2024 Construction Outlook: (Cautious) Optimism Should Rule The Day

When it comes to the short-term economic outlook for equipment manufacturing and the construction industry it serves, the only thing anyone can honestly say for certain is there are no certainties.

It’s easy to look back on what’s happened in construction since the onset of COVID-19 with the benefit of hindsight and recognize the lasting impact of the pandemic – along with various other shocks and strains – and understand how market forces drove us to where we are today.

But in terms of where we’re headed, the outlook for construction is mixed. More specifically, the latest economic indicators suggest there is little reason to expect the industry to experience significant and sustained growth in the weeks and months ahead. Consider:

• The construction industry experienced contraction of about 3 percent this year.
• Prices dropped by 6.3 percent last year, and a further decline of about 3 percent is expected this year.
• The U.S. Fed opted to keep interest rates on hold at a 22-year-high, reflecting ongoing concerns about inflation.
• That high-interest rate environment negatively impacted the residential sector – by far the largest single construction sector – in terms of homebuilding.

All of that is concerning, no doubt. However, several notable trends and some available data – particularly in certain sectors of construction – do offer some hope for an eventual turnaround for the industry:

• The passage of the Infrastructure, Investment and Jobs Act – and, perhaps more specifically, spending coming from it – is leading to notable growth in both the infrastructure and energy and utilities sectors after significant weakness in recent years.
• Signs of life are being seen in both the commercial and institutional sectors, but that’s coming on the heels of a few very weak years.
• Construction materials prices are coming down, albeit from very high peaks.
• Construction activity overall is set to improve overall in 2024, but mostly in certain areas (industrial, infrastructure and energy, in particular).

From an employment perspective, the numbers are positive. Most notably, there were more than double the numbers added to construction in October when compared to September, according to the most recent Associated General Contractors of America analysis. A total of 23,000 jobs were added in October, while only 11,000 new construction jobs were reported the month prior.

The unemployment rate in construction was 4 percent during the month of October, which was among the lowest rates for that month since 1990. However, the industry’s need for new talent is evident in the federal government’s recent report of a record-high 450,000 job openings in construction at the end of September. Equipment manufacturers across the country are also experiencing a significant shortage in the labor pool. Our industry has more than 85,000 vacancies, particularly for the high-skilled jobs needed to make the equipment that builds the world around us.

Looking at things from a technology perspective, it’s long been said construction is slow to adapt and adopt. That’s not entirely true, however. The men and women who support the industry want to do their jobs efficiently and effectively, and they take pride in their work. New and cutting-edge construction equipment technologies allow them to do their work faster, better and safer. And, as technology evolves for the better and is eventually adopted, its benefits to people, planet and productivity will be validated, driving even wider industry adoption. Finally, manufacturers continue to invest in technology, focusing on the needs of their customers. The construction industry will soon see proven benefits, along with an even greater return on their investment.

There’s no arguing with the fact that 2023 has been a bit of an up-and-down year for the construction industry. A number of factors – most notably high interest rates and record-high job openings – suggest the outlook for 2024 is uneven as well. In addition, our members report demand for product across the construction industry has softened as of late.

All that being said, the long-term future of the construction industry is undeniably bright. The Infrastructure Investment and Jobs Act (IIJA) will continue to be a key driver for construction growth, with hundreds of billions of dollars allocated for infrastructure, energy and utilities. Meanwhile, the CHIPS and Science Act and the Inflation Reduction Act are driving spending in the industrial and manufacturing sector. This growth and momentum have even more potential, especially as the industry embraces technology to improve productivity and performance.

Perhaps more importantly, however, our member survey data points to widespread enthusiasm due to ongoing investments in infrastructure, energy and utilities. It’s not a question of if, but rather a matter of when the industry sees a surge in growth. In the meantime, however, cautious (but consistent) optimism regarding construction’s future should rule the day.

Megan Tanel is president of AEM.