Navigating Economic Uncertainty in the Construction Industry: How to Prepare for a Possible Recession

The construction industry is facing an uncertain future as interest rates and inflation dominate the news and the possibility of a recession looms. As the industry adapts to these challenges, many professionals are left wondering: are we headed towards a recession, and if so, what does that mean for the future of the construction industry?

Often these are the questions that many of us in the construction industry have been asking ourselves recently.

Recession and the Construction Industry:

It's important to understand that a recession is a normal part of the economic cycle. It occurs when there is a significant drop-in economic activity, such as a decrease in gross domestic product (GDP) or a rise in unemployment. This can happen for a variety of reasons, such as a decrease in consumer spending or a drop in business investment.

While it's true that interest rates and inflation can be indicators of an impending recession, it's important to note that they are not the only factors to consider. Factors such as political instability (e.g. China Zero-Covid/Ukraine war), natural disasters (e.g. 2022 drought in Africa), and changes in government policies (e.g. interest rate hike to tame inflation) can also play a role. In addition, it's worth noting that the construction industry can be particularly sensitive to changes in the economy. This is because construction projects are often large and expensive, and they require a significant amount of planning and financing. As a result, developers and builders may be hesitant to start new projects if they feel that there is too much uncertainty in the economy.

In the construction industry specifically, we've noticed a slowdown in activity. Developers are hesitant to start new projects due to rising interest rates, which has led to a shortage of manpower and materials, as well as delays in construction. This has also led to unemployment in the construction management industry, with companies having to downsize or lay off employees to survive. It's difficult to say how long this situation will last, but we can easily prepare ourselves.

Damage Control:

The question is, how can we prepare for a potential recession? The key is to have a plan in place in case of job loss, and here are some suggestions:

• Diversify Your Skill set:

o It's always a good idea to have different skills that you can offer to different employers or different type of projects. This will make you more marketable if the sector you are currently in becomes stagnant, you can pivot to another sector that's still thriving.

• Keep your job search tools up to date:

o Make sure your resume and cover letter are polished and ready to go when job opportunities arise. You can seek professional help from recruitment agencies for no cost.

• Invest in your education and skills:

o Take advantage of training and development opportunities to increase your skills and set yourself apart from the competition.

• Network and explore new opportunities:

o Reach out to industry contacts and attend events to stay informed of new job opportunities. Consider looking for opportunities outside of your current location, a recession in one area may not mean a recession in another.

Control What You Can:

• It's important to remember that we can't control everything, but there are steps we can take to mitigate the impact of a possible recession. The best thing we can do is to prepare and plan for the worst-case scenario, stay informed about the housing market and economic news, and maintain a positive attitude. As the philosopher Epictetus once said: "The only thing we can control in life is our attitude toward what happens to us."

The Resilience of the Construction Industry:

While the construction industry was hit hard during the 2008 housing bubble crisis, it has shown its resilience in the face of the COVID-19 pandemic. Despite the challenges presented by the pandemic, unemployment rates have remained low, with the US at 3.7% and Canada at 4.6% as of 2022. Although the current situation is different from the 2008 recession, keeping ourselves informed and being prepared are crucial.

Looking Forward:

The construction industry is facing economic uncertainty, but with a plan in place, a focus on education and skill development, and a positive attitude, we can navigate these challenges and come out on the other side even stronger. As professionals in the industry, it's important to stay informed and adapt to change, in order to secure a bright future for ourselves and the industry.