February 20, 2015
Article by Joseph Natarelli, National Construction Industry Group Leader, and Anirban Basu, Marcum's Chief Construction Economist, "Construction Industry Finally Hitting Stride," Featured in Construction Accounting & Taxation
After a challenging start to the year, the nation's economy came racing back as the final snows melted in early 2014. Construction projects that were delayed by the harsh winter got underway, auto sales surged, and people began to dine out, shop, and generally engage in business activity. The impact of ongoing economic progress can be viewed through multiple lenses, including from the perspective of labor market performance. The nation supports more than 2.7 million more jobs than it did a year ago and for the first time in six years national unemployment has fallen below 6 percent.1 Even the quality of jobs being added has improved of late, with more middle income jobs being produced in construction, manufacturing , energy, professional services, and IT.
Data regarding national output are consistent with the notion of blossoming momentum. The U.S. economy bounced back with a robust 4.6 percent annualized performance during the second quarter and followed that up with a 5 percent showing during the third.2 The third quarter surge represents the fastest pace of growth since the third quarter of 2003. Over the past four quarters , GDP has expanded 2.7 percent.3 Nonresidential fixed investment , which encompasses nonresidential construction activities, surged 7.6 percent over that same time period.4
Business investment is likely to continue to be strong in 2015. For many years, businesses have been able to expand profitability by shaving expenses rather than by significantly expanding revenues . This is consistent with subpar macroeconomic growth. That can only continue for so long. At some point, expanding profits requires growing revenues, which in turn requires more capital investment to expand output and generate new products. We appear to be entering such a phase of the recovery.