucking, manufacturing and on-site construction.

Supply Chain & Material Availability

• Gasoline and petroleum costs are now much lower than their all-time highs last summer but are still significantly higher than pre-pandemic values.
• The general freight trucking index from the Bureau of Labor Statistics has declined or remained flat for the past year and is down almost 5% during that time.
• Availability has improved for many construction materials, while mechanical and electrical equipment continue to maintain extended lead times.
• Despite increased steel orders of 20% over the past quarter, wide flange beams, metal decking and bar joists have actually become easier to obtain. This is the largest increase in orders since Q1 2021.

Contractor Confidence & Construction Volume

• Contractor confidence remains somewhat mixed in the industry but seems to be on the upswing as confirmed by most of the publications monitored and surveyed by the Market Trends Team.
• According to the St. Louis FRED, commercial construction spending declined 3% in Q1 2023 after an increase of 10% the previous quarter. All construction spending, inclusive of commercial, was flat for two consecutive quarters before increasing by 3% in Q1 2023.
• Contractor backlog continues to remain very strong at +8.9 months nationally as reported by Associated Builders and Contractors (ABC) in June.

Cost Escalation

• The Consumer Price Index (CPI) rate fell to 4.1% in May, continuing down from its 40-year high of 9.1% in June 2022. By comparison, the 40-year historical US average is 3.8%.
• The Federal Open Market Committee (FOMC) continues raising interest rates as necessary in an effort to return inflation to the targeted 2% range.
• The CBRE Construction Cost Index showed a decline in annual escalation from 2022 and is forecast at 6.3% (± 2%) for the year. This is still projected above the 10-year average of 3-5% per year.