After six long years of dragging and clawing back from near financial disaster, the U.S. economy is finally looking up. Forecasters are optimistic at the predicted growth of 3.1% for the year and expect it to expand at its fastest pace in more than a decade.
Impossible? Not quite. According to the National Association for Business Economics, the economy expanded at a 5% annual rate from July through September last year-the quickest for any quarter since 2003.
What's contributing to this "sudden" turnaround?
Plunging oil prices for one. With gas prices half of what they were last summer, consumers have a little more cash on hand. And, as we all know, when there is more accessible cash flow, consumer spending picks up in all sectors.
Americans' personal finances are in better shape than they have been, too. The Great Recession forced many Americans to skimp on spending. As a result, the average debt as a percentage of income has dropped to levels seen in 2002.
Job growth is also accelerating as more workers re-enter the job force after dealing with several years of downsizing, layoffs and cut backs. Economists predict the jobless rate to drop to 5.5% or lower in 2015. Gus Faucher, senior economist at PNC Financial Services Group, forecasts about 2.8 million net new jobs in 2015--the most in 15 years. The increased demand for workers will help push up stagnant wages in both skilled and un-skilled labor sectors.
Businesses have been anxiously waiting for the turnaround and have already begun investing in buildings and software to prepare for the expansion.
What does this mean for the Construction Industry?
Things are definitely improving for construction and manufacturing. According to the 2015 Dodge Construction Outlook, total U.S. construction starts for 2015 are predicted to rise 9% to $612 billion. That's 4% higher than last year's gain. More readily available financing, a more focused approach to real estate investment and government easing on restriction of passing bond measures will help grow and stabilize the industries.
Nashville based Liddle Brothers Contractors, Inc., sees an upswing in building activity for Kentucky and Alabama, especially in commercial and housing. Executive Vice President Mike Taylor believes contractors in these areas will return to pre-recession revenues and possibly margins, too. The downsides are increased material costs-about 3 to 5 percent from 2014-and increased labor costs.
Finding skilled workers continues to be a problem for the industry since many left the field during the recession. As a result, labor costs have increased. In 2015, those costs could increase by 10 percent. However, Alabama is leading the way in the search and training of employable workers. AIDT Alabama Workforce Training Center and Go Build Alabama are just two of the organizations looking to attract and establish a viable construction industry workforce.
All in all, the pace continues to grow and improve in 2015 for the U.S. Economy. The world economy is watching as the U.S., once again the "Comeback Kid," gets back on its feet and drives global growth in 2015.
Update on the 179D Tax Deduction
On December 19, President Obama finally signed the Tax Increase Prevention Act of 2014 (HR 5771) into law which officially and retroactively extended the section 179D Tax deduction and over 50 other expired incentives for individuals and businesses through the end of 2014. As of midnight on January 1, 2015, the sections 179 ceiling limit had been reduced to $25,000 with no bonus depreciation available for this tax year. However, with a new Congress emerging, a huge backing in the business sector and key Congressional leaders, it is expected that the expanded section limits could be restored. We'll keep you posted.
See Section179.org for more information on the Section 179 Deduction.
