What Recession? America is Going Through a Massive Construction Boom
Not the type of headline you’d expect when recession probabilities jumped to 70% yesterday. But don’t confuse 2008 with 2023…
2008: The financial crisis led to a deep multi-year construction recession.
2023: So far, no signs of a deep construction recession. And here’s why…
1. Ramp-up in American manufacturing
2021’s infrastructure bill and last year’s climate bill have fueled new industrial project construction.
- Last year, the US spent a record $108B on manufacturing construction.
- Construction firm Suffolk, centered on government-supported projects, has 3-4 years of work lined up (WSJ).
Focus has been on the semiconductor and electric vehicle sectors — designated by the Biden Administration as national priorities.
2. Strong new home demand
Homeowners are hoarding properties with lower rates locked in — so homebuyers have turned to new home constructions.
- Last week, America’s third-largest homebuilder PulteGroup (NYSE:PHM) hit new highs (up 45% this year) after reporting record sales — selling 6% more homes at 9% higher prices.
- On its earnings call, Pulte execs said they would ramp up building homes targeted to new buyers — while adding more construction staff.
The increase in new builds has led to a major construction worker shortage — with an estimated 800K workers still needed — partly explaining why the US unemployment rate is still near record lows.
Looking forward: Funding for new projects could be harder to come by after the recent banking collapses. But that can also vary based on industry. New office construction? No TY.