Despite the ongoing de-escalation in the ECI, Hoyt said it remains healthy enough to support consumer spending, as does the expected increase in the nation’s total personal income level, an important driver of business activity. Like the ECI, it is expected to follow a familiar 2025 trendline: a healthy increase despite de-escalation. “Mainly because of slower job growth, we have the increase in wage and salary income slowing to 4.7 percent in 2025, compared to our expectation of 6.6 percent for 2024, and 5.4 percent for 2023,” said Hoyt.
Maybe it’s a looser labor market, but employers are in no hurry to trim their employee rosters. “Employers want to maintain their ability to jump on the growth side once the economy rebounds a little,” said Hoyt. “So employment levels have held fairly steady.”
Many economists peg an unemployment rate of 3.5 percent to 4.5 percent as the “sweet spot” that balances the dual
risks of inflationary wage escalation and economic recession.
Housing Rebounds
Economists expect healthy growth in housing activity, a mighty driver for the economy. “We forecast housing starts to increase by 6.2 percent in 2025, after falling by 4.7 percent in 2024 and declining 8.4 percent in 2023,” said Yaros.
Why the rebound? A decline in the cost of money and a concomitant loosening of credit standards. “Lower mortgage rates should help the single-family home market,” said Conerly. “It will be a little less painful for people with 3 percent or 4 percent mortgages to give them up, sell their current houses and move up.”
Lower interest rates should also re-invigorate commercial construction activity—a sector that has been underperforming. “Te non-residential side has a kind of bad reputation right now, especially when people think of downtown office or downtown retail,” said Conerly. “But office and retail are doing okay in many suburban areas. And a lot of the retail sector has been under-built. People thought we were totally abandoning going to the store, and it turns out we're not.”
However, many areas of the country may continue to experience lackluster activity when it comes to multifamily residential, hotel, and office construction. A change in fortune will not happen overnight. “With lower interest rates, there'll be an easier time lining up project financing at acceptable cost,” said Anirban Basu, Chairman & CEO
58
of Sage Policy Group (
sagepolicy.com). “But these things take time. We might see some softness in a meaningful fraction of contractors in 2025. And then perhaps things get a bit better in 2026 as these lower interest rates prompt more activity.”
One sector that will do well out of the gate: large- scale infrastructure projects, computer chip and battery manufacturing plants, and data centers. “Tis is the era of the megaproject,” said Basu. “Future prospects are quite positive for contractors who are able to participate in major public works.” Much of this is driven by the re-emergence of industrial policymaking in America, an economic transformation that has led to programs such as the Inflation Reduction Act, the Chips and Science Act, and the Infrastructure Investment and Jobs Act.
All told, while economists expect lower interest rates to fuel a positive turn in business sentiment, they are hedging their bets for 2025. “We look for business investment to rise 4.1 percent in 2024 and 4.1 percent in 2025, compared to 6.0 percent in 2023,” said Yaros.
Supply Chains
Businesses in all sectors will benefit from a national commitment to reposition supply chains in the United States. “Logistical issues are persuading many CEOs to place production closer to final consumers,” said Basu. “Tere is also a trend toward favoring nations that provide significant protection for intellectual property.”
Relief from delivery disruptions can’t come soon enough for many operations. “Supply chain issues are still present,” said Palisin. “We are seeing shortages around semiconductor chips and some other technological products, as well as chemicals, equipment assemblies, and metal parts. Tat’s causing production delays and late deliveries.”
Palisin cites a number of causes for supply chain issues. Over the past year, the nation has lacked sufficient skilled workers to meet production demands. And in an environment of high interest rates and slowing growth, companies did not invest as much as required in new facilities. “As for the semiconductor situation specifically, there's this huge demand coming up against a shortfall in global supply,” said Palisin.
While the U.S. is committed to the reshoring of production, the task of increasing domestic manufacturing and delivery systems will take time. “We are not going to turn things around right away,” said Palisin.
The Road Ahead
Te incoming Trump administration promises tax relief measures that should help bolster profits. Economists warn, however, that increased tariffs may reignite inflation and increase the cost of goods sold. Tey advise keeping a close watch on the following areas in the opening months of 2025:
TPI Turf News January/February 2025
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