The Construction Industry, our Current Economy and some Predictions

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The Everything Building Envelope Episode Transcript:

Paul: Welcome back, everyone, to The Everything Building Envelope podcast. This is Paul Beers, and today I’m really excited about our guest, Anirban Basu with the Associated Builders and Contractors, otherwise known as ABC. And ABC is a national construction industry trade association representing nearly 21,000 chapter members. They’re founded on the merit shop philosophy. ABC and its 70 chapters help members develop people, win work, and deliver work safely, ethically, profitably, and for the betterment of the communities in which ABC and its members work. ABC’s membership represents all specialties within the U.S. construction industry, and it’s comprised primarily of firms that perform work in the industrial and commercial sectors. And I’m happy to say that my company, GCI Consultants, has been a member of ABC in the Florida chapter for many years and they’re really a great group, and we’ve gotten a lot of benefit from it. One of the big benefits is the economic input that we get. Anirban, thank you again for coming on today.

Anirban: My pleasure.

Paul: Can you tell us a little bit about yourself and what you do with ABC?

Anirban: Sure. I’m an economist, and I happen to serve as ABC’s chief economist. The position of chief economist was outsourced to my consulting firm back in 2008, so we actually serve the chief economist functions for other organizations as well, but ABC is probably our most well-known client. And as I say, I’ve been serving as their chief economist for more than eight years now, which means that I was with ABC during the worst of the construction downturn and I have been around to see the subsequent recovery.

Paul: That 2008 period was not a lot of fun. I don’t ever wanna go through that again.

Anirban: And in fact, the worst years for construction followed 2008. Coming into 2008, many construction firms had significant backlog, and so they worked that backlog down in 2008, and some in 2009 as well. Many firms will tell you that their worst year was, in fact, 2010 or 2011. In fact, nonresidential construction spending hits its cyclical nadir during January of 2011. By that point, the broader economy had been in recovery for well over a year, but nonresidential construction recovery had scarcely begun by that point. And so, we have seen some downs and now we’ve seen some ups.

Paul: Well, we’ve kinda gone crazy since then, haven’t we?

Anirban: Certain segments certainly have gone crazy. You know, there is a lot of office space construction right now in America. There’s a fair amount of health construction-related spending, many hotel rooms under construction in America. We continue to see more spending on educational facilities as well, at least in the last couple of years. There are certainly some categories that have not recovered. Many of those are publicly-financed categories like water and sewer and public safety. Public safety includes elements like police stations, fire stations, the prisons, jails. And the government dollar is stretched pretty thin. Government dollars is increasingly going toward entitlements, and this is true for state and federal governments, and, to a certain extent, local governments as well. And so it’s a mixed bag out there. For all the construction, recovery has been quite soft, but there has been some segments in which recovery has been much more robust.

Paul: Yeah. I’m sitting in down here in South Florida. You know, when I said we went crazy, what I was saying was down here, it was insane how much work came. You know, we were so…I don’t wanna use the word depressed, probably a bad word. But the work was so scant and then, all of a sudden, it started up again and it was like, you know they opened the spigots and it just would not slow down. But now it does seem like it’s slowing down a little bit, so I think we’re…

Anirban: Right. So, you’re right. There were five states that were hit hardest by the real estate and construction downturn. Florida was one of them, along with Georgia, Arizona, Nevada and California. So, I became ABC’s chief economist in 2008, and by that time, Florida was really feeling the sting of the recession that began in December of 2007. And shortly after I became ABC’s chief economist, the Lehman Brothers faltered on September 15th of 2008, and that, of course, is when things got really, very difficult for construction firms across the board. Prior to that, it had really been homebuilders who had suffered. But after that, everyone suffered.

Paul: Yeah. You know, I remember the Lehman Brothers, and when they failed we had a big casino job in Las Vegas that was supposed to get their financing and get started. And the day that Lehman Brothers failed was the day that project got canceled. I don’t think they ever built it. And that was really…for us, we had work, a lot of work like that that was actually, you know, ceased to exist, that what we thought was gonna be happening we were all ready for it, and then it was gone. So, really was pretty abrupt.

Anirban: It can be. When capital dries up like that, and capitalism needs capital to operate, when the capital goes away, so too does the economic activity. Particularly, the large-scale economic activity, the things that are financed, like construction. So, yes. But now, here we are 2017 and, undoubtedly, the bulk of construction firms feel much better about economic life.

Paul: Yeah. I think everybody agrees it definitely feels better now than it did but, you know, those of us who’ve been around for a while know how cyclical things are. And you know, when things are going well, we worry about what the future holds. So, for those of us that are in the construction industry, what are the things that we should be paying attention to with regards to the economy, and trying to probably do the impossible and predict the future?

Anirban: Yeah. There are some leading indicators out there. So, one could put forth the idea that certain construction segments are now in the process of becoming overbuilt. We have added a lot of hotel rooms in recent years, we’ve added a lot of office space in recent years. Actually, despite the ongoing growth of the e-commerce economy, there’s actually been quite a bit of construction of retail space. People who work on the residential side of the industry know how many apartments have been built in metropolitan areas across the country in recent years. And I’m starting to sense that some of these markets are becoming a bit overbuilt, and so what people would wanna look for is evidence of slower rent growth for apartments, for instance, or office space.

I’d then want to see or look for indications of higher vacancy rates, slower net absorption of office space, higher vacancy rates in hotels, meaning a fall in occupancy rates at hotels. Because those types of metrics suggest that supply is beginning to outstrip demand. And when that happens, the performance of commercial properties deteriorates, because rent is not growing as quickly and there’s more vacant hotel rooms, or more vacant office space, so on and so forth. And if, after that period, when it becomes apparent to people that buildings are beginning to underperform, that capital begins to dry up. And what that leads to, ultimately, is fewer new construction starts. We’re not there yet. You know, I am just starting to sense some overbuilding in certain segments and certain geography. But for right now, capital is available, architects are busy, which is a leading indicator, and I think that most construction firms can look forward to a quite active 2017 and 2018, based upon backlog data and general business confidence. But at some point, as you pointed out, a cyclical industry, at some point the cycle will end, and I think we’re starting to see the seeds of the end of the cycle being sown right now.

Paul: Yeah, funny. So, I’m not an economist and I really appreciate the insight, but from where I sit, you know, I look at projects coming across my desk. I do a lot of business development for proposals and what not. And they still are coming across the desk and it’s very interesting because, last year, two years ago, there was a lot of residential condominiums, multifamily, stuff like that, and then it seemed to get more into offices, hotels, retail, mixed-use, that kind of stuff. And that still seems to be coming through. And I just feel I’m so gun-shy from, you know, having been in this industry for 30 years now. I just kinda keep waiting for the…no, no. I guess I probably shouldn’t say the bottom fall-out. That’s what happened last time, and I hope that we don’t have that again.

Anirban: Well, I can imagine that we wouldn’t have that again because, in that case, it came down to the notion that almost everyone’s house was overvalued. And that’s a huge bubble. And that’s very different in terms of order of magnitude, relative to, let’s say, an overbuilt hotel market in New York or an overbuilt condominium market in Miami. You know, these kind of spotty disequilibria. That was, the entire U.S. housing stock is overvalued, and that sets a stage for really tumultuous downturn. I don’t think we have bubbles that large and, therefore, that threatening.

That said, you know, one of the distinguishing characteristics of this economic cycle has been the prevalence of incredibly low-interest rates. And that has many implications, but one of them is that anyone looking for investment yield has been forced into riskier assets to find that yield. Some of that money has ended up in the stock market, of course. We know that the stock market has been hitting record levels recently, whether you measure that in terms of the S&P 500, or to the Nasdaq or the Dow Jones Industrial Average. We know that office buildings have become very valuable, apartment buildings have become very valuable based upon very low capitalization rates. And my very strong sense is that asset prices, in many cases, are elevated relative to economic fundamentals. So, I think there are some bubbles forming out there, but I don’t see a bubble of the magnitude that we saw prior to the Great Recession, which affected the entirety of the U.S. housing market.

Paul: So, with interest rates, you mentioned interest rates are very low right now and I know when we read about it almost every day that, you know, that Fed is starting to try to ease the rates up. Where do you see things going from here with interest rates, and how does that affect the economic picture for the construction industry?

Anirban: Right. So, I expect rates to edge higher over the course of the year. Part of that is due to Federal Reserve policy making. They’re going to raise short-term rates and the market guesses right now that they’ll raise short-term rates. I mean, the Fed funds raised, for instance, three times this year. And so that will have, presumably, some impact on the longer term rates at which we transact, the 5-year loan to prime businesses at that rate, or the 10-year Treasury yield, or the 15 or 30-year fixed mortgage rate. The interest rates at which we transact are likely to rise, but I think fairly gradually, as it turns out. I sense some inflationary pressures building up in the economy. A lot of talk recently about rising apartment rents, of surging health care costs, but the biggie, I think, is wage pressure. It has become very difficult to find good workers, very difficult to find workers at all. And I think that wage pressures are really building up. Part of that is due to some of the minimum wage increases we’ve seen in various markets around the country, but a lot of this is simply demand and supply.

So, if I’m right that inflationary pressures are building in 2017 and 2018, one would expect to see interest rates rising in 2017 and 2018. And you asked the question, “Well, what does that means for construction firms?” That probably softens the construction market because, once rates rise and boring costs rise, it makes it less likely that an individual project’s pro forma will pencil out, and that makes it less likely that that project will move forward. And so, one would expect to see some slowing in construction starts, let’s say, by 2018-2019, given the expectation regarding interest rates.

Paul: How’s economy look overall? What’s it supposed to do in the next couple of years? Is it like in ratio, with the inflationary growth? Or how’s that factor in?

Anirban: You know, last year, the U.S. economy grew just 1.6%, meaning in 2016. It was another disappointing year of growth. The forecast for the current year, 2017, is better. Many forecasters predict that the U.S. economy could grow between 2.5% and 3% this year. That’s probably a good guess, 2.5% to 2.6% is probably a good guess, regarding where the economy will end up but there is a lot of wildcards out there. You know, as of this conversation, we don’t actually have a corporate tax reform package in front of us to consider. We don’t know what reform there is gonna be to the personal income tax code. We don’t know if there’s gonna be an infrastructure-led stimulus package, or a border tax or all kinds of things, what immigration policy will be.

So you know, there’s a lot of uncertainty regarding policy-making. That hasn’t dissuaded equity investors, meaning stock market investors, from driving stock prices higher. There’s a lot of confidence out there regarding where we’re headed in terms of policy-making, but a lot of the policies have yet to be really promulgated and, certainly, none of them have yet been passed into law. So, I think the outlook is pretty good, but there’s a lot of good news already built into asset prices. And the new administration in Washington DC really better deliver on some of these assurances regarding tax reform and other pro-growth elements. Otherwise, we could have a real issue out there with respect to the direction of stock prices, rather asset prices, because as I say, a lot of good news is built into those prices already.

Paul: So, what kinds impact do you see the Trump presidency having on construction, given, you know, as you say, I know they haven’t done anything yet, but given what we’ve heard is possibly coming along?

Anirban: You know, I think that the impact is positive in the short-term and unknowable in the long-term. So, here’s what I mean. You know, even before the inauguration in January of 2017, the Architecture Billings Index, which is a favorite leading indicator of commercial construction, surged in December, the month after the election. Architects got busier. And the notion is that if architects get busier upstream, construction firms get busier, eventually, downstream, that first projects are planned and then they are built. And architects, of course, are part of the planning phase. And the data seemed to indicate that architects right now are very busy. That means a lot of planning is taking place. And that, since the election took place on November 8, architects have become significantly busier. So, that’s very good news and it speaks, I think, to the broader issue of growing business confidence in America.

And this is true not just among real estate developers, for instance, this is true among businesses generally. We’ve seen a pickup in hiring recently. We’ve seen a pickup in investment that takes the form of equipment purchases or software purchases recently. Businesses are responding to the new environment and the presumed policy-making to take place. So, in the near-term, it seems to me that the Trump presidency is quite good for construction volume. And by near-term, I mean 2017 and 2018. And this would be particularly true if an infrastructure-led stimulus package is passed, because this would be very good news for road builders and other folks who work on infrastructure-related projects, obviously. But then the longer term outlook is fuzzier. So, the nation is a few weeks away from a \$20 trillion national debt. What will be the impact of proposed tax cuts on the national debt? What will be the impact of increased defense spending on the national debt? Or of the repeal and replacement of Obamacare on the national debt? These things are unknown. What will the effect be of the new administration’s immigration policies? There is some talk that some of the visa programs will be adjusted, whether the H-1B visa program, H-2B, J-1, so on and so forth. And so, if fewer immigrants are allowed to come to America, including to work, what does that mean for the longer term outlook for the economy? So, there’s a lot going on here. Obviously, trade policy makes a difference too, if one presumes that, if there’s a border tax, that this will raise the price of imports and this could spark some inflationary pressures. A lot of wild cards are from the long-term perspective but what we can see right now is the short-term, and the short-term looks quite benign from a construction firm perspective.

Paul: Yeah. So, we’ve been through this period before the last election, I think, on the government side of stagnation, that they were deadlocked and they couldn’t get anything going. Now, obviously, it looks like there could be a lot of changes and, as you say, it’s creating uncertainty. I guess, the overall, from what you’re saying, the overall feeling is that there may be some helpful things coming on the horizon?

Anirban: Well, I think that that’s right. You know, you bring up a very good point. A lot of people will look back on November 8 and say that the biggest surprise was Donald Trump’s victory over Hillary Clinton, and maybe that’s true. But I think also surprising was the fact that the Republicans maintained control of the Senate, because there were a lot of predictions suggesting that that wasn’t gonna happen. That a particular Senator in Wisconsin, who is a Republican, was gonna lose his race. And the same was true of Pennsylvania, and so on and so forth. But the Republicans kept more seats than people thought. And so, not only does Donald J. Trump win the presidency, but he has a Republican House of Representatives and the Republican Senate, and so the notion is that we don’t have stagnation anymore. We don’t have divided governments anymore, and that really meaningful things that can get done. And that includes corporate tax reform and trying to re-shore offshore profits, and an infrastructure-led stimulus package, and personal income tax reform, and immigration reform, and so on and so forth, and that by and large, these things are pro-business. Things like deregulation of the banking sector, at least to an extent, deregulation of the energy sector, at least to an extent, the reform of labor laws.

And of course, many construction firms, among other firms, have complained about onerous labor-oriented regulations. Well, some of that regime is likely to be torn down and, all things being equal, that’s quite pro-business, that allows firms to save costs and enures to the benefit of the bottom line. And if firms are more confident about their financial future, they’re likely to invest more today, and we’ve already, actually begun to be that in some of the data.

Paul: You were talking about the architects are busy, and it makes total sense, so the architects are going now, then it should, in theory, trickle into the builders building later. Have we had periods where architects get busy, but then they never build it? Can we count on that or do we still need to be cautious?

Anirban: No. We always need to be cautious. So, you know, architects were busy coming into 2007. You know, asset prices were still rising then, the stock market peaked on October 9th of 2007. But two months later, we were in recession. And capital starts to dry up during the early stage of the recession and then, of course, we enter the financial crisis of September 2008. But up until that point, architects had been quite busy, and then the market changed very quickly. And so if your question is, “Could that happen again?” the answer is, of course. The market is a fickle. Right now, the market feels very good about the near-term future. The notion is that the U.S. economy is going to grow more quickly. There’s actually indications that the global economy is starting to improve as well, and that enures to the benefit of corporate earnings. That, of course, has been one of the reasons that the stock market has done so well during the early weeks of the Trump presidency, the feeling that corporate earnings growth is going to accelerate because overall economic growth is set to accelerate.

So, right now ,that’s what the market believes. And for a time, at least, it could be a self-fulfilling prophecy. If businesses expect things to get better, they will, because they’re gonna hire people and they’re going to invest in Main Street economies and things are gonna get better. But the question becomes, what is the rate of return on that investment? And so, a good example is what happened a decade ago, many people were building homes. And for a time, it seemed like a very good thing to do, to build really wonderful, beautiful homes, whether condominiums in South Beach or homes in Riverside, California. And then the market changed its mind and determined that these homes are overvalued, that the paper that is supported by the price of these homes is not worth that much, and that the insurance that’s been written against that paper, on that paper, is not worth much either and the financial crisis begins. So, yes, things can change quickly. But I think for right now, if we’re talking about 2017, we’re in pretty good shape.

Paul: Doesn’t seem like we’re…I mean, things are different now, obviously. I look at the way, for instance, luxury condominiums are financed and they’re taking a lot more money from the owners along the way, rather than 10% down and run away. And you have these empty buildings which I thought would never get flipped, but they did, actually. So it’s amazing, the resiliency that happened after all that.

Anirban: That’s a very good point. You’ve made a couple of very good points. One, of course, is that lending standards are more disciplined than they were a decade ago. You don’t hear that much about no-document loans anymore and, you know, people are having to put down larger down payments when they buy property. And the other, or the flip side of that, is that the banking system is much better capitalized than it was in 2007, 2008. You might remember that, even before the failure of Lehman Brothers, Bear Stearns, another major New York investment bank, got into financial trouble. They were excessively leveraged. Eventually, they were acquired by another firm and so the crisis was averted, but no one acquired Lehman Brothers. Lehman Brothers was allowed to fail on September 15th of 2008, and the rest is history. The full-blown financial crisis was born. It was a global financial crisis. But today, when we look at the large banks, they seem to be in much better shape from a capitalization perspective. Their balance sheets are not nearly as toxic. And that’s one of the reasons to think that when there is another downturn, and there will be another downturn at some point, it won’t be nearly as severe as the 2007 to 2009 episode.

Paul: Be softer.

Anirban: Probably a bit softer.

Paul: Yeah. That’s a good thing. from where those of us in the construction business sit. You had mentioned the infrastructure stimulus as being one of the things that has been discussed and may be coming along, so what are the construction segments going forward that appear right now or look to have the best possibilities for growth going forward?

Anirban: So I mean, I think one of the things upon which the president has focused is manufacturing. And I think that there will be some fairly meaningful growth in manufacturing-related construction in 2017. I think we’ve heard about the, you know, high-profile occurrences at Carrier and Ford, and so on and so forth but I think, in general, we will see more investment in factories and equipment in 2017. So that, I think, is one of the categories that to turn around, you know, we’ll continue to see a fair amount of investment in office space and hotels, and in retail space. The capital is out there. One of the things that owners and operators of malls are coming to realize is that they really cannot compete with Amazon in terms of merchandise. So, the only way to really compete with Amazon is the experience, and to improve the customers’ experience means having to invest in brick and mortar. And we’ve seen that, and I think we’ll continue to see that.

One segment in which we might not see much progress is healthcare-related construction. Obviously, there’s a lot of uncertainty regarding where we’re headed in terms of healthcare financing, what the replacement for Obamacare might look like. Will there be a replacement for Obamacare? What will this mean for hospital finances? And I can imagine that many major medical systems will put projects on hold until some of this is sorted out.

And then, as the final point. Absent in an infrastructural-led stimulus package, I think public constructional will continue to be soft. You know, many states are dealing with underfunded pensions. A lot of money at the state levels is going toward Medicaid expenditures, and therefore being deflected away from investment in infrastructure, again, whether it’s roads and bridges, or public safety, or water and sewer systems. And I think that that is likely to remain a weak spot, unless the Trump administration is successful in crafting an infrastructure-led stimulus package that actually passes Congress.

Paul: So we talk about…I was just reading, actually, in the paper within the last week or so, that I’ve heard a word that I haven’t seen much lately, Inflation. What’s the outlook with that, going forward?

Anirban: Yeah. I the inflationary pressures, right now, are fairly well-contained but that inflationary pressures are building. You know, healthcare costs, apartment rents, home prices are rising, of course. All things being equal, that means higher mortgage payments for those who ultimately end up buying a home. And then the biggie is wages. You know, the official unemployment rate indicates that the nation’s unemployment is below 5%. I know a lot of people look with skepticism regarding those types of numbers, but most businesses will agree that it is really difficult right now to find skilled workers. That the recovery has lasted long enough now, that virtually all of the skilled workers have been soaked up, that a lot of people looking for work right now aren’t suitably skilled, at least not for jobs in construction. And that implies that construction compensation costs are headed higher, and that’s true for many industries. That’s true for retailers, that’s true for manufacturers, that’s true for people in logistics. So, as I say, inflationary pressures are building. Things are getting more expensive more rapidly, and that’s consistent with higher interest rates and it also might, ultimately, put some pressure on asset values. Right now, again, with the stock market setting record levels, obviously the stock market is not right now fixated on inflationary pressures. It’s an afterthought. But as an economist, I can see that these pressures are beginning to build and, eventually, that’s going to make its impact felt in financial markets and in other ways.

Paul: You know, it’s funny. So, what you’re saying really resonates for me personally, because my business, on the wage side of things and the employment side of things, we are understaffed right now. And we are having a tremendous difficulty finding, you know, we like to say we like to hire A players. So we’re having a tremendous difficulty finding, you know, good fits for company and it’s because everybody so busy. And of course, you know, one way to get through that is to spend a little more money, and we’re happy to do that. But even with that, the costs on the wage side for us in the construction business are up, and everybody I talk to concurs that we’ve gotten to the point where we started out where people, anybody, you know, you had people that were overqualified taking jobs just to be employed. And now it’s gone full circle that we’re really, really having difficulty filling positions with qualified people.

Anirban: And the same is true in auto repair and in truck driving, and there’s not enough machinists, there’s not enough welders. I mean, as I say, obviously, there are many construction occupation categories implicated by this skill shortfall, but it’s hardly just construction. And ultimately, what this translates into is inflation. And if cities like Seattle or other cities say that the minimum wage worker is gonna make, ultimately, \$15 an hour, well, that means that the coffee you get in the morning is more expensive, and other things, the haircuts, and so on and so forth. It all feeds into inflation, and so the inflationary pressures are building. As I say, right now the financial markets don’t seem to be taking this into consideration very much. They are much more excited about the notion that the economy is going to grow faster, and therefore earnings are likely to also grow faster. But at some point, these inflation pressures become significant enough that the markets have to take note. And maybe that’s not a 2017 phenomenon, but it would not surprise me if we’re not talking much more about inflation in 2018 and 2019.

Paul: So, how do we keep up with all this? You know, for those of us who are not economists, I have to tell you, if you can read the news every day you would just be scared to death. Everything that’s there, I call it the bad news. But how do we get good information? I know that you put out and I’m big fan of the information that comes through ABC, but how do we keep up with economic developments and try to really get a feel for things, going forward?

Anirban: Well, a couple of things there. One, you mentioned the media, and you’re right. I mean, if you watch some of the news channels, I shouldn’t mention any but let’s say CNN, or MSNBC or whatever channels people watch, it’s pretty easy to get nervous very quickly and to think that we’re in the midst of pure dysfunction. But if you watch CNBC and watch the stock market rising to new heights, you say, “My goodness, everything is great.” So one thing, of course, is to diversify one’s source of news. And for folks who only watch one source of news, that’s probably not enough, particularly given the biases of certain news channels these days.

So how do you…you know, your question is, though. bigger than that. It’s how do we monitor these things? There are so many leading indicators out there. Some of my favorite leading indices include the Conference Board, index of leading economic indicators. The Conference Board is a private organization in New York, very solid, leading indicator, 10 components. People who are really interested in the direction of the economy should study those 10 components. The data typically come out on a monthly basis. Look at the data. The Architecture Billings Index we’ve we’ve talked about, is another wonderful leading indicator and that’s specific to the construction industry. The stock market itself can be fairly good indicator of sentiment. And of course, there’s also surveys of business confidence like the National Federation of Independent Businesses, survey of small businesses or the consumer confidence index, if people are wondering about consumer sentiment. I think all of these things are valuable, but not one measure is going to bring you home. You have to look at all these measures together and then juxtapose that against the performance of one’s own firm.

I know a lot of construction firms get nervous if business doesn’t come rolling in for a couple of weeks, and then they wonder, “Is that just us or is that happening to everyone?” I mean, you know, if one looks at the macroeconomic indicators that we’ve talked about, and there’s many others, the Baltic Dry Index, it goes on and on and on. The Federal Reserve produces many reports, including the Beige Book report. People should read those because they give you a sense of what the monetary policy makers in our country are thinking, and they’re at the cutting edge of thinking about the economy. It’s a lot sources of information. It takes time to read it all. I would not fixate so much on the television news, because people will have panic attacks if they do that. Better to look at the raw data and to make one’s own judgment.

Paul: Yeah. I’m smiling as you’re saying, panic attacks because, truly, I call it the bad news. Obviously, their job is to get ratings and I guess that’s effective. The indicators, you know, I think it’s really powerful information to pay attention to what, I guess, unbiased information. I kept hearing you say the word a lot today, confidence. And that’s got a lot do with it, doesn’t it? Just mindset and how people feel about things?

Anirban: Oh, there’s no question about it. You know, we economists have a tough time trying to quantify the effects of what we would call animal spirit, but the fact of the matter is economic decisions are often very emotional. And when a business person is deciding to move forward with a particular investment, or to buy a new vehicle for their business or whatever it happens to be, there is a part of that decision that’s rational and there’s a part of that decision that’s just their gut. And right now, their gut, in many cases, is telling them that things are gonna get better and they should go ahead and buy that vehicle because they’re gonna need it, because they’re gonna get work. And if they don’t have that vehicle, they’re not gonna be able to bid for that work. Or if they don’t hire those workers, they’re not gonna be able to bid for that work. And there’s gonna be a lot of bidding opportunities, that’s the feeling out there.

And you know, you point out yourself, it’s hard to find good workers, you’re looking for A players. And then the question becomes, “Well, my goodness, if I’m looking for A players, those A players probably work for my competitors right now. So, how much do I have to pay those A players to bring them onto my team and keep them on my team? Or do I change the business model and accept some B and C players?” Which, of course, can cost the firm in different ways. It’s a tough world out there. Even when the economy is good, it’s tough. It’s just that the challenges on a good economy are different from the challenges on the bad economy. And in general, people would like to deal with the challenges of a good economy, and that’s where we are. So yeah, confidence plays a big role. Right now, those animal spirits are at work, consumers are confident, businesses are confident, investors are wildly confident, and so it speaks to a 2017 that’s probably gonna be quite good.

Paul: That’s what we like to hear. So, Anirban, thank you so much for coming on. It’s really, really interesting and I know it’s big interest area for our listeners. Now, obviously, if the listeners wanna keep up with you and what you’re doing, I know, obviously, joining ABC is a great way to do that. Are there any other areas that they can follow you?

Anirban: Well, they can come just to abc.org and look at the website. And we, at least three times a month, post new information about the construction economy. Sometimes, we talk about investments, meaning, you know, construction starts, and how much money is being spent on putting construction into place. Sometimes, we talk about construction employment. We talk about materials prices, whether the price of natural gas, or oil, or iron ore or copper. And so we try to be comprehensive in our coverage of construction. And if they go to abc.org, they’ll see some of our ongoing writing there.

Paul: Great. Well, again, thank you very much for coming onto the podcast. It was really interesting.

Anirban: It was a privilege to be with you today. Thank you.

Paul: Okay. So thank you, everyone, for listening to The Everything Building Envelope podcast. I wanna remind that we have a newsletter, and if you’d like to get The Everything Building Envelope newsletter please text the word building envelope to 22828. Again, building envelope to 22828. And until next time, this is Paul Beers saying, “So long.”

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