Contractor Backlogs Slip in December and Over 2024

A healthy backlog of work is a sign of confidence for contractors. More work lined up allows contractors to make strategic hires and buy equipment knowing those investments will be used. It also allows gives contractors pricing power over additional work, meaning if they already have a lot of work, they will opt to take on additional work at higher fees. Of course, the converse is also true. Lower backlogs create anxiety, reduce forward-looking investments, and lead to pursuing work with lower fees to be more competitive. 
Contractor backlogs, measured by the Associated Builders and Contractors as months of work under contract but not yet completed, were down fractionally from November to December 2024 and down over the the preceding 12 months. This should not induce panic, as the overall industry backlogs are close to the 71-month average (currently sitting at 8.3 month's worth of work versus a 8.5-month average over the past 71 months). However, they down substantially from a monthly peak of 9.5 in March 2019 (or a quarterly max of 9.9 months in Q2 2018 (prior to 2019, only quarterly data was collected). 

The devil, of course, is in the details. Some sectors, regions and contractors sizes were up while others were down. The table below parses the information into subcategories. Infrastructure and the western states had a good year, while firms with revenues between $30 million and $100 million did not. Infrastructure's tailwinds are likely related to federal investment by way of infrastructure bills. With a changing in federal administrations, I would expect areas that are heavily influenced by private investment to enjoy more favorable conditions going forward, so long as the overall economy stays strong.

Further details are below. Interestingly, there seems to be a convergence of backlog among the various sectors while there is clear separation by contractor size.