With so many factors affecting project development, the amount of construction work available is always growing or decreasing. As a result, contractors are used to ups and downs, and forever are trying to discern future trends and see opportunities—or calamities—in the making. But sometimes that's a lot more difficult than others.

Obviously construction is seasonal. Often work is planned to take advantage of long summer days and account for the shorter daylight hours of winter. Although blistering midday heat and bone-chilling cold can bring projects to a halt, savvy contractors know to build contingencies into bids and schedules to accommodate such limitations.

The industry also goes in cycles, with boom periods followed by slowdowns, and both present significant management challenges. When work is abundant, the urge to expand and take on more is great. Then things slow down and companies have a natural resistance to contraction. Getting smaller can be difficult and unpleasant, even though it sometimes is necessary.

But when the U.S. economy changes as dramatically, and rapidly, as it has over the last few years, it is hard for the average contractor to see it coming, let alone take the steps necessary to be completely prepared. How does one prepare for the perfect storm? A good first step, at any point, is to get a grasp on the current situation.

Every time one tries to pin down what's going on in the economy today, new data are released that can't be ignored, and the reevaluation process begins again. Regardless of the details, several things are abundantly clear.

CONSTRUCTION SPENDINGAlthough construction spending decreased in 2007 and 2008 and will again in 2009, the largest part of that has been in the residential sector. As nonresidential construction continues to slow entering 2009, it may be that residential turns the corner.

The United States is in a recession that began nearly a year before it officially was declared as such. But the signs were clear that things had been slowing, and most of us already knew it in our gut.

Residential new construction dropped significantly each of the last two years and is expected to fall even further in 2009. Of course, construction in that sector will only pick up when new home sales rise again, which is not expected this year either. One good measure of this activity, monthly new home sales, peaked in mid-2005 at 1.4 million units, but likely will drop below 400,000 in 2009.

The nonresidential arena has continued to fare better and is finishing 2008 up a bit. But unless the economic stimulus package kicks in with results that are better and come sooner than expected, this industry segment is expected to decrease several percent over the course of 2009.

MATERIAL AND LABOR COSTSSupply and demand factors as well as moderating fuel costs are likely to move overall material costs slightly lower in 2009. At the same time, restraint will continue hold down labor cost increases.

Overall employment numbers are another key economic indicator. In November, U.S. unemployment reached 6.7%, up 1.7% from a year ago. Government figures released shortly before Christmas show a number of states now have unemployment exceeding 8%, and claims for unemployment benefits are at the highest level in 25 years.

Meanwhile, the Federal Reserve Bank has lowered its overnight rate to as little as 0% in an effort to bolster credit and help get the economy going again. And credit markets remain clogged and tightly closed up. That, combined with sagging tax revenues, has led to delay and deferment of many state and local projects.