Attendees at the 2018 Dodge Construction Outlook Conference in Chicago on Nov. 2 could have left not feeling great about the future, but there also was no reason to worry either. As Cristian deRitis, senior director Moody Analytics, said, "The economy today is pretty good. The economic outlook for 2018 is quite positive. Both consumers and businesses are confident in the future."
Although there is a "skills mismatch," in the labor force, there have never been more job openings, 6.1 million, for people looking for work.
But infrastructure has not panned out as expected. "I was more optimistic about infrastructure this time last year," deRitis said. "I thought whoever won the election would have passed an infrastructure bill and get one win on the board and then move on to more difficult things."
Looking for the next downturn, deRitis says recessions often occur three years after the economy reaches full employment. That would be 2020. A federal funds interest rate of 3.5% by 2020 "would expose the economy to a recession. I would bet 2020 is the best bet for the next recession."
On the bright side, deRitis says the next recession would be of the "garden variety," and nowhere near the GDP and employment contraction the U.S. experienced in 2007-09.
Similarly, Robert Murray, vice president, economic affairs, Dodge Data & Analytics, added, If we reach a peak in 2018, the correction that would follow would be mild compared to other past declines."
Murray added, "the expansion has been underway for quite some time." but, "concerns that this economy has run its course are premature. It's a good, but not great, economy."
Murray expects the U.S. economy to grow at a 2.6% pace in 2018, after an estimated pace of 2.2% this year.
Construction activity in 2018
Murray forecasts total construction to increase 3% in 2018, a slight pullback from 4% in 2017 and 5% in 2016. He specifically sees the following sectors growing or contracting:
Single-family Housing: +9%Multifamily Housing: -8%
Commercial Buildings: +2%
Institutional Buildings: +3%
Manufacturing Buildings: -1%
Public Works: +3%
Electric Utilities/Gas Plants: -13%
In other matters, Murray told the crowd that the economic impact of the hurricanes in Texas and Florida this summer may not be as great as initially thought, partly because the downtown areas of Houston (Harvey) and Miami and Tampa, Fla., (Irma) escaped severe damage. While initial estimates ranged from $150 billion to $200 billion in total, Harvey may have caused $65 billion in damage, and Irma, $49 billion. Contrast that with $143.6 billion for Hurricane Katrina in 2005.
Also, the construction labor shortage in the U.S "is dampening construction, but not curtailing construction." Still, Murray said there are reports that crane operators in Dallas are being "poached" from one construction job to another.