New realities as employment is nearly full

The economy is expanding at a solid pace, even as we bump up against full employment.

No one knows what “full employment” really means, unless it is 100 percent of all possible workers. Despite the slow growth of population millions of discouraged workers are being drawing back into the labor force. So for a few years, with productivity helping, we might be able to grow at 3-plus percent in GDP.

We are starting to see all the forgotten things that happen at full employment: worker shortages, wage increases, inflation pressures building and imports growing.

But we also have growing tax receipts, growing state and local spending, and massive wealth creation. For the most part, these are excellent conditions for higher construction spending.

Regionally, the patterns of growth are starting to look like pre-2006: The Sun Belt and energy states are leading while the expensive states are lagging. The difference is that the Rust Belt is growing much faster than at anytime in the past 10 years. Combined, it means higher construction materials growth for a while.

The private segments (i.e., residential, nonresidential) are close to a cyclical peak as financing costs and project costs go up. Nonbuilding looks the strongest for the next few years as states look to catch up with deferred maintenance and new expansion plans.