I wrote about the most recent Black Swan event in this and our sister publication in the spring of 2020. I first wrote about the fear that was gripping Milan, Italy, as ground zero in the West for the rapidly spreading COVID-19 pandemic, and I worried about how rapidly and how far it could spread. As we know, it turned out to be a global catastrophe that brought the entire world to its knees.
That’s what Black Swan events are. The theory refers to unexpected events of large magnitude and consequence, and their dominant role in history, coupled with their complete unpredictability and the rapid nature in which they grab sentiment by the throat.
I had no idea we would witness what occurred in the two years hence. But as we know, the world got back to normal a couple of years later after more than 7 million deaths to date worldwide. Other Black Swan events have included 9/11 and the financial and emotional impact it had on America, an attack that mirrored Pearl Harbor in terms of the strike on American sentiment. There is also the Great Recession of 2008-09 that really dragged on for years in term on impact on the aggregates industry.
And now, a new Black Swan event has rocked me back on my heels and causes me to substantially revisit the optimism I have espoused about our industry for the last few years.
Washington. Putting politics aside, as there is no place for that in our objective evaluation of the health of the construction economy, there are too many arrows pointing to a sudden and unexpected slowdown in the economy based on the research and metrics we follow, all of which indicate a precipitous fall, or contraction, in sentiment and the resultant metrics that point to tougher times ahead.
For the first time in years, the tight labor market has all but disappeared. U.S. construction measured 236,000 open, unfilled jobs on the last day of January, a 42% drop from the same month in 2024, according to data from the Bureau of Labor Statistics. The monthly report measures jobs for which employers are actively hiring. Though January job openings were up 15% from the end of December, the general decrease in openings in recent months has indicated a trend of uncertainty.
The continued decline in job openings suggests that while demand for workers remains, contractors are becoming more cautious about hiring amid uncertainty about tariffs, project pipelines and future economic conditions.
Another economic measure, retail sales, shocked economists by rising 0.2% in February from the prior month, up from January’s downwardly revised 1.2% decline. That was much lower than the 0.7% increase economists projected, fully one-third of what was predicted.
Retailers credit this contraction to the administration’s trade spat with America’s biggest trading partners that has spurred high levels of uncertainty among consumers and businesses. That skittishness has been evident across many consumer surveys, and now shoppers seem to be adjusting their purchasing behavior accordingly.
Consumer Sentiment. But the biggest indicator of all is my favorite metric, which is consumer sentiment, as it drives 70% of GDP. In an astounding continuation of a trend that has be evident for months now, consumer sentiment in the United States sank much further in March, as worries intensify over what the tariffs, government layoffs, funding cuts and immigration restrictions that the administration has introduced might mean for the economy.
The University of Michigan’s closely watched index of consumer sentiment nosedived another 11% to 57.9 in mid-March from 64.7 last month, continuing a downward trend that has taken hold since Trump took office. That marked the lowest level since November 2022, and was much weaker than the 63.2 that economists polled by The Wall Street Journal expected.
Compared with a year earlier, consumer sentiment is down 27%. One prominent economist labeled the report “horrific” adding that elevated economic policy uncertainty and the sharp drop in stock prices have greatly undermined consumers’ confidence.
This clearly falls into the category of a Black Swan event. In a matter of weeks, a previously strong economy has had the brakes jammed on it, and we worry about the impact it will have on construction over the next few years.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers and acquisitions. He has a career spanning almost five decades, and volunteers his time to educate the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on X @allenvillere.