U.S. construction starts in 2015 increased 11 percent over the prior year, but the growth rate for 2016 is expected to come in at one percent. Forecasts prepared prior to November’s election suggested a five percent increase for 2017 (Source: 2016 and 2017 Dodge Construction Outlooks). Depending on the segment of the industry in which your company operates, your experience may be higher or lower than these broad industry figures.

There has been much speculation in the weeks since the election about what impact, if any, the election of Donald Trump will have on the economic outlook for the construction industry for 2017 and beyond. Here are a few thoughts based on President-elect Trump’s early proposals.

Investment in Infrastructure

Trump has proposed up to $550 billion in federal funds to be invested over a five-year period in infrastructure projects involving roads, airports, and utilities. Incentives offered for additional private investments could raise the total funding to $1 trillion.

Changes in Regulatory Climate

Segments of the construction industry not directly impacted by infrastructure investment could benefit from promises to reduce federal regulations, which may take pressure off high building costs arising from current regulations.

Ripple Impact of Tax Reform

Trump’s proposed tax reform initiatives include:

  • A reduction of the tax rate on business profit to 15 percent,
  • A reduction of the top personal tax bracket rate to 33 percent,
  • Elimination of the alternative minimum tax,
  • A repeal of the estate tax, and
  • Other measures intended to lower the tax burden on businesses and individuals.

Funds resulting from tax savings presumably will flow to some degree into a higher rate of investments that could ultimately lead to enhancements in the commercial, industrial, and housing segments of the construction industry.

Immigration Measures’ Potential Impact on Labor Supply

During the campaign, Trump promised to materially reduce the number of undocumented individuals living in the U.S. Undocumented construction workers make up a significant component of the construction workforce. Initially, deportation policies are likely to focus on criminal and homeland security concerns, and therefore won’t immediately create adverse pressures on labor supply or cost.

Legislative Process

To portray the logistics of the legislative process over the past few years in a negative manner will probably not draw much debate. President-elect Trump will have a Republican-controlled House and Senate for at least the next two years which, in theory, should lead to fewer stalemates. However, there are some fundamental differences of opinion between elements of the party leadership and his proposals, so there will likely be some level of compromise required.

Michael R. Viens can be reached at Email or 215.441.4600.

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