It is that time of year again. The holiday season looms and one can hear bank accounts emptying. Granted, this consumer binge doesn’t have a huge direct effect on electrical contractors, but there are indirect influences. 

Too much spending now means less cash available for home projects next year, and it can even affect people's willingness to buy a house. Besides, there will be those who want that new kitchen or bathroom under the tree, so to speak. 

The increased holiday spending essentially starts with Halloween, as this has become the second-biggest shopping period in the calendar. This will be the fifth year in a row that adult costumes will outsell kids’. Next up is “Blackvember,“ which used to be Black Friday. This is the period for sales and discounts to lure serious shoppers. 

Finally comes the last frantic shopping period as people remember that Christmas is once again on the 25th. They gift junk to their loved ones, and that sends legions of irritated spouses into stores to exchange it for what they really want. In many cases, that is a new appliance or the upgrade they have been hinting at. Remodelers report a surge of interest right after the holidays. The good news for the electrical contractor is that much of what is in demand these days will require considerably more electric power and capacity in residential and nonresidential sectors. 

The surge in demand for electric vehicles is expected to fade as many incentives evaporate and fuel prices keep falling. On the other hand, the demand for data centers keeps expanding at a feverish rate. The next big thing, believe it or not, is expected to be domestic robots. By the end of this decade, it is predicted that one in three homes in the United States will have a domestic robot to clean, cook and provide personal care.

It is also important to remember that income has a large effect on home building decisions. For the last several years, the driving consumer sector was made up of those in the upper third of earners (over $100,000 per year). They notice inflation but are not inhibited from spending. This is the segment buying more expensive homes and paying for pricey projects. As long as the markets remain lively, this segment will have money to spend and the extension of the tax breaks will also encourage that behavior. 

The next sector encompasses people making between $50,000 and $100,000. They spend as long as their jobs are secure; this has been the case for many years. Meanwhile, the unemployment rate is still very low, but it has been creeping up and now stands at 4.3% at the time of printing. The last set of job numbers were miserable—the lowest number of gains in several years. Right now, businesses have no idea what the rules are and have essentially stalled—especially construction. 

The last group of consumers make less than $50,000 and have been hammered by inflation. They are living paycheck to paycheck, and many use credit cards to get by. Credit card debt is growing quickly and is only exceeded by student loan issues.

At this point, construction projects are falling into categories that depend on their ability to manage costs or absorb cost overruns. There has been growth in the energy sector as demand has been surging and will continue to do so. The medical sector has been relatively stable as demand has been increasing, but these projects depend on funding, which has been erratic. 

Struggling sectors include hospitality and retail, as nobody has a good sense of the future. Housing has been characteristically erratic, but the growth has been where the costs are lower (taxes, cost of living, etc.) This includes the Midwest, Southeast and Southwest, but there have been pattern shifts. Cities such as Phoenix, Dallas and Nashville, Tenn., have seen slowdowns as prices rise. 

The factors to keep an eye on include the Fed’s interest rate decisions and the long-term bond market's performance. The betting now is that there will be another interest rate adjustment by the end of the year, after the quarter point in September; expect another quarter point in December. 

If job numbers keep fading and big layoffs continue, that pace might accelerate with still another cut this year. This could spur business investment, but not until there is more stability. The effect on home building is less certain as mortgage rates respond more to the long-term bond yields, and that is unusually high as the bond markets have not been pleased by the crushing U.S. deficit. Right now, the debt is 125% of the nation’s GDP, and that percentage is never supposed to be more than 60%. Getting that debt and deficit under control has been a priority for Treasury Secretary Scott Bessent, but he has not been able to make much progress in the face of big spending decisions and reluctance to hike taxes. 

Many ECs have been caught in a waiting game as projects stall. Most of the concerns regarding the economy have been rooted in uncertainty rather than any clear data signal. The sense is that a period of calm would allay a lot of concerns, but, thus far, that calm seems unlikely. 

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