US & Washington Construction Cost Outlook Presentation to the Sound Transit Board (System Expansion Committee) Seattle February 14, 2019 Ken Simonson Chief Economist, AGC of America simonsonk@agc.org
2 Headline Forecast • The US economy is still growing well: - 304,000 jobs added in January, 2.8 million in past 12 months —the most since ‘15 - consumer, business confidence are generally high; recession probability is low - but home & auto sales are slowing; trade & fiscal policy concerns continue • Contractors remain busy and confident; construction employment at 11-year high with growth in most states and project categories • Three concerns: - impact of trade policies on materials costs and demand for construction - widening labor shortage, worsened by hostile immigration policy - rising interest rates may cut demand for income-producing projects, new homes Source: Author
3 Summary • Costs for many construction materials have risen sharply in the past two years • Labor costs are accelerating as pool of experienced unemployed jobseekers dries up • Contractors want to add workers in 2019 but expect difficulty finding them • As a result, some contractors are increasing bid prices or completion times Source: Author
4 Prices for key inputs have risen sharply (change in producer price indexes, Nov. 2017-2018 & Nov. 2016-2017) 20% Diesel fuel 42% 20% Steel mill products 8% 6% Aluminum mill shapes 13% 9% Paving mixtures 0% 3% Ready-mixed concrete 3% 0% 10% 20% 30% 40% 50% November 2017 – November 2018 November 2016 – November 2017 Source: Bureau of Labor Statistics
5 Construction Employment Change from Year Ago 1/08 – 12/18 (seasonally adjusted) 12/17 – 12/18: 12% 8% Washington 4.4% 4% U.S. 4.1% 12-month % change 0% -4% -8% -12% -16% -20% -24% 2008 2010 2012 2014 2016 2018 Source: BLS
6 Construction employment change by WA metro, 12/17 – 12/18 Over 10% 5.1% to 10% 0.1% to 5% 0% -0.1% to -5% -5.1% to -10% Over -10% Shading based on unrounded numbers Source: BLS state and regional employment report 6
7 Construction workforce indicators (not seasonally adjusted) Construction openings: all-time high; hires steady Construction job openings rate has been growing as pay accelerates (Dec. data, 2009-18) (Dec. data, 2009-18) 12/18 6% 12/18 400,000 Job openings rate 382,000 Openings in construction 350,000 5.0% 5% 12-mo % change 300,000 in construction 4.0% 4% Hires average hourly 250,000 earnings 219,000 200,000 3% 150,000 2% 100,000 1% 50,000 0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Bureau of Labor Statistics
8 AGC members’ expectations for 2019— US & WA US/WA Net % who expect dollar volume of projects to be higher 14%/38% Transportation (e.g., transit, rail, airport) 14%/11% Water/Sewer 17%/12% Public building 13%/0% Private Office 16%/12% Highway 12%/8% Manufacturing 16%/13% Hospital 11%/9% Higher Education 16%/6% K-12 school 10%/13% Power 15%/5% Federal (e.g., VA, GSA, USACE, NAVFAC) 5%/-6% Multifamily Residential 15%/12% Retail, Warehouse, Lodging Source: AGC 2019 Outlook Survey, Jan. 2019 8
9 Rising materials and labor costs may portend higher bid prices Cumulative change in highway bid prices and input costs, Dec. 2015 – Sep. 2018 12-month % change, not seasonally adjusted 15.0% Cost of construction materials & services 12.0% Const. wages & 9.0% salaries 6.0% Highway contract 3.0% prices 0.0% -3.0% Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Sources: Highway contract prices: Federal Highway Administration, National Highway Construction Cost Index Const. pay and materials, services cost: Bureau of Labor Statistics, Current Employment Statistics, Producer Price Index
10 AGC Outlook Survey: WA contractors expect to add workers but are having trouble finding them Expect to add workers in 2019 77% Having trouble filling positions 75% Will be hard/harder to find workers in 2019 55% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source: AGC 2019 Outlook Survey, Jan. 2019
11 AGC Outlook Survey: WA Firms with staffing challenges face higher costs and delays Costs have been higher than we anticipated 16% We've put higher prices into bids/contracts 29% Projects have taken longer than we anticipated 27% We've put longer completion times into 20% bids/contracts 0% 5% 10% 15% 20% 25% 30% Source: AGC 2019 Outlook Survey, Jan. 2019
12 2017-2018 US summary and 2019 forecast 2017 2018 2019 actual actual forecast Total spending 4% 4.5%* 5-8% Goods & services inputs PPI 4.4% 3.8% 4-6% Wages & salaries (avg. hourly 3.1% 3.6% 3.5-4.5% earnings) *Jan.-Nov. 2017 to Jan.-Nov. 2018
13 AGC economic resources (email simonsonk@agc.org) • The Data DIGest : weekly 1-page email (subscribe at http://store.agc.org) • monthly press releases: spending; producer price indexes; national, state, metro employment with rankings • yearly employment & outlook surveys, state and metro data, fact sheets: www.agc.org/learn/construction-data
Recommend
More recommend
