The Building Boom Lifeline
Amid weakening revenues, higher costs, and a regional banking crisis, many have wondered how markets and sentiment have paused any external forces from leading to turmoil. The largest reason for this is the job market, specifically employment, which has recently come off a 53-year high, signaling strong monetary circulation in the domestic economy. Now, one of the largest players that has boosted the labor market has been infrastructure, specifically the accelerated construction of apartments, homes, and retail buildings. Following the pandemic, lower costs for building materials and government outlays promoted booms in both residential and non-residential construction spending. Since 2020, spending for construction projects in residential and non-residential domains has increased by roughly 40% and 25%, respectively.
With persistent growth in the robust sector, jobs have remained steady, undermining the effects of the Federal Reserve’s tightened monetary policies. As we enter the new month, several analysts speculate that financing issues spurring from the regional banking crisis as well as decreases in post-pandemic home improvement will cause declines in construction spending; however, the effects of this may not be immediately felt in the broader economy. For the remainder of the year, investors hope for a “soft landing,” but the strength of employment and construction continues to prolong the Fed’s action to loosen its policy, leading to rate cuts that may not be seen until 2024.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.