With 2016 now in the rear view mirror, we turn our attention to 2017 and examine the outlook for the construction industry in this edition of our quarterly update.
The Ups and Downs
2016 was a wild-ride for the U.S. economy. Stock markets saw a brief plummet mid-year in response to the U.K. “brexit” vote, however, rallied to near all-time highs at the end of the year riding the wave of momentum from Donald Trump’s somewhat surprising win in the presidential election.
Year-end unemployment numbers were at a 9-year low, which could indicate a possible heat-up of the overall economy. The Federal Reserve Bank raised the federal funds rate a quarter point in December and hinted that three additional rate hikes in 2017 were imminent.
What does this mean for the Construction Industry?
So we ask the question: What does this mean for those operating in the construction industry? A recent survey by the Associated General Contractors of America and Sage Construction and Real Estate provide some interesting insights. According to the survey, 73% of construction firms across the U.S. plan to expand their payrolls, as many are anticipating a demand for new projects. The Trump administration has alluded to plans for major investments in infrastructure, which bodes well for the construction industry which should benefit both directly and indirectly as a result of the projects that could soon present themselves.
Still, with unemployment relatively low and the already significant shortage in construction industry labor, companies are wondering where the manpower to perform this work will come from. Virginia Business Magazine sites that 59% of Virginia contractors are having a hard time filling salaried and craft-worker positions. Increases to pay, benefits, and bonuses are among the most popular methods being used to lure new hires and retain team members already on the payroll.
Changes in regulatory issues are top-of-mind with nearly all contractors. As we saw in December, the new Department of Labor Overtime rules were delayed, with its ultimate fate yet to be determined. The Affordable Care Act’s future also appears to be up in the air, with a repeal or replacement very likely combined with the Trump administration and Republican control over congress.
Extensive tax reform is expected within the first half of 2017. It will be important to analyze how these changes may impact the construction industry as well as the owners and managers of construction companies.
An Uncertain Start
Thus, we’re left with a mix of optimism and uncertainty as we head into the first quarter of 2017. Firms should implement plans to obtain goals for the year based on factors that they can control, while still monitoring the potential for ongoing changes, and being ready to react and respond swiftly.
Your team of trusted advisors at YHB are here to both keep you informed, and help you adapt to these changes as the circumstances arise. We hope you have a great start to 2017 and look forward to speaking and meeting with you soon.