By Rayan Saad of CBIZ

The economy was one of the most critical issues for voters in last year’s presidential election. In general, inflation and economic struggles have affected every household in the United States over the last five years, starting with the COVID-19 pandemic in 2020 and ending where we are today, with high prices that have stabilized after increasing rapidly. We will not point fingers at what or who caused these economic conditions in this article, as it was a combination of several factors and variables. Instead, we will be talking about 2025 and how the economy in general, and the construction industry specifically, may be impacted going forward as a result of the new administration’s policies.

Undoubtedly, confidence and optimism are in the atmosphere surrounding the economy and the construction industry post-election. Based on strong economic data from the last quarter, the economy is strong and heading in the right direction as the U.S. expanded at a 3.1 percent rate in the third quarter of 2024. According to the U.S. Census Bureau, construction spending in the United States in November 2024 stood at a seasonally adjusted annual rate of $2,152.6 billion. The November figure reflected a 3% increase compared to November 2023. Private construction spending reached $1,650.7 billion, which is 0.1% above the revised October figure of $1,649.8 billion. On the other hand, public construction spending reached $501.9 billion, which is 0.1% below the October figure of $502.5 billion.

Like other sectors, the construction industry will be impacted by the new administration’s policies, assuming those policies follow similar patterns to President Donald Trump’s previous administration. The following list features certain key policies that the administration may pursue and details their potential effects — both positive and negative — on the industry:

•    Tax Policies: If the president continues to advocate for corporate tax cuts like the Tax Cuts and Jobs Act of 2017, construction companies could benefit from reduced tax liabilities, potentially allowing for increased investment in new projects and hiring. On the other hand, lower individual taxes might lead to higher disposable incomes and increased demand for residential construction.

•    Infrastructure Spending: Trump has shown a strong interest in boosting infrastructure spending. Increased government investment in infrastructure projects (e.g., roads, bridges, airports) can lead to a surge in construction activity.

•    Regulatory Environment: Trump’s previous administration was known for its deregulation efforts, particularly in the environmental and labor sectors. Continued deregulation could reduce compliance costs for construction firms, potentially speeding up project timelines and reducing expenses. In addition, streamlined permitting processes could lead to faster project approvals and commencements. Trump also supported energy policies that favor fossil fuels, which may reduce the focus on green energy projects.

•    Economic Growth: The new administration’s goal is to lower interest rates, which will affect the cost of borrowing for construction projects, making it cheaper to finance large projects and potentially speeding up growth.  However, the Federal Reserve’s interest rate rises were intended to control inflation. In the near future, this trend may continue if inflation remains a concern, but it could also stabilize if inflation rates normalize.

•    Trade Policies: Tariffs on imported materials like steel and aluminum could impact the cost of construction materials. Higher material costs could increase overall project costs and affect profit margins. Tariffs and trade disputes might lead to supply chain disruptions, affecting the timely availability of construction materials.

•    Labor Market: Strict immigration policies could impact the availability of labor in the construction industry, leading to potential labor shortages and increased labor costs. The construction industry relies heavily on immigrant labor, and restrictions could worsen labor market tightness. Labor shortages may drive up wages, impacting project budgets and timelines.

Ultimately, the economy is heading in the right direction, and many industry experts are optimistic and looking forward to a better year ahead. A second Trump term will bring changes to the construction industry, affecting taxes, regulation, trade policies, and the labor market. We expect 2025 to bring many opportunities and challenges to the construction industry, but the chances for growth are great.

Rayan Saad is a supervisor in CBIZ’s New Haven, Connecticut office. He has more than 10 years of experience in providing comprehensive accounting services to closely held businesses and their owners. Rayan’s skillset includes financial statement preparation and review, income tax preparation and compliance, and income tax planning and consulting.

He serves clients in a variety of different industries, including professional services, food & beverage, technology, manufacturing, real estate and long-term facilities. He can be reached at rayan.saad@cbiz.com or 203.781.9668.