Second Quarter Construction Economics: The Relatively Good, the Unprecedentedly Bad, and the Potentially Ugly
By Anirban Basu, Chief Construction Economist, Marcum LLP
Issue 32 – Second Quarter 2020
The Marcum Commercial Construction Index for the second quarter of 2020 reports that the industry is holding relatively well in the face of the COVID-19-driven recession. Construction employment has rebounded since plummeting in March and April, and the industry’s unemployment rate stands at 8.9 percent, below the 10.2 percent rate observed across all industries.
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The Relatively Good
The Business Cycle Dating Committee of the National Bureau of Economic Research announced that the economy entered recession in February 2020, ending the longest economic expansion in U.S. history.
The Unprecedentedly Bad
The nation’s gross domestic product was 9.5 percent lower during the second quarter relative to the first. Given that a depression is defined as a 10 percent loss in economic activity, and given the loss in GDP registered during the first quarter of 2020, depression-like conditions were experienced earlier this year. On an annualized basis, GDP fell 32.9 percent during the year’s second quarter according to the Bureau of Economic Analysis.
The Potentially Ugly
The economy has several problems but for now, inflation isn’t one of them. While it is true that global economic activity will shrink approximately 5 percent this year, the relative lack of inflation is not to be taken for granted. Central banks around the world have been injecting financial systems with abundant liquidity, public sector spending has reached unprecedented levels, and the economy is steadily coming back to life after its spring hibernation.