b'ECONOMIC UPDATE Continued from page 15computer chip and battery manufacturing plants,shrunk, particularly in construction, thanks to a and data centers, many in support of technologicalslowing economy, so hiring has slowed. Residential transformationsuchasthegrowthofartificialcontractors in particular appear to be looking for intelligence, said Basu. fewer workers.ForcontractorsdependentuponmultifamilySoftening employment growth has given workers less construction, hotels, or retrofits of existing officebargaining power, so employers are experiencing space, the 2025 outlook is a bit more bleak. Highsome much-needed relief from the rising trendline interest rates have led to very high financing costs,of worker wages. Entry-level hourly wage increases along with the general inflation experienced withincameto3.7%in2024atPalisinsmember the construction sector, said Basu. And banks havecompanies, markedly lower than the vigorous 8%-become more reluctant to lend, partly because of an10% levels clocked for each of the previous two increase in regulatory oversight. As a result, certainyears. (Historically, such increases have tended to contractors have become vulnerable to a lack ofsettle in the 2.5% to 3.0% range).work, and they are quite concerned about 2025.National figures concur. The Employment Cost A change in fortune will not happen overnight. WithIndex (ECI) is slowing, said Hoyt, referring to a lower interest rates, therell be an easier time liningcommon measure of average worker wages. We up project financing at acceptable cost, said Basu.are forecasting 2.8% growth in 2025, compared to But these things take time. We might see some3.9% in 2024 and 4.5% in 2023. softness in a meaningful fraction of contractors inDespite the ongoing de-escalation in the ECI, Hoyt 2025. And then perhaps things get a bit better insaid it remains healthy enough to support consumer 2026 as these lower interest rates prompt morespending, as does the expected increase in the activity. nations total personal income level, an important Healthy employment driver of business activity. Like the ECI, it is expected The economy does better when people are optimistic,to follow a familiar 2025 trendline: a healthy increase since consumer spending accounts for a large portiondespite de-escalation. Mainly because of slower job of the nations business activity. While consumersgrowth, we have the increase in wage and salary remain troubled by the residual effects of inflation inincome slowing to 4.5% in 2025, compared to our the form of high prices for gas and groceries, theyexpectation of 4.8% for 2024, and 5.9% for 2023, remain in a fairly good mood. We look for consumersaid Hoyt. confidence to move slightly higher in 2025, saidMaybe its a looser labor market, but employers are Scott Hoyt, Senior Director of Consumer Economicsin no hurry to trim their employee rosters. Employers for Moodys Analytics (economy.com).want to maintain their ability to jump on the growth Why the optimism? Healthy employment levels. Weside once the economy rebounds a little, said Hoyt. look for the unemployment rate to end 2025 at 4.3%So employment levels have held fairly steady. and 2026 at 4.2%, said Yaros. This is roughly inSupply chainsline with the 4.1% reported toward the end of 2024.Construction companies will benefit from a national (Many economists peg an unemployment rate ofcommitment to reposition supply chains in the United 3.5% to 4.5% as the sweet spot that balancesStates. Logistical issues are persuading many CEOs the dual risks of inflationary wage escalation andto place production closer to final consumers, said economic recession.)Basu. There is also a trend toward favoring nations If favorable unemployment figures will encouragethat provide significant protection for intellectual consumer spending, employers should also enjoyproperty.relief from the deleterious effects of the past yearsIndeed, many contractors are concerned about the tightlaborconditions.Whilemanycontractorsre-emergence of supply chain issues. Its taking continue to view the lack of skilled labor as theirlonger to ship equipment around the world, in part number one challenge, it is not necessarily of thebecause of issues in the Red Sea, said Basu. same magnitude as a year ago, said Basu. TheCargo is being diverted and having to travel much number of available unskilled job openings haslonger distances in many instances, especially cargo 16 www.mrca.orgMidwest Roofer'