America’s Construction Economy: A Race Against Time

The ongoing strength of the U.S. economy has been a source of incredulity for many economists. When interest rates took off in 2022, a conventional wisdom formed indicating that America was headed for certain recession in 2023. Economists from Bloomberg and elsewhere placed the probability of an economic downturn last year at or near 100 percent. That had everything to do with rising interest rates, which not only caused many stock values to tumble in 2022, but also implied a weakening of both consumer and business spending in 2023.

But no downturn came. Instead, the U.S. economy managed to grow 2.5 percent. Job growth continued, wage pressures persisted, consumers kept spending and travelers kept traveling. Meanwhile, inflationary pressures abated as something akin to pre-pandemic normalcy began to take hold.

While it remains easy to point to many challenges, including in the forms of war, Red Sea piracy, and unpredictable elections transpiring in much of the world, U.S. economic growth has continued apace. According to an initial estimate from the U.S. Bureau of Economic Analysis, the economy expanded at a 2.8 percent annualized rate during 2024’s second quarter. A separate report from the Federal Reserve Bank of Atlanta indicates that the U.S. economy is poised to roughly match that performance during the third quarter.

At the heart of America’s momentum, which has generally not been matched in the balance of the advanced world, has been a consumer who has been willing to ramp up their indebtedness to continue spending. While surging credit card debt and expanding delinquency represent causes for concern, they also reflect an underlying confidence in the future. Much of this confidence is attributable to labor market performances that continue to exceed expectations. An initial estimate from the U.S. Bureau of Labor Statistics indicates that America added another 206,000 in June, which means that national employment is up by 6.3 million since February 2020, the month before the pandemic undid the economy.

While it is true that unemployment has continued to edge higher, standing at 4.1 percent in June, that remains reasonably low by historic standards. A rising unemployment rate is also consistent with diminishing wage pressure, another prominent feature of the U.S. economy. That declining wage pressure along with sharp declines in the price of many goods (though not services) has positioned the Federal Reserve to begin reducing interest rates in September. The prospect of declining interest rates has many economic stakeholders abuzz with hope, something reflected in record stock prices as reflected in many indices like the S&P 500 and Dow Jones Industrial Average.

Home values have also been rising, further expanding American wealth and fueling household expenditures. The Federal Reserve estimates that as of the first quarter 2024, total American household wealth ripped past $151 trillion. To put that into perspective, just four years earlier, household wealth was sitting a bit below $104 trillion. In short, America remains embedded in a virtuous cycle in which household spending helps support growth demand for workers which in turn fuels more spending. Add to the mix massive outlays by tech companies on things like artificial intelligence (AI) platforms and ongoing federal spending on munitions, infrastructure, subsidies to expanding manufacturers, etc., and there remains plenty of aggregate demand powering the economy.