Impacts of Economic Disruptors on the U.S. Transportation Infrastructure Market

Fiscal and monetary policymakers responding to the COVID-19 pandemic in 2020 ‘over-did it,’ by spending too much and providing too much liquidity. But ‘the ship is being turned,’ said David Wilcox, director of U.S. economic research at Bloomberg Economics and senior fellow at the Peterson Institute for International Economics.

At the Federal Issues Program on May 16, both Wilcox and ARTBA Chief Economist Alison Black painted a cautiously optimistic future for the transportation construction sector, despite price increases ‘across the board’ that have driven project costs up anywhere from 10 percent to 15 percent, on average, Black said.

Both economists say recession is a real risk if the Federal Reserve hikes interest rates too much, too quickly. Black noted that COVID relief funds have helped state budgets and transportation programs over the last year.

Moreover, funding from the IIJA is starting to have an impact. State and local government transportation contract awards are up 36 percent in the first quarter compared to last year. ‘This money is getting into the pipeline,’ she said.

The Fed’s balancing act of taming inflation and engineering an economic ‘soft landing’ is like the challenge pilots face guiding a plane onto an aircraft carrier bobbing about in the sea, Wilcox said. ‘The ocean doesn’t offer much cooperation,’ he said, adding, ‘I haven’t given up hope. But buckle your seat belts.’

–John Schneidawind

(PHOTO: Black and Wilcox.)