Construction Spending, Labor and Materials Outlook AGC Financial - - PowerPoint PPT Presentation

Construction Spending, Labor and Materials Outlook

AGC Financial Issues Committee Meeting Washington, DC, June 8, 2018 Ken Simonson Chief Economist, AGC of America simonsonk@agc.org

Construction spending & employment, 2006–2018

$0.00 $0.30 $0.60 $0.90 $1.20 $1.50 2006 2008 2010 2012 2014 2016 2018 0.0 2.0 4.0 6.0 8.0 2006 2008 2010 2012 2014 2016 2018

Total spending, Feb. ‘06 (peak)–Apr. ‘18

trillion $, seasonally adjusted annual rate

Total employment, Apr. ’06 (peak)–Apr. ‘18

millions, seasonally adjusted

4/18 Total: $1.31 trillion (9% above ‘06 peak) 7.7 million Private residential (18% below ‘06 peak) Public (9% below ‘09 peak) Privatenonresidential (10% above ‘08 peak) Nonresidential (1% below ‘08 peak) Residential (19% below ‘06 peak) 4/18 Total: 7.2 million (7% below peak)

• Apr. 2017–Apr. 2018: total 7.6%

private res. 9.5%, private nonres. 5.3%, public 7.7%

• Apr. 2017–Apr. 2018: total 4.1%

residential 4.9%, nonresidential 3.6% 2

Source: spending--U.S. Census Bureau; employment--Bureau of Labor Statistics

Construction spending & employment, 2016–2018

Source: spending--U.S. Census Bureau; employment--Bureau of Labor Statistics

• 10%
• 5%

0% 5% 10% 15% 2016 2017 2018

12-month % change Total public: 8% Private res: 10% Private nonres: 5% Total: 8%

Construction spending 12-month % change: Jan. 2016 – Apr. 2018

0% 1% 2% 3% 4% 5% 6% 7% 2016 2017 2018

12-month % change Nonres: 3% Residential: 5% Total: 4%

Construction employment 12-month % change: Jan. 2016 – Apr. 2018

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4/17–4/18 4/17–4/18

2017

• vs. 2016

Jan–Apr ’18 vs. Jan–Apr ’17 2018 forecast

Nonresidential total (public+private) 0% 5% 1-5% Power (incl. oil & gas field structures, pipelines)

• 6
• 4

5-10% Educational 2 5 2-7% Highway and street

• 4
• 3

0-3% Commercial (retail, warehouse, farm) 14 10 5-10% Office 2 5 0-3% Manufacturing

• 12
• 4
• 2 to 2%

Transportation 4 22 7-12% Health care 4 9 2-7% Lodging 6 13

• 2 to 2%

Sewage & waste disposal

• 13

9

• 2 to 2%

Other--amusement; communication; religious; public safety; conservation; water: 11% of ‘17 total 12

• 2 to 2%

Nonresidential segments: 2017 % change, 2018 forecast

Source: U.S. Census Bureau construction spending report; Author’s forecast

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'16 '17 '18 $0 $10 $20 $30 '08 '15 '16 '17 '18

Construction spending: industrial, heavy

annual total, 2008–15; monthly (seasonally adjusted annual rate), 1/16–4/18; billion $

$0 $30 $60 $90 $120 '08 '15 '16 '17 '18

Manufacturing (99% private in 2017)

Apr ‘17–Apr '18: -4% (chemical -21%; other 13%)

• ther

chemical

Communication (99.5% private in 2017)

Apr ‘17–Apr '18: 19%

Source: U.S. Census Bureau construction spending report '16 '17 '18 $0 $10 $20 $30 '08 '15

Amusement & recreation (55% private in 2017)

Apr ‘17–Apr '18: 3% (private 16%; public -11%)

public private

Power (94% private in 2017)

$0 $30 $60 $90 $120 '08 '15

Apr ‘17–Apr '18: 0% (oil & gas -1%; electric 0%)

electric

• il & gas

5

total total total

Key points: power & energy, mfg, amusement & recreation

• Solar, wind power are growing again; expect more gas-fired plants,

natural gas pipelines in ‘18

• Manufacturing construction should recover in ‘18 based on energy

projects, tax-induced reshoring, U.S. & global economic growth, weaker dollar; but tariffs, foreign retaliation are a concern

• Amusement & recreation spending is very “lumpy”—a few big

stadiums at irregular intervals; but funding for local, state, federal parks keeps eroding

Source: Author

6

'16 '17 '18 $0 $30 $60 $90 $120 '08 '15 $0 $10 $20 $30 '08 '15 '16 '17 '18

Construction spending: public works

annual total, 2008–15; monthly (seasonally adjusted annual rate), 1/16–3/18; billion $

$0 $10 $20 $30 '08 '15 '16 '17 '18

Highways (99.7% public in 2017)

Apr ‘17–Apr '18: -2%

Sewage/waste (99.1% public in 2017)

Apr ‘17–Apr '18: 10%

Water supply (98% public in 2017)

Apr ‘17–Apr '18: 3%

Source: U.S. Census Bureau construction spending report $0 $20 $40 $60 '08 '15 '16 '17 '18

Transportation facilities

(air, transit, rail, water; 65% public in 2017)

Apr ‘17–Apr '18: 22% (air 45%; other 11%)

air

• ther

7

total

Key points: roads, transportation, sewer/water

• State highway funding and P3s gradually increasing but federal

funding likely to be flat through 2018; pickup likely by 2019

• Many new and ongoing public & private airport projects; revival of

freight rail construction; but no net increase likely in public funding for port, passenger rail or transit construction

• Huge declines in water & sewer spending in 2017: hard to explain

and unlikely to be repeated

Source: Author

8

$0 $25 $50 $75 $100 '08 '15 $0 $10 $20 $30 $40 $50 '08 '15 '16 '17 '18

Construction spending: education, health care

annual total, 2008–15; monthly (seasonally adjusted annual rate), 1/16–4/18; billion $

'16 '17 '18

Education: (state/local K-12, S/L higher; private)

Apr ‘17–Apr '18: 9% (private 9%; state/local preK-12 9%; state/local higher ed 3%)

state/local preK-12 private state/local higher ed

Health care: (private hospital, S/L hospital, other)

Apr ‘17–Apr '18: 8% (private hospital 13%; S/L hospital 29%; other: special care, medical office, federal -3%)

state/local hospital

private hospital

Source: U.S. Census Bureau construction spending report

total (77% public) total (74% private) Other

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Key points: education & health care

• Rising house & commercial property values are supporting school

district tax receipts & bond issues for preK-12 projects

• Higher-ed enrollment declined 21% from 2011 to 2016, so

colleges need fewer dorms & classrooms; apts. (multifamily) replacing dorms (educational construction)

• Rising stock prices help private school & college capital campaigns
• Health care spending is shifting from hospitals to special care

facilities (standalone urgent care, surgery, rehab, hospices)

Source: Author

10

'16 '17 '18 $0 $20 $40 $60 $80 '08 '15

Construction spending: developer-financed

annual total, 2008–15; monthly (seasonally adjusted annual rate), 1/16–4/18; billion $

$0 $20 $40 $60 $80 '08 '15 '16 '17 '18 $0 $10 $20 $30 $40 '08 '15 '16 '17 '18

Retail (private)

Apr ‘17–Apr '18: -3%

Office (86% private in 2017)

Apr ‘17–Apr '18 : 5% (private 2%; public 25%)

Public Private Total

Warehouse (private)

Apr ‘17–Apr '18: 30%

Lodging (private)

Source: U.S. Census Bureau construction spending report $0 $10 $20 $30 $40 '08 '15 '16 '17 '18

Apr ‘17–Apr '18: 16%

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Key points: retail, warehouse, office, hotel, data centers

• Retail now tied to mixed-use buildings & renovations, not standalone

stores or shopping centers; massive store closings imply downturn in ‘18

• Warehouse growth is still benefiting from e-commerce; more local than

huge regional distribution centers likely in future; self-storage is booming

• Office growth is slowing; employment still rising but space per worker is

shrinking; more urban & renovation work than suburban office parks

• Hotel: more markets reaching saturation; more competition from Airbnb
• Data centers remain a strong niche but no data available on how strong

Source: Author

12

Private residential spending: steady single-family growth, slower multifamily

annual total, 2006–15; monthly (seasonally adjusted annual rate), 1/16–4/18; billion $

'16 '17 '18

Dollars (in billions)

Multifamily

(4% below Apr ‘17 peak)

Source: U.S. Census Bureau construction spending report

• 10%
• 5%

0% 5% 10% 15% 20% 25% 30% 2016 2017 2018

12 month % change

Improvements: 14% Single-family: 10% Multifamily: -4% Private total: 10%

12-month % change

Private total

(18% below Feb ‘06 peak)

Single-family

(39% below Feb ‘06 peak)

Improvements

(1% below Feb ‘18 peak)

4/17–4/18:

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$0 $100 $200 $300 $400 $500 $600 '06 '15

Residential spending forecast--2018: 6-9% growth (11% in 2017)

• SF: 8-10% growth in 2018 (9% in 2017); rising interest rates, tax law changes,

student debt will limit number of potential buyers

• MF: near 0 change in 2018 (4% in 2017)

– occupancy rates, rents have leveled off; but permits are rising, implying rebound in 2019 – millennials are staying longer in cities and denser suburbs where MF construction is bigger share of market than in outer suburbs – nearly all MF construction is rental, not condo; more high-rises

• Improvements: 10-15% growth in 2018 (16% in 2017); unpredictable because

Census lacks reliable data source; post-storm reconstruction may boost totals

Source: Author

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Population change by state, July 2016–July 2017 (U.S.: 0.72%)

AK

• 0.2%

1.7% 1.4% 0.6% 2.2% 1.1%

• 1.0%

2.0% 1.6% 1.4% 0.1%

• 0.02%

0.9% 0.7% 0.2% 0.2% 1.4% 0.9% 0.5% 0.4%

• 0.04%

0.4%

• 0.3%

0.3% 0.5% 0.4%

• 0.04%

0.3% 0.3% 0.1% 0.1% 0.7% 1.1% 1.1% 1.6% 0.4%

• 0.7%

0.5% 1.9%

HI

• 0.1%

1.3% VT 0.0% CT 0.0% RI 0.2% DE 1.0% NJ 0.3% MD 0.5% DC 1.4% NH 0.6% decrease 0-0.49% 0.5-0.99% 1.0-1.49% MA 0.5% 1.5%+ Source: U.S. Census Bureau 1.0%

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CT 2% 5% 5% 6% 7% 8% 0% 1% 10% 8% 7% 7%

• 17%
• 3%
• 2%
• 1%

3% 6% 2%

• 3%
• 1%

2% 5% 3% 6% 4% 1%

5%

2% 2% 3% 4% 5% 8% 7% 2%

12%

• 1%

8%

HI

• 2%

1% VT

• 1%

MD 1% DC 1% NH 6% Over -10%

• 5.1% to -10%
• 0.1% to -5%

0.1% to 5% MA 6%

State construction employment change (U.S.: 3.3%)

4/17 to 4/18: 38 states and DC up, 12 down

5.1% to 10% Over 10%

Shading based on unrounded numbers

0% Source: BLS state and regional employment report 2% NJ

• 0.3%

DE 4% RI 1% 4%

16

Top 5

WV 11.6% NV 9.8% AZ 8.2% UT 8.1% ID 7.9%

Bottom 5

HI

• 1.9%

NE

• 2.1%

IA

• 3.2%

SD

• 3.3%

ND

• 17.0%

Metro construction employment change (U.S.: 3.3%)

4/17 to 4/18: 245 metros up, 46 unchanged, 67 down

Source: BLS state and regional employment report

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Top 5

Midland, TX 31% Merced, CA 29% New Bedford, MA NECTA 20% Atlantic City- Hammonton, NJ 19% Weirton- Steubenville, WV- OH 19%

Bottom 5

Columbia, SC

• 11%

Battle Creek, MI -12% Auburn- Opelika, AL

• 14%

Bismarck, ND

• 15%

Bloomington, IL -16%

Over -10%

• 5.1% to -10%
• 0.1% to -5%

0.1% to 5% 5.1% to 10% Over 10% 0%

100,000 200,000 300,000 400,000 500,000 600,000 700,000 '01'02 '04 '06 '08 '10 '12 '14 '16 '18 0% 1% 2% 3% 4% 5% '01'02 '04 '06 '08 '10 '12 '14 '16 '18

Production and nonsupervisory employees:

• avg. hourly earnings, 12-mo. % change, 4/01–4/18

Construction workforce indicators (not seasonally adjusted)

500,000 1,000,000 1,500,000 2,000,000 '01'02 '04 '06 '08 '10 '12 '14 '16 '18

Unemployment, Mar. 2001–Mar. 2018

100,000 200,000 300,000 400,000 500,000 600,000 700,000 '01'02 '04 '06 '08 '10 '12 '14 '16 '18

Job openings, Apr. 2001–Apr. 2018

Source: Bureau of Labor Statistics

Construction hires, Apr. 2001–Apr. 2018

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Producer price indexes for key inputs, 4/17–4/18

19

Source: Bureau of Labor Statistics

3% 3% 5% 7% 8% 10% 12% 42% 0% 10% 20% 30% 40% 50%

Flat Glass Paving Mixtures Concrete Products Steel mill products Gypsum Copper & brass mill shapes Aluminum mill shapes Diesel fuel

• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7% 2016 2017 2018

12 month % change

Labor & materials costs are rising faster than bid prices

PPI for inputs to construction Average hourly earnings for all construction employees PPI for nonresidential building

12-month % change, not seasonally adjusted: Jan. 2016 – April 2018

20

Source: Bureau of Labor Statistics

6.1% 4.2% 3.7%

4/17–4/18

2016–2017 summary, 2018 forecast

Source: actuals: Census, BLS; forecasts: Author’s estimates

2016 actual 2017 actual 2018 forecast Total spending 6% 4% 2-7% Private – residential 11% 11% 6-9% – nonresidential 8% 1% 1-5% Public

• 1%
• 2%
• 3 to 3%

Goods & services inputs PPI 1% 4% 4-5% Employment cost index 2.2% 2.7% 3-4%

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AGC economic resources

(email simonsonk@agc.org)

• The Data DIGest: weekly 1-page email (subscribe at

http://store.agc.org)

• monthly press releases: spending; PPI; national, state,

metro employment

• yearly employment & outlook surveys, state and metro

data, fact sheets: www.agc.org/learn/construction-data

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