Sector made roaring post-COVID recovery in 2021, generating $373B in direct economic output
Washington, D.C. (Oct 17, 2022) — The engineering and design services sector made a full recovery from the pandemic in 2021 and looks poised to deliver a historically high economic output of $413.3 billion, a 10.9% year-over-year rise, according to the newest annual report from the ACEC Research Institute.
The report, “2022 Economic Assessment of the Engineering & Design Services Industry,” marks the third such release from the Institute and aims to describe, measure, and analyze the economic significance of engineering and design services.
“What we see in this most recent study is that, despite the outsized impact of the pandemic on engineering and design services, our sector proved to be incredibly resilient in its recovery and a major contributor to the overall U.S. economy,” said Linda Bauer Darr, ACEC president and CEO. “Even with the challenges ahead, there’s reason to be optimistic that our industry will continue to see healthy growth in the mid- to long-term.”
In 2021, the sector contributed $558 billion to U.S. GDP, an 11.2% year-over-year increase that accounted for 2.7% of total U.S. GDP.
Factors that contributed to the rapid rebound of engineering and design in 2021 included exceptional monetary and fiscal stimulus, healthy household balance sheets, relatively low interest rates, rebounding corporate profits and strong demand for both residential and non-residential construction. The sector managed to retain much of its talent through the economic downturn caused by the pandemic, a condition that restricted 2021 employment growth to only 2.1% (1.53 million jobs) despite economic output soaring nearly 10%.
For the remainder of 2022, the report anticipates accelerated economic output growth of 10.9% year over year to $413.3 billion. Yet, inflation will hinder actual performance, with adjusted real output gains (output adjusted for inflation) expected to top out around 3%.
Other forecast highlights include:
The $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) signed into law in 2021 will add $132 billion in economic output in the Engineering and Design Services sector over the next five years.
Though productivity indicators show the sector has been able to accomplish more with fewer people by leveraging new technology, the labor shortage will continue to create challenges for engineering and design. For every new hire between 2019 and 2022, there were 1.6 job openings in the industry.
Similarly, labor shortages in the construction industry are causing project delays that act as a headwind for the engineering and design services sector — a trend that’s likely to continue.
A mild recession is expected in 2023, but there is increasing risk for a more moderate or even severe recession should the Federal Reserve try to address rising inflation too aggressively. Significantly tighter financial conditions would lead to a contraction in the engineering and design services sector next year.
“While our forecast shows there are clouds on the horizon, there are still plenty of bright spots to indicate a very healthy outlook for engineering and design services,” said ACEC Research Institute Board Chair John Carrato.
The definition of the engineering and design services industry used in the report has been primarily developed based on the North American Industry Classification System, or NAICS. The NAICS code “5413, Architectural, Engineering, and Related Services” is part of the broad category of “Professional, Scientific, & Technical Services” and includes both private and public sector organizations from a number of sub-sectors including: architectural services, landscape architectural services, engineering services, drafting services, building inspection services, geophysical surveying and mapping services, surveying and mapping (except geophysical) services, and testing laboratories. The study focuses on the all-inclusive NAICS 5413 categories to define engineering and architectural services activity.
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About ACEC Research Institute
The ACEC Research Institute is the research arm of the American Council of Engineering Companies, the business association of the nation’s engineering industry. The Institute’s mission is to deliver knowledge and business strategies that guide and elevate the engineering industry, and to be the leading source of knowledge and thought leadership to create a more sustainable, safe, secure and technically advanced built environment.