Marcum economist talks jobs, offers 2021 outlook

Basu

The construction industry recovered 73 percent of the 1.1 million jobs that were lost during the first two months of the pandemic, according to the Marcum Commercial Construction Index.

According to Marcum, construction employment has rebounded since its plummet in March and April, with the industry’s unemployment rate at 6.8 percent as of October – right about in line with the nation’s 6.9 percent unemployment rate.

The bounce back in construction employment is largely due to gains in residential building, according to Anirban Basu, Marcum’s chief construction economist.

“Much of the construction industry’s momentum pertains to a surge in homebuilding,” Basu says. “For a variety of reasons, the single-family housing market has emerged as one of America’s leading economic drivers. While mortgage rates were low as the pandemic approached, they have fallen further since, inducing many people to begin thinking about home ownership.”

By segment, private sector spending shrunk 6 percent in September, on a year-over-year basis, while public sector spending fell 2 percent, according to Marcum. While private segments such as lodging (down 15.4 percent) and manufacturing (down 9.8 percent) dropped precipitously, public segments like public safety (up 32.9 percent), and sewage and water supply (up 11.8 percent) posted the largest year-over-year gains.

“Materials prices expanded nearly 2 percent in September and are now higher than they were at the same time last year,” Basu says. “Despite the lingering pandemic, the global economy has been recovering, increasing demand for key commodities. Rapid viral spread, including in Europe and parts of North America, render materials shortages more likely during the winter months.”

While there are reasons for optimism, Basu warns of potential headwinds during the winter.

“While many recent economic metrics provide reasons for optimism, contractors should remain on guard,” Basu says. “Another recession is probable as COVID-19 rages across the nation, driving up hospitalizations and inducing governors, mayors and others to reimpose social distancing directives. The ‘V’ is set to become a ‘W.'”

However, while winter may pose continued challenges to construction contractors and the industry as a whole, Basu maintains an optimistic outlook on 2021 as a whole.

“The good news is that much of 2021 could be spectacular for the broader economy as the post-election stimulus potentially synergizes with a vaccine,” Basu says.

Featured image: P&Q Staff