The labor crunch in construction is continuing unabated. According to an April report by Associated Builders and Contractors, February 2023 saw 412,000 job openings across the construction industry. An Associated General Contractors of America analysis of government data showed construction employment increases in 45 states, with Texas leading the way at 37,900 new workers. As demand for workers has increased, the Labor Department is offering incentives to attract underrepresented groups into the field. There is also some movement away from contracting toward self-performing as job candidates seek greater security and career prospects.
With recent coverage of the fight over the debt ceiling on Capitol Hill and the likes of multinational accounting firms such as Deloitte calling for a debt ceiling solution to avoid an economic downturn, it's easy to lose track of what the debt ceiling is — and how it affects the economy.
Fans of the hit musical “Hamilton” might recall that during the birth of the United States, Secretary of the Treasury Alexander Hamilton successfully negotiated for his plan to assume state debts into a national debt as a way to boost available credit for the nation on favorable terms. According to the U.S. Treasury, the United States has carried debt ever since. It wasn’t until 1917, as the U.S. prepared to enter World War I, that the idea of a debt ceiling made its way into law. And since 1939, when the first overall federal debt limit was established, Congress has raised the ceiling to keep pace with federal spending — about 80 times since the 1960s. As a result, the United States has always paid creditors on time. Thus, like a person who always pays their credit card bill on time, the U.S. government pays a lower interest rate on its debts. By one estimate, this will translate to a savings of about $50 billion over the next year.
It’s unclear what would happen if the debt ceiling is not raised in time. It’s never happened — although technically it happened in January — and contingency measures are already in place. There is even some question whether the debt ceiling legislation itself violates Section 4 of the 14th Amendment. But in 2011, during the fallout of the Great Recession, the Treasury Department developed a debt ceiling contingency plan in which securities would continue to be paid out but other payments — such as to federal agencies and contractors — would be delayed. Should such a plan come into force in 2023, it may threaten infrastructure spending and increase borrowing costs, which in turn might be enough to trigger a larger economic slowdown.
For contractors, this could be a double whammy. Borrowing costs, such as for heavy equipment purchases, might increase at the same time that infrastructure spending — a bright spot for the industry in 2023 — could grind to a halt.
“When other nations have defaulted, it has been because they do not have the ability to continue servicing their sovereign debt. But we do.”
Further Reading: Costs of Crossing the X Date (Bipartisan Policy Center)
According to the Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 236,000 in March, led by the growth in the leisure and hospitality, government, professional and business services, and healthcare industries. Employment in the construction industry remained unchanged. The overall unemployment rate dipped slightly to 3.5%, with nonseasonally adjusted unemployment in the construction industry down to 5.6% in March, down from 6.6% in February 2023 and 6% in March 2022. Also in March, average hourly earnings for all employees on private nonfarm payrolls rose 9 cents to $33.18. Average hourly earnings have risen 4.2% over the last 12 months but have not kept pace with inflation, which rose 0.1% in March and 5% over the last 12 months.
Baton Rouge, Louisiana. Richmond, Virginia, Bend, Oregon. Across the country, there is clearly a demand for affordable housing. While builder sentiment and new home starts have only just turned around, there are still economic uncertainties surrounding new project starts. One possible solution: modular home construction. Homes built in factories can be 20% cheaper to build, and the industry is equipped to construct the multifamily, built-to-rent units that will be key to solving the crisis.