Just like the economy, the construction industry goes through business cycles.
Between the years 1854 and 2009, the U.S. economy averaged 38.7 months in expansion and 17.5 months in contraction. According to the National Bureau of Economic Research, there were 33 business cycles between those years, with each full cycle lasting roughly 56 months on average.
The current economic expansion in the U.S., for example, has lasted more than 100 months, one of the longest in our country’s history.
An Expert Look at U.S. Industry Trends
Robert Murray, Chief Economist and Vice President with Dodge Data & Analytics, has been analyzing construction industry trends for nearly forty years. He leads a team that developed the Construction Market Forecasting Service, providing five-year projections for 22 building types by nine regions in the U.S.
Mr. Murray has identified four business cycles in the construction industry since 1975.
The cycles have varied in length, with the first cycle being the shortest at just seven years. From 1982 to 1991, we experienced a nine-year cycle, and afterward the industry experienced the longest cycle that went on 20 years from 1991 to 2011. This was followed by a steep decline.
“When you look back at the prior decade, single-family housing and also store construction was overbuilt, and that certainly has had an impact in terms of what has taken place in this cyclical upturn,” Mr. Murray said.
The industry’s current cycle started in 2011, and now that we are seven years in, two clear questions remain:
- How much longer do we have?
- Will we continue to see growth?
Analysts and industry forecasting experts like myself are wondering if decreases are near on the horizon.
I had the opportunity to interview Mr. Murray to discuss this topic in depth and learn about the headwinds and tailwinds the U.S. construction sector might see. I encourage you to check out my video interview with Mr. Murray to see his thoughts on this question.