How do contractors really feel about the economy? Just check Google.
According to a new report from Flexbase, queries for “construction recession” are being Googled at levels mirroring 2008.
Since 2004, there have been three spikes in searches that averaged 400% or more over the baseline:
- March - June 2020 (Covid-19)
- And June - July 2022
While Google can’t pinpoint exactly who the searchers are, it’s highly likely that the 7 million people employed in the construction industry are worried and heading to the Internet to do some research.
Looking for advice, solutions or a place to commiserate, contractors have also found some solace in online forums and communities such as Reddit, an online network of communities based on interests, and Hammr, an online community just for contractors.
In the past month, there have been more Reddit threads about a recession impacting the construction industry than since the beginning of the pandemic, says the report.
“Yeah, people are fearful,” Brek Goin, founder and CEO of Hammr, says bluntly. “Construction has shown it can handle rising rates, but many businesses are unsure if they can handle a recession. Cash is king. Businesses are cutting costs. The ones who can weather storms are feeling optimistic about acquiring new talent as the labor market reshuffles.”
Meanwhile, strong backlogs are quelling some fears but taking a bite out of margins.
According to the latest report from Associated Builders and Contractors, the construction backlog currently stands at 8.9 months, up 0.4 months from the same time last year.
“Several months ago, there was conjecture that contractors were generally too upbeat regarding their collective future,” said ABC chief economist Anirban Basu.
“Increasingly, the data suggest that they were. At the time, many contractors reported surging backlog and an ability to pass along hefty cost increases to project owners. For months, contractors expected sales, employment and margins to expand. The most recent ABC survey indicates that, to secure work and to induce project starts, a growing fraction of contractors are having to trim margins.”
He noted that while circumstances are hardly catastrophic, the nonresidential construction marketplace is not as strong as it was expected to be.
“Many factors are involved, including materials prices that have remained stubbornly elevated and construction skills shortages that have refused to dissipate. In the context of rising fears of recession and rising borrowing costs, the stage has been set for softer nonresidential construction activity going forward," said Basu.
While public contractors will continue to benefit from the infrastructure spending package, the market may not be as robust as anticipated due to delayed project starts.
Despite all of these factors, Basu says contractors can continue to expect industry sales and employment to expand over the next six months.