From the Desk of Bill McConnell, Chairman of the Board
“As anticipated, put-in-place construction was flat in Q1 with a nominal growth rate of 2.8% (US Census Bureau released this information on May 1st). Considering CPI is at 2.4%, real growth was 0.4%. Public construction growth (4.3%) continues to outpace private construction growth (2.3%). Private construction remains constrained by high interest rates, which directly impacts the near $1T residential sector (as of March, multifamily construction is down 12% year-over-year). Residential growth will continue to wane until the FOMC cuts interest rates, similar to the path it took during the second half of 2019.
Growth in Q2 will likely follow Q1’s weak results, particularly because federal policy changes have pushed layoffs and tariffs, and these actions have decelerated construction starts, construction job openings, design inquiries, and new permit counts. Construction Dive reported last week that construction hiring “slows to lowest rate ever recorded.” One respite is that ABC’s Backlog Indicator shows that contractor backlogs are holding steady.
Why would the current administration implement actions to decelerate the economy? Well, in January, unemployment was at a historic low, interest rates were high, and the equities market was priced to perfection. In other words, there was nowhere for the economy to run. Thus, the recent actions have shocked the economy into a mini reset. Real growth in Q1 was slightly negative (-0.3%) and Q2 might result in a second consecutive negative read, which could signal a recession is upon us, particularly if unemployment spikes (which is not the case based on the March figures, as the rate remained unchanged at 4.2%). However, if unemployment jumps in April, the FOMC will be in a position to cut rates.“
Read more on the topic via Construction Dive
Discover the detailed analysis and insights on the Q1 2025 construction industry trends and their implications for future growth by visiting our Economic Analysis page.
The Author
Bill McConnell
PE, JD, MSCE, MBA
Chairman of the Board
Bill McConnell is a co-founder and Chairman of The Vertex Companies, LLC. Bill is a top expert witness for construction disputes as he has testified nearly 250 times, most notably for quantum/damages, scheduling, allocation, termination, and standard of care opinions. As the Chairman of VERTEX, Bill sets the strategy for VERTEX’s future.