In every economy, people look to a few numbers which sum up the direction of the economy. For example, the average age to buy a new home is 40 years of age. (it has taken the average person working for 20 years to afford the down payment on the house and enough credit to furnish the house). This can be a good thing, but when housing and its expenses allows for many indirect jobs, it would be a factor in a slowing economy.

In an article by Sydney Ember of the New York Times News Service, President Trump’s policies while they might be effective in the long-term are having a detrimental effect on the construction industry.

Tony Rader, the chief relationship officer at National Roofing Partners, a commercial roofing company in Coppell, Texas says it just seems like every time we turn around, we have something else to fight.

Tariffs have pushed up prices of many parts that go into home building such as screws, plates and other supplies.

The tariffs are on a wide-ranging products and while they are meant to encourage more domestic manufacturing, this has not been the case. The complicated nature of supply chains means that it will take time for companies that buy materials from abroad to shift gears. It is also unclear whether foreign suppliers, American companies or consumers will shoulder the extra costs and how much prices will rise from consumers? (in your community do you see manufacturers setting up shop to build in America?)

This year, the National Association of Home Builders estimated tariffs would inflate the cost of building a typical home by $10,900. Prices on construction materials are up 2.3% from a year earlier according to the Bureau of Labor Statistics. Iron and steel prices are up 9.2%, copper wire and cable are up 13.8%.

In terms of people to build the construction projects, it is estimated that the workers living illegally in the US make up 13% of the construction industry in 2022. Construction projected demand is the need for 500,000 construction workers. The industry unemployment rate is 3.2% a record low.

Selma Hepp, chief economist at Cotality, a real estate data provider, says we already seen some challenges both in terms in the terms of cost of materials being driven higher and now the labor shortages being exacerbated by deportation policies. I think we have not seen the worst of it yet.

In terms of spinoffs of construction, trucks are needed to move supplies, according to the National Trucking Association, shipping of supplies are down 30%. The trucking industry employs 30 million people versus the 2 million in the build out of the AI data centers. At the moment, less truckers are working.

President Trump might have a good idea, but good ideas need implementation and often government assistance to bridge the gap. If most of the supply system is based on lower prices, if a company sets up shop in America at what point will they match the price point? Given the government is trying to spend less, why would they help businesses more?

Linking to dividend paying stocks, often times with government they have reasonable ideas but governments send conflicting messages. For example, we want aluminum to be made in the US, but what is the biggest cost to making aluminum – very inexpensive electricity. In the US due to demand for AI data centers, electricity prices are going up. Fortunately, most dividend paying stocks have the ability to make profits through each economic cycle and the ability to ensure government policies are the correct one for them.

There are more questions than answers, till the next time – to raising questions.