www.mrca.org — Midwest Roofer 11 POISED FOR A MODEST REBOUND U.S. Gross Domestic Product (GDP) (Annual % Change) 2015: 2.9% 2016: 1.8% 2017: 2.5% 2018: 3.0% 2019: 2.5% 2020: -2.2% 2021: 6.6% 2022: 2.5% 2023: 2.9% 2024: 2.8% * 2025: 1.7% * 2026: 2.0% A subdued economy will challenge business operations in 2026. Sources: World Bank; * = projections by Oxford Economics. of capital equipment is being bought, I am seeing a lot of data center-related equipment in there,” said Conerly. “Data centers also require a lot of garden variety wiring, connectors, and plumbing for cooling.” Every sector of the construction industry shares a common challenge: labor availability. Oxford Economics forecasts an unemployment rate of 4.4% and 4.3% at the end of 2025 and 2026, respectively. That’s not much higher than the 4.1% clocked at the end of 2024. Low unemployment, largely due to slowing growth in the nation’s working age population and aggressive immigration policies, can result in rising labor costs. Business confidence For all business sectors, money and labor are not the only production factors on the rise. “The real problem is the world has become much more expensive in the last few years,” noted Basu. “Construction materials are more expensive. And of course there are tariffs on items like steel, aluminum, and copper.” Little wonder the high cost of doing business is top of mind for many operators. “As we head into 2026, the area of most concern for the construction industry is profit margin,” said Basu. “Many operators are simultaneously experiencing an increase in costs of delivering services while demand fades.” Given the variety of business concerns, it’s little wonder many projects are being put on hold. “It’s hard to engage in cost savings when both materials and labor are becoming more expensive,” said Basu. “Too often, the pro formas don’t pencil out. Many companies are responding by not expanding their operations and trying to trim expenditures at the margins. They are focusing more on cash flow preservation by slowing hiring, and being less aggressive in leasing and purchasing equipment, particularly equipment impacted by tariff pricing.” This generalized business hesitation is evidenced in the numbers. “We look for business investment to increase by only 1.6% in 2026, after rising by 3% in 2025 3.6% in 2024,” said Yaros. Looking ahead As we enter the early months of 2026, economists suggest that companies in the construction industry watch these key economic indicators for an idea of how the year will turn out: # Employment “I would pay close attention to the unemployment rate,” said Yaros. An unexpected decline in employment would spur faster interest rate cuts as the Fed seeks to reinforce economic expansion. # Consumer spending “How is the consumer faring?” poses Basu. “Bear in mind that many low and middle income people are exhausted financially. Indebtedness and delinquencies are up for credit cards, mortgages and loans.” # Inflation “If we get stubbornly high inflation, that will prevent further progress on interest rate,” said Basu. Oxford Economics still expects the nation to avoid a recession, and the expected 2% GDP growth is right around the level economists peg as the nation’s “natural growth rate”—one that supports business activity, maintains full employment, and avoids triggering inflation. Perhaps of even greater importance, though, is a little heralded threat to productivity. “One thing that sort of permeates the whole economic picture right now is the nation’s low population growth rate,” said Conerly. “Immigration is down, due to Trump administration policy. The next generation entering their working years is about the same size as the retiring boomers, so there will be no net growth in the labor force.” Responding to this trend, companies in the construction industry will look for ways to maximize their return on labor by increasing output per worker, noted Conerly. “The focus of businesses in 2026 will be increasing productivity—not by whipping people harder, but by providing them with better tools, better training, and better first-level managers.” ECONOMIC FORECAST
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