Capitol Update 12/12/2022
US could skirt recession, former Fed economist says
While the potential risks of a coming economic downturn are “very high,” factors such as the strong labor market and loosening pressure on supply chains could see the U.S. economy narrowly missing a recession, Julia Coronado, president and founder of economic research firm MacroPolicy Perspectives said during a panel discussion Tuesday. “I have the U.S. economy skirting a recession — I don’t have recession as a baseline,” she said, speaking during a media event on the results of a survey on risks top of mind for business leaders conducted by global consulting firm Protiviti and NC State University. Coronado, a former Federal Reserve economist who served an eight-year tenure at the Fed beginning in 1997, according to her LinkedIn, currently serves as the president of National Association of Business Economists (NABE). A NABE survey of 51 professional forecasters released Monday found the odds of a U.S. recession exceed 50%, with a downturn most likely to begin in the first quarter of 2023. The recession is likely to be mild, according to the NABE survey, with the U.S. economy set to recover and expand 0.3% for the full year. Economic uncertainty was the second-highest rated overall risk for 2023, the 11th annual Executive Perspectives on Top Risks for 2023 and 2032 found, with concerns regarding inflation and a recession abounding. The survey includes insights from 1,304 board members and executive leaders surrounding their top risk concerns — out of a list of 38 risks — both for the upcoming year as well as ten years in the future. Fears surrounding central bank policies, persistent supply chain challenges and rising labor costs have dampened executive sentiments for the economy, according to the survey, alongside concerns over a potential recession which could occur early next year. Relaxing supply chain pressures, a shift back to service-based spending by U.S. consumers, and a robust labor market — the unemployment rate is hovering around 3.7% — are all factors that could see the U.S. economy narrowly miss a recession, Coronado said. “It’s really hard to tip the ocean liner of the U.S. economy over, so I think it’s going to be a tough year, a volatile year, but companies are hard at work trying to manage these risks, and we’re making progress, so I’m relatively optimistic compared to some of my peers,” she said. Coronado also pointed to a Nov. 30 speech by Federal Reserve Chairman Jerome Powell, who indicated the Fed will likely slow the pace of tightening in coming months in a bid to hopefully achieve a soft landing. The Fed has hiked interest rates 3.75 percentage points thus far this year in a bid to clamp down on inflation. Concerns over economic uncertainty stretches out beyond 2023 for executive leaders, however, according to the Protiviti survey. Economic conditions that could potentially restrict growth opportunities came in as the eighth-highest overall risk cited by board and executive leaders for 2032, according to the survey. The risk that was top of mind both for 2023 and for executives’ 10-year outlook concerns talent retention, however, according to the study. The ability to attract and retain top talent was the top rated risk both for 2023 and 2032, according to the survey, as executive leaders struggle with the changing future of work, the role of emerging technologies such as automation and artificial intelligence (AI), and rising labor costs.
Twenty-five new and five modified projects planned by the US Army Corps of Engineers would advance with more than $37 billion in funding under a bipartisan agreement on a new Water Resources Development Act — the legislative vehicle for the passage of this year’s National Defense Authorization Act. The final agreement includes $21.4 billion for projects to protect the Texas Gulf Coast from hurricanes and storms, and $2.4 billion for additional dredging at the New York-New Jersey Harbor. Full Story: Engineering News-Record (tiered subscription model)
In-office occupancy levels rose to their highest pandemic level last month, but macroeconomic challenges remain and are expected to weigh on investment in the sector, according to a report by Newmark, a New York City-based commercial real estate advisory firm. That was apparent in the third quarter as office investment activity fell about 6% from the preceding quarter, largely due to difficulties in the tech sector.Full Story: Construction Dive (12/7)
Hotel and data center projects helped lift the commercial component of the Dodge Momentum Index by 4.3% last month, with the overall index rising 3.8% to 207.2. The institutional component was up as well, with a 2.7% gain fueled by administrative buildings and religious facilities. Full Story: Dodge Data & Analytics
Federal agencies by 2030 would be required to electrify equipment and appliances and reduce their energy usage in 30% of their building space under an initiative proposed by the Biden administration. About 300,000 buildings would be affected with required energy retrofits and efficiencies. Full Story: Engineering News-Record (tiered subscription model)
Officials in the US and EU reportedly are considering new tariffs on steel and aluminum imports from China on the grounds that such production is at odds with their respective climate agendas. Tariffs haven’t been proposed yet but could be among the first examples of governments using tariffs to further their climate goals. Full Story: Bloomberg
Construction activity grew in November for the 30th consecutive month, with improvement noted in the labor situation, according to the latest Services ISM Report on Business from the Institute for Supply Management. Although delivery snarls and a persistent shortage of concrete were reported, the Services PMI rose 2.1 percentage points from October to 56.5% while the Business Activity Index climbed 9 points to 64.7%, says Anthony Nieves, chair of ISM’s Services Business Survey Committee. Full Story: For Construction Pros
The 22nd Street Revitalization project in Tucson, Ariz., and the Lake Street Multimodal Improvements Project in Minneapolis are among many projects benefiting from federal funding under the bipartisan infrastructure law. The Transportation Department profiles several projects nationwide and how discretionary grants are supporting projects that foster public safety, climate resilience and equity in transportation. Full Story: Department of Transportation
The Producer Price Index for final demand increased 0.3 percent in November. Prices for final demand services advanced 0.4 percent, and the index for final demand goods inched up 0.1 percent. The index for final demand rose 7.4 percent for the 12 months ended in November.
Laid-off tech employees are flooding the market. What does that mean for construction?
The tech industry is in turmoil.Large companies like Twitter, Amazon and Meta have slashed jobs at a relentless pace, dumping thousands of workers with a vast array of tech skills into the employment market. Now, the Harvard Business Review writes, these mass layoffs present a significant opportunity for traditional companies to modernize — and no industry presents a sorer need than construction. Some contractors are starting to wonder what these newly unemployed techies can do for them. For example, Montreal-based contractor WSP discussed the flight of tech workers on its most recent earnings call. Alexandre L’Heureux, president and CEO, noted that it was in a position to expand what it could offer to its clients. “We are taking advantage of what’s going on in the labor market,” L’Heureux said. “More importantly, we’re taking advantage of our brand to attract the smartest and brightest individuals in our industry, but also outside of our industry.” However, in order to do so, contractors will have to pay up. Experts told CIO Dive that good tech talent won’t come cheap. “It’s easy to read the headlines and think you’re going to be able to get talent, and at cheaper rates than it was before,” said Thomas Vick, Dallas/Fort Worth regional director for human resources consulting and recruiting firm Robert Half. “That is not the case. If you’re not making competitive offers, you’re not going to take talent away from where they are now.”
High-speed rail line from LA to Las Vegas could begin construction in 2023
California could see its second high-speed rail project begin construction next year, according to news reports. Brightline West looks to build an $8 billion passenger rail corridor connecting Southern California and Las Vegas, mainly within the median of the Interstate 15 freeway. It would operate 180-mph electric trains. Unlike the publicly funded high-speed rail project from San Francisco to Los Angeles, Brightline West would be privately owned and operated. Brightline West and Brightline are owned by Fortress Investment Group, a global investment firm focusing on transportation, infrastructure and other investments.
Three light-rail projects in Los Angeles County would benefit from $1.9 billion in state funding sought by the L.A. Metro board. A Jan. 31 decision is expected for the funds, which would come from California’s Transit and Intercity Rail Capital Program. Full Story: Trains