Market Watch

AE Industry Expected to Defy Economic Headwinds in 2023

Blue skies ahead

Although economic storm clouds are gathering, the 2023 forecast remains bright for most AE industry sectors. Seventy percent of architecture, engineering, and environmental consulting firm executives attending Morrissey Goodale’s Southeast M&A, Strategy, and Innovation Symposium this March expect 2023 to be even better than 2022’s banner year. “Despite inflation, rising interest rates, and fears of a recession, it’s ‘full steam ahead’ for the AE industry in 2023,” says Morrissey Goodale Director of Market Intelligence Rafael Barbosa. “Firms are looking at backlogs that dwarf what they’ve experienced in the past, and there’s still no slowdown in sight.”

Pedal to the metal

Massive federal funding from the Infrastructure Investment and Jobs Act and Inflation Reduction Act will make public-sector infrastructure markets among the strongest in 2023. The American Road & Transportation Builders Association predicts that the total value of highway and bridge construction will increase 13.4% in 2023 after a 4.2% rise in 2022. When asked to assess prospects for 17 market sectors in 2023, Associated General Contractors of America (AGC) members expressed their greatest optimism about the highway and bridge; transit, rail, and airport; water and sewer; and federal markets. (They were most pessimistic about the lodging, office, and retail markets.)

Beneficial backlogs

According to an aggregation of construction forecasts by the American Institute of Architects (AIA), nonresidential building construction is expected to rise by 5.8% in 2023 with increases of 15.1% for industrial construction, 4.1% for institutional construction, and 2.6% for commercial construction. Although the AIA’s Architecture Billings Index closed 2022 with three straight months of decline, architecture firms still carried an average backlog of nearly seven months into 2023. “Healthy architect and contractor project backlogs should ease the negative impact of an economic slowdown,” says AIA Chief Economist Kermit Baker. 

House calls

The National Association of Home Builders (NAHB) projects that the housing market recession that began in 2022—thanks to rising material costs and the doubling of mortgage rates—will persist through the first half of 2023. The NAHB forecasts that single-family housing starts will drop 25.5% in 2023 after an 11.8% fall in 2022, the first dip in single-family starts in 11 years. It also predicts a 28% plunge in apartment construction in 2023. To learn more about what to expect in 2023, access the recording of Morrissey Goodale’s 2023 Market Outlook for the AE Industry online event.

Technology Corner

Poor Password Hygiene Poses Cybersecurity Threat

The threat from within

Your firm’s greatest cybersecurity risk could be your employees’ passwords. According to the 2022 Verizon Data Breach Investigations Report, stolen or weak passwords were responsible for 80% of data breaches last year, and poor password management has been the leading cause of data breaches since 2009 as cybercriminals reuse passwords from other hacked sites, phish employees for passwords, and launch brute force attacks in which they use automation to try various letter, symbol, and number combinations to hack passwords. 

Sticky problems

Password management company LastPass estimates the average worker maintains approximately 200 sets of usernames and passwords. Having to keep track of so many logins can lead to bad habits such as reusing passwords or using passwords that are easy to remember—but also easy to guess. According to a 2021 study by password manager Keeper Security, 57% of workers save passwords on sticky notes and 49% do so in unprotected, plain text documents. There’s also a monetary cost that comes from forgotten passwords. The Gartner Group estimates that as many as 50% of all IT help-desk calls are password resets, and the average help-desk labor cost of each reset is approximately $70 according to Forrester Research. 

Hygiene habits

Ensuring employees practice proper password hygiene is one of the easiest cybersecurity steps firms can undertake—but it’s also one of the most neglected. According to a 2022 LastPass study, 89% of respondents know reusing the same password or a variation of it is risky, yet 62% still do it. Firms should train employees to practice password hygiene and identify threats such as phishing. Experts say passwords should contain at least 12 characters and combine uppercase and lowercase letters, symbols, and numbers. In addition, they recommend the use of two-factor authentication and password manager software such as LastPass, Bitwarden, and Dashlane. 


The good news is that the days of the password—and password pitfalls—might be numbered. The increasing use of biometrics such as fingerprints or facial recognition promise a more secure authentication process. In addition, Apple, Google, and Microsoft have partnered for WebAuthn, a passwordless sign-in standard. Last year, Apple introduced a passkey that allowed iOS 16 users to sign in with biometrics and a screenlock password, and in early 2023 Google introduced its Credential Manager API for Android users. With the backing of big tech companies, these initiatives could help usher in a passwordless future.

The New Workplace

“Quiet Firing” Can Be as Toxic as “Quiet Quitting”

Damage done

The phrase “quiet quitting” burst into the business lexicon in 2022. It was hard to escape the media frenzy about the supposed new trend of disengaged workers punching the clock and no longer putting forth their best efforts. Less talked about, however, is a related issue that AE firm leaders also need to monitor—“quiet firing.” According to a November 2022 report by Gallup, quiet firing occurs when “managers fail to adequately provide coaching, support, and career development to an employee, which results in pushing the employee out of an organization.” In the most egregious instances, managers seeking to avoid uncomfortable conversations or severance payments intentionally create a hostile work environment to induce workers to quit. More common—but no less damaging—are managers who engage in quiet firing without even knowing they are doing it.

Three strikes

Gallup identified three primary contributors to quiet firing. First is when managers fail to routinely discuss goal progress and deliver performance feedback with employees. Gallup reports that employees who receive meaningful feedback at least weekly are nearly half as likely to be job-hunters. Second is when managers withhold development opportunities. According to Gallup, only 37% of managers strongly agree that they invest in their employees’ development, and even fewer employees (25%) strongly agree. Third is when managers don’t provide enough individualized recognition. Here there is a big disconnect. Gallup reports that while 60% of managers believe they do a good job recognizing direct reports when they do good work, only 34% of employees strongly agree. 

Burn marks

Quiet firing can create a toxic work environment and damage your firm’s reputation. To prevent it from occurring, look for instances of quiet quitting among your managerial ranks. Managers are hardly immune from burnout or work-life balance struggles, particularly in short-staffed firms struggling with massive backlogs. Burned-out managers are going to be more disengaged from their reports. As the Gallup report states, “When your managers quiet quit, they quiet fire their team.”

Get yourself connected

Two-way communication that is honest and constant is the key to prevent quiet firing. This can be particularly challenging inside firms with hybrid and remote workforces, so leaders need to make sure that managers are taking the time to connect one-on-one with their reports, foster their career development, and provide constructive feedback and recognition in both formal evaluations and informal check-ins. Managers also need to be trained in how to deliver honest feedback so that they don’t avoid difficult conversations with their reports. 

Searching for an external Board member?

Our Board of Directors candidate database has over one hundred current and former CEOs, executives, business strategists, and experts from both inside and outside the AE and Environmental Consulting industry who are interested in serving on Boards. Contact Tim Pettepit via email or call him directly at (617) 982-3829 for pricing and access to the database.

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