United States Construction Market Trends

• Labor costs and hourly wages continue to rise. Increasing construction labor costs are a major challenge facing the industry. Companies are competing for a limited pool of skilled workers, which is driving up wages. Sustained demand for skilled construction workers coupled with a lack of qualified candidates to fill the positions has added to the strain. This is due in part to an aging workforce and a lack of interest in trade careers among younger generations.
• The unemployment rate remains low both nationally and for construction as the overall workforce contracts by 2%. According to USBLS, there were 374,000 construction industry job openings in December. This is down 4.1% from this time last year, but still relatively high overall showing continued demand.

Supply Chain & Material Availability

• Fuel costs have plummeted compared with last quarter as freight costs decline from their peak. The cost of No. 2 diesel fuel was -$0.76/gallon or 16.4% lower than last quarter. Diesel remains key to the supply chain as it is the predominant fuel used for shipping and freight distribution.
• There were few changes in material availability this past quarter. Some Electrical equipment continues to have extended lead times and reduced availability.
• The Environmental Protection Agency is imposing new regulations on the HVAC industry on January 1, 2025, to reduce greenhouse gas emissions due to coolants. The implications are yet to be fully seen but will certainly impact the industry.

Contractor Confidence & Construction Volume

• Contractor backlog remains very strong nationally with an average of 8.6 months as reported by Associated Builders and Contractors (ABC) in December.
• According to the AIA Construction Consensus Spending Forecast, the outlook for construction volume is negative for most sectors over the next two years. Volume is also down this quarter for Office, Commercial and Residential construction. According to data from the U.S. Census, private commercial and office construction volume were nearly flat since last quarter and down significantly compared with last year.
• Construction contractor confidence presents a mixed picture, reflecting both positive trends and ongoing challenges. Adaptability, innovation, and collaboration will be key for navigating uncertainty and ensuring a resilient future for the industry.

Cost Escalation

• The Consumer Price Index (CPI) rate reached 3.3% in December 2023, compared with the 40-year high 9.1% in June 2022. This is comparable to the 40-year (1983 – 2023) historical US average of 2.8%.
• The Federal Open Market Committee (FOMC) continues fine-tuning interest rates to return inflation to the targeted 2% range.
• The CBRE Construction Cost Index showed a decline in annual escalation compared to the record high 2022. 2023 concluded at 4.9% (± 2%). This is still higher than the industry pre-COVID average of 2-5% per year.