US Construction Spending, Labor and Materials Outlook
AGC National & Chapter Leadership Conference
Washington, DC, September 24, 2017
Ken Simonson
Chief Economist, AGC of America
Construction spending & employment, 2006-2017
$0.00
$0.25
$0.50
$0.75
$1.00
$1.25
2006 2008 2010 2012 2014 2016
0.0
1.5
3.0
4.5
6.0
7.5
9.0
2006 2008 2010 2012 2014 2016
2
Total spending, Feb. ‘06 (peak)-July ‘17trillion $, seasonally adjusted annual rate
Total employment, Apr. ’06 (peak)-July ‘17millions, seasonally adjusted
$1.21 trillion(0.1% above2006 peak)
7.7 million
6.9 million
Private Residential
Total
Public
Private nonresidential
Nonresidential (6% below peak)
Residential (15% below peak)
Total (11% below peak)
July 2016-July 2017: total 2%private res. 12%, private nonres. -4%, public -6%
July 2016-July 2017: total 2.8%residential 4.6%, nonresidential 1.8%
Source: spending--U.S. Census Bureau; employment--Bureau of Labor Statistics
-5%
0%
5%
10%
2015 2016 2017
12
-mo
nth
% c
han
ge
Construction spending & employment, 2015-2017
3
Non-res: 1.8%
Residential: 4.6%
Total: 2.8%
Source: spending--U.S. Census Bureau; employment--Bureau of Labor Statistics
Construction employment 12-month % change: Jan. 2015 –July 2017
-10%
0%
10%
20%
30%
2015 2016 2017
12
-mo
nth
% c
han
ge
Total public: -5.6%
Private res: 11.6%
Private non-res: -3.6%
Total: 1.8%
Construction spending 12-month % change: Jan. 2015 –July 2017
in construction
Possible storm/flood impacts on construction
• Immediate demand for plywood, wallboard, laborers, trucks
• Increased demand for new single- and multifamily housing; reconstruction of commercial, public buildings, infrastructure
• But most rebuilding will take years to get funding, design, regulatory approvals
• Meanwhile, businesses and individuals who would have built cancel or defer projects that they can’t afford/don’t need; public $ is reallocated
• Net: selectively higher materials, labor costs; little change in spending
4
Source: Author
Jan.-July’17 vs. ’16
Full-year 2017 forecast
2018 forecast
Nonresidential total (public+private) 0% 1-3% 1-5%Power (incl. oil & gas field structures, pipelines) -4 -2 to 2 positive
Highway and street -4 -4 to 0 flat
Educational 1 0 to 3 positive
Commercial (retail, warehouse, farm) 16 8 to 12 less pos.
Manufacturing -10 -7 to -10 flat
Office 11 7 to 10 less pos.
Transportation -1 -3 to 1 small pos.
Health care 1 -1 to 2 small pos.
Lodging 6 1 to 5 negative
Sewage & waste disposal -20 -15 to -20
Other--amusement; communication; religious; public safety; conservation; water: 11% of total -1 -2 to 1
Nonresidential segments: year-to-date change, 2017-18 forecast
Source: U.S. Census Bureau construction spending report; Author’s forecast
5
'15 '16 '17
$0
$5
$10
$15
$20
$25
'08 '10 '12 '14 '15 '16 '17
Construction spending: industrial, heavyannual total, 2008-14; monthly (seasonally adjusted annual rate), 1/15-7/17; billion $
6
$0
$25
$50
$75
$100
'08'10'12'14'15 '16 '17
Manufacturing (99.4% private in 2016)
July '16-July '17 change: -16% (chemical -10%; other -21%)
Other
Chemical
Communication (99.3% private in 2016)
July '16-July '17 change: 0.5%
Source: U.S. Census Bureau construction spending report
'15 '16 '17
$0
$5
$10
$15
$20
$25
'08'10'12'14
Amusement & recreation (54% private in 2016)
July '16-July '17 change: 3% (private 8%; public -3%)
Public
Private
Power (91% private in 2016)
$0
$30
$60
$90
$120
'08'10'12'14
July '16-July '17 change: -9% (oil & gas 6%; electric -13%)
electric
oil & gas
Key points: power & energy, mfg, amusement & recreation
• Solar, wind power are growing again; expect more gas-fired plants, natural gas pipelines into ‘18
• Manufacturing construction recovery in ‘18 depends on policy impacts, especially trade and tax
• Amusement & recreation spending is very “lumpy”—a few big stadiums at irregular intervals; but funding for local, state, federal parks keeps eroding
7
Source: Author
'15 '16 '17
$0
$30
$60
$90
$120
'08'10'12'14
$0
$10
$20
$30
'08'10'12'14 '15 '16 '17
Construction spending: public worksannual total, 2008-14; monthly (seasonally adjusted annual rate), 1/15-7/17; billion $
8
$0
$10
$20
$30
'08 '10 '12 '14'15 '16 '17
Highways (99.7% public in 2016)
July '16-July '17 change: -5%
Sewage/waste (98% public in 2016)
July '16-July '17 change: -13%
Water supply (98% public in 2016)
July '16-July '17 change: -11%
Source: U.S. Census Bureau construction spending report
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16 '17
Transportation facilities (69% public in 2016)
July '16-July '17 change: -4% (private 4%; public -8%)
public
private
Key points: roads, transportation, sewer/water
• State highway funding and P3s gradually increasing but federal funding likely to be flat through 2018
• Many new and ongoing airport projects but no increase likely in transit construction funding; storms may trigger port rebuilding
• Huge declines in water & sewer spending in 2017 hard to explain and unlikely to be repeated
9
Source: Author
$0
$25
$50
$75
$100
'08 '10 '12 '14
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16 '17
Construction spending: education, health careannual total, 2008-14; monthly (seasonally adjusted annual rate), 1/15-7/17; billion $
10
'15 '16 '17
Education: state/local K-12, S/L higher; private
July '16-July '17 change: -4% (private -9%;state/local preK-12 -5%; state/local higher ed 4%)
S/L preK-12
Private
S/L higher ed
Health care: (private hospital, S/L hospital, other)
July '16-July '17 change : -1% (private hospital -6%; S/L hospital 12%; other: special care, med. office, federal 6%)
S/L hospital
Private hospital
Source: U.S. Census Bureau construction spending report
Total (78% public)
Total (76% private)
Other
Key points: education & health care
• Bond issues passed in 2014-16 should boost preK-12 projects through 2018
• Higher-ed enrollment declined 21% from 2011 to 2016, so colleges need fewer dorms & classrooms; apts. (multifamily) replacing dorms (educational construction)
• Hospitals may resume spending in 2018 if Affordable Care Act is left intact; demand should continue for special care facilities
11
Source: Author
'15 '16 '17
$0
$20
$40
$60
$80
'08'10'12'14
Construction spending: developer-financedannual total, 2008-14; monthly (seasonally adjusted annual rate), 1/15-7/17; billion $
12
$0
$20
$40
$60
$80
'08 '10 '12 '14 '15 '16 '17
$0
$10
$20
$30
$40
'08'10'12'14'15 '16 '17
Retail (private)
July '16-July '17 change: 0.4%
Office (88% private in 2016)
July '16-July '17 change: -0.2% (private-0.1%; public -0.4%)
Public
Private
Total
Warehouse (private)
July '16-July '17 change: 25%
Lodging (private)
Source: U.S. Census Bureau construction spending report
$0
$10
$20
$30
$40
'08'10'12'14 '15 '16 '17July '16-July '17 change: -0.1%
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
• Office growth is slowing; employment still rising but space per worker is shrinking; more urban & renovation work than suburban office parks
• Hotel: flat since mid-2016; likely to drop as occupancy rates slip
• Data centers remain a strong niche but no data available on how strong
13
Source: Author
$0
$100
$200
$300
$400
$500
$600
$700
'06 '08 '10 '12 '14
Private residential spending: steady single-family growth, slower multifamilyannual total, 2006-14; monthly (seasonally adjusted annual rate), 1/15-7/17; billion $
14
'15 '16 '17
Total
Multifamily
Source: U.S. Census Bureau construction spending report
-20%
0%
20%
40%
2015 2016 2017
12
mo
nth
% c
han
ge
Improvements: 16%
Single-family: 10%
Multifamily: 3%
Total: 12%
12-month % change: Jan. 2015-July 2017
Total
Single-family
Improvements
7/16-7/17:
Private residential spending forecast--2017: 7-9%; 2018: 6-9%
• SF: 7-9% in 2017 & 2018; ongoing job gains add to demand; but student debt and other credit impairments, limited supply of lots and labor will limit growth
• MF: 3-5% in 2017; near 0 in 2018
– occupancy rates, rents have leveled off; starts, permits are down from 2016
– millennials are staying longer in cities, 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% in 2017 & 2018; unpredictable because Census lacks reliable data source; post-storm reconstruction may boost totals
Source: Author
15
Population change by state, July 2015-July 2016 (U.S.: 0.70%)
16
AK 0.6%
1.8%
1.7%
0.7%
1.8%
1.0%
-0.2%
2.0%
1.7%
1.7%
0.03%
0.1%
0.9%
0.7%
0.02%
0.4%
1.6%
0.7%
0.4%
0.3%
0.3%
0.2%
-0.3%
0.1%
0.3%
0.3%
-0.02% 0.2%
0.1%
-0.01%
-0.1%
0.5%
1.1%
1.1%
1.8%
0.2%
-0.5%
0.3%
2.0%
HI0.2%
1.4%
VT-0.2%
CT-0.2%
RI0.1%
DE0.8%
NJ0.2%
MD0.4%
DC1.6%
NH0.4%
decrease 0-0.49% 0.5-0.99% 1.0-1.49%
MA0.4%
1.5%+
Source: U.S. Census Bureau
0.9%
CT0.2%
-3%
4%
13%
7%
4%
-0.4%
-2%
13%
1%
0.1%
5%
0%
-6%
-2%
1%
5%
2%
6%
-5%
-0.2%
10%
1%
-2%
4%
5%
4%
-4% 5%
3%
1%
1%
2%
-1%
8%
9%
4%
3%
7%
HI-3%
3%
VT-3%
MD3%
DC2%
NH12%
Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5%
MA3%
State construction employment change (U.S.: 2.8%) 7/16 to 7/17: 36 states + DC up, 1 unchanged, 13 down
17
5.1% to 10% Over 10%
Shading based on unrounded numbers
0%
Source: BLS state and regional employment report
4%NJ4%
DE2%
RI13%
-1%
Metro construction employment change 7/16 to 7/17: 259 metros up (72%), 41 unchanged, 58 down (16%)
18
Hardest positions to fill
28%
32%
48%
51%
50%
53%
58%
70%
0% 25% 50% 75%
Engineers
Estimators
Project mgrs/supervisors
Concrete workers
Plumbers
Electricians, bricklayers
Carpenters
All hourly craft positions
% of respondents who are having trouble filling
19
Source: AGC Member Survey, August 2016
20%
24%
50%
Increasing contributions/benefits
Providing incentives/bonuses
Raising base pay
Hourly workers
How contractors are coping with worker shortages
20
0% 10% 20% 30% 40% 50%
Building information modeling 7%
Offsite prefabrication 11%
Lean construction 15%
Unions 17%
Labor-saving equip., tools, mach. 22%
Craft labor suppliers 22%
Engage w/ career-building prog. 27%
Subcontractors 39%
In-house training 46%
Overtime hours 47%
0%
1%
2%
3%
4%
5%
6%
2001 2004 2007 2010 2013 2016
Production and nonsupervisory employees: avg. hourly earnings, 12-mo. % change, 6/01-6/17
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2001 2003 2005 2007 2009 2011 2013 2015 2017
Construction hires, Jun. 2001-Jun. 2017
Construction workforce indicators (not seasonally adjusted)
21
0
500,000
1,000,000
1,500,000
2,000,000
2001 2004 2007 2010 2013 2016
Unemployment, Jun. 2001-Jun. 2017
0
100,000
200,000
300,000
400,000
500,000
600,000
2001 2004 2007 2010 2013 2016
Job openings, Jun. 2001-Jun. 2017
Source: Bureau of Labor Statistics
80
90
100
110
2015 2016 2017
80
90
100
110
2015 2016 2017
Latest 1-mo. change: 8.7%, 12-mo.: 20%
80
90
100
110
2015 2016 2017
Producer price indexes for key inputs, 1/15-7/17 (Jan. 2015=100)
22
Copper & brass mill shapes Aluminum mill shapes
Latest 1-mo. change: 1.1%, 12-mo.: 15% Latest 1-mo. change: -1.7%, 12-mo.: 7%
Diesel fuel
80
90
100
110
2015 2016 2017
Steel mill products
Latest 1-mo. change: 0.3%, 12-mo.: 10%
Source: Bureau of Labor Statistics
80
90
100
110
2015 2016 2017
80
90
100
110
2015 2016 2017
Paving mixtures
Producer price indexes for key inputs, 1/15-7/17 (Jan. 2015=100)
23
Concrete products
Latest 1-mo. change: 0.7%, 12-mo.: 10%
Latest 1-mo. change: 0.2%, 12-mo.: 3%
80
90
100
110
2015 2016 2017
Flat glass
Latest 1-mo. change: -0.1%, 12-mo.: 0%
Source: Bureau of Labor Statistics
80
90
100
110
2015 2016 2017
Gypsum products
Latest 1-mo. change: 0.2%, 12-mo.: 9%
-6%
-4%
-2%
0%
2%
4%
6%
2015 2016 2017
12
mo
nth
% c
han
ge
Latest 12-mo. change: PPI for nonresidential building: 3.1%; PPI for inputs to construction, goods: 3.0%; average hourly earnings for all construction employees: 2.6%
Change in costs for buildings, material inputs and wages
24
PPI for inputs to construction, goods
Average hourly earnings for all construction employees
PPI for nonresidential building
12-month % change, not seasonally adjusted: Jan. 2015 –July 2017
Source: Bureau of Labor Statistics
2016 summary, 2017-18 forecast
Source: actuals: Census, BLS; forecasts: Author’s estimates
2016actual
2017forecast
2018forecast
Total spending 6% 3-5% 2-7%
Private – residential 11% 7-9% 6-9%
– nonresidential 8% 2-4% 1-5%
Public -1% -4 to -6% -3 to 3%
Goods & services inputs PPI 2% 2.5-3.5% 3-4%
Employment cost index 2.2% 2.5-3% 3-4%
25
AGC economic resources(email [email protected])
• 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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