Construction spending hits four-year high in July

Associated General Contractors of AmericaTotal construction spending hit a four-year high in July as private residential and nonresidential activity increased while public spending declined, according to an analysis of new Census Bureau data by the Associated General Contractors of America. Association officials urged lawmakers in Washington to make infrastructure investment a top federal priority before funding runs out at the end of September.

Construction put in place in July, $901 billion, was the highest mark since June 2009, and an increase of 0.6 percent from the month before and 5.2 percent from July 2012. Totals for May and June were revised up, implying a stronger second quarter for the overall economy than the government reported last week.

Private residential spending rose 0.6 percent for the month and 17 percent from July 2012. New single-family construction climbed 0.5 percent in July and 29 percent from a year ago. New multifamily spending edged up 0.1 percent in July and advanced 39 percent year-over-year.

Private nonresidential spending gained 1.3 percent in July and 2.0 percent year-over-year. Components with substantial increases since July 2012 included lodging, up 33 percent; warehouses, up 11 percent; and the largest private nonresidential category, power—including oil and gas as well as electricity—up 5 percent. However, there were decreases in private health care construction, down 3 percent; and communication, down 12 percent, Simonson noted.

Public construction spending slipped 0.3 percent for the month and 3.7 percent over 12 months. The two largest public components both dropped: highway and street, down 1.1 percent in July and down 3.8 percent year-over-year; and educational, down 1.5 percent and 12 percent, respectively, Simonson said.

Association officials urged policy makers in Washington to enact federal spending bills by September 30 in order to avoid costly interruptions to federally funded construction projects. They said even a short lapse in appropriations could be very disruptive to construction schedules for infrastructure and building projects.

Architecture Billings Index Stays Positive in July

AIAThe Architecture Billings Index (ABI) saw a jump of more than a full point last month, indicating acceleration in the growth of design activity nationally. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the July ABI score was 52.7, up from a mark of 51.6 in June. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 66.7, up dramatically from the reading of 62.6 the previous month.

Key July ABI highlights:

  • Regional averages: Northeast (54.3), South (54.2), West (51.1), Midwest (50.8)
  • Sector index breakdown: mixed practice (56.9), commercial / industrial (54.2), multi-family residential (53.3), institutional (50.6)
  • Project inquiries index: 66.4

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

Architecture Billings Index stays in growth mode

AIAThe Architecture Billings Index (ABI) remained positive again in June after the first decline in ten months in April.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.  The American Institute of Architects (AIA) reported the June ABI score was 51.6, down from a mark of 52.9 in May.  This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings).  The new projects inquiry index was 62.6, up sharply from the reading of 59.1 the previous month.
“With steady demand for design work in all major nonresidential building categories, the construction sector seems to be stabilizing,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA.  “Threats to a sustained recovery include construction costs and labor availability, inability to access financing for real estate projects, and possible adverse effects in the coming months from sequestration and the looming federal debt ceiling debate.”

Key June ABI highlights:

  • Regional averages: Northeast (55.6), South (54.8),  West (51.2), Midwest (48.3)
  • Sector index breakdown: commercial / industrial (54.7), multi-family residential (54.0), mixed practice (52.4), institutional (51.8)
  •  Project inquiries index: 62.6

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

Construction employment increases in 185 out of 339 metro areas

Associated General Contractors of AmericaConstruction employment increased in 185 out of 339 metropolitan areas between May 2012 and May 2013, declined in 115 and was stagnant in 39, according to a new analysis of federal employment data released today by the Associated General Contractors of America. Association officials said the number of metro areas adding jobs, and the pace at which construction employment is expanding in those metro areas continues to grow.

Pascagoula, Miss. added the highest percentage of new construction jobs (47 percent, 2,000 jobs), followed by Eau Claire, Wis. (29 percent, 900 jobs); Hanford-Corcoran, Calif. (29 percent, 200 jobs) and Napa, Calif. (25 percent, 600 jobs). Phoenix-Mesa-Glendale, Ariz. added the most new jobs (13,000 jobs, 15 percent), followed by Dallas-Plano-Irving, Texas (9,700 jobs, 9 percent); Boston-Cambridge-Quincy, Mass. (9,100 jobs, 18 percent); Houston-Sugar Land-Baytown, Texas (8,900 jobs, 5 percent) and Fort Worth-Arlington, Texas (8,800 jobs, 15 percent).

The largest job losses were in Riverside-San Bernardino-Ontario, Calif. (-3,100 jobs, -5 percent), followed by Cincinnati-Middletown, Ohio-Ky. (-2,800 jobs, -7 percent); Sacramento–Arden-Arcade–Roseville, Calif. (-2,800 jobs, -7 percent) and Northern Virginia (-2,600 jobs, -4 percent). Rockford, Ill. (-18 percent, -800 jobs) and Steubenville-Weirton, Ohio-W.V. (-18 percent, -300 jobs) lost the highest percentage. Other areas experiencing large percentage declines in construction employment included Decatur, Ill. (-14 percent, -500 jobs); Mansfield, Ohio (-14 percent, -300 jobs) and Pocatello, Idaho (-14 percent, -200 jobs).

Association officials said the new, mostly positive, figures were welcome news for a construction industry that bore the brunt of the recent economic downturn. But they cautioned that years of dwindling employment prospects and neglect of vocational and skills-based educational programs have discouraged many potential job seekers from considering careers in construction. They said contractors in some faster growing metro areas were likely to have a tougher time finding skilled workers if the industry continues to add jobs.

View construction employment figures by state and rank.

Green Is Growing in Retail and Hospitality

According to a new report released today by McGraw Hill Construction in partnership with Waste Management, “Green Retail and Hospitality SmartMarket Report: Capitalizing on the Growth in Green Building Investments,” owners of retail and hotel establishments plan higher levels of green building activity over the next two years. The report is based on a study of 79 retail, 30 hotel and 22 restaurant owners conducted in 2013 by McGraw Hill Construction.

SmartMarket Report graphic

The study defined a green building project as one built to LEED or another recognized green building standard, or one that is energy-efficient, water-efficient, and improves indoor air quality and/or engages in material resource conservation. Notably, by this definition, the percentage of retail owners that have taken a green approach in over half of their building projects rose from 18% in 2011 to 38% this year, and is expected to rise to 52% by 2015. Hotel owners show an even greater investment in green building—the percentage of those owners that have taken a green approach in over half of their building projects rose from 28% in 2011 to 48% in 2013, and is projected to rise to 64% by 2015.

According to the study, owners are also committing to green operations and maintenance (O&M) practices, with nearly two thirds (65%) of retail owners reporting high green O&M activity, and an even stronger 73% of hotel owners reporting the same.

Owners note strong business benefits from green building investments and green O&M practices, helping to drive this growth. Most notably, they report the following when comparing the performance of their green buildings to traditional buildings:

  • Annual operating cost reductions: Reported by 66% of retail owners (at an average reduction of 8%) and by 51% of hotel owners (at an average reduction of 1%)
  • Energy use reductions: Reported by 58% of retail owners and 67% of hotel owners at an average reduction of 15% for both
  • Asset value increases: Reported by 61% of retail owners (at an average increase of 7%) and by 71% of hotel owners (at an average reduction of 11%)
  • ROI increases: Reported by 67% of retail owners (at an average increase of 8%) and by 85% of hotel owners (at an average reduction of 14%)

There are many factors driving these owners toward adoption of green building investments and practices. While operating cost reductions are the most highly reported reason for going green (by 66% of retail owners and 73% of hotel owners), there are several other factors considered highly important in their decision-making process:

  • Utility rebates: according to 63% of retail and 70% of hotel owners
  • Protecting/enhancing brand: according to 51% of retail and 73% of hotel owners (for hotel owners, this is as important as operating cost decreases)
  • Improving ROI: according to 52% of retail and 67% of hotel owners

Business factors alone do not, however, account for the increasing commitment to green building. Forty four percent of retail owners and 50% of hotel owners find that human impact benefits have also been an important factor in encouraging their decision to invest in green building projects. Seventy percent of retail owners see meeting government regulations and standards as a key factor in their decision to do green projects in the future, and 70% of hotel owners consider water use reduction an important factor in that decision. In addition, over half in both sectors report that improved environmental health and well-being has a strong impact on their decision to make future green investments.

Key factors posing challenges to increases in green building investments include higher initial implementation costs for green practices (47% retail, 43% hotel); budgeting challenges (37% retail, 40% hotel); and getting corporate leadership buy-in (30% retail, 50% hotel). However, it is notable that no challenge was reported as having a high impact by more than half the respondents.

While energy efficiency is a key factor behind engagement in green building investments and practices, other aspects of green building also hold weight. For retail owners, 62% report recycling and waste management of critical importance; 63% of hotel owners report the same. These owners are also placing green building requirements on their contractors and suppliers—77% of retail owners and 73% of hotel owners say they require green waste handling practices from their contractors, and nearly the same percentages report requiring recycling and composting from their O&M contractors.

The report also includes opinions from the construction community. In fact, contractors are reporting increased requests from their customers for green projects, reinforcing the findings reported by the owners.

Download the full report.

Architecture Billings Index Rebounds

AIAFollowing the first reversal into negative territory in ten months in April, the Architecture Billings Index has bounced back in May. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI score was 52.9, up dramatically from a mark of 48.6 in April. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.1, up slightly from the reading of 58.5 the previous month.

Key May ABI highlights:

  • Regional averages: Northeast (53.7), West (52.1), South (50.9), Midwest (47.5)
  • Sector index breakdown: multi-family residential (52.8), institutional (52.2), mixed practice (51.0), commercial / industrial (47.5)
  • Project inquiries index: 59.1

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

Construction unemployment drops to 10.8%

Associated General Contractors of AmericaConstruction employment increased by 7,000 in May, helping to push the industry’s unemployment rate down to the lowest May level in five years, according to an analysis of new government data by the Associated General Contractors of America. Association officials said the relatively positive jobs report for the sector underscores the need to address potential shortages of skilled workers.

“Although the monthly job gain in May was modest, both residential and nonresidential construction have been adding workers at roughly double the rate of the overall economy in the past year,” said Ken Simonson, the association’s chief economist. “At the same time, formerly unemployed construction workers are finding jobs in other sectors, retiring or going back to school. These conditions may lead abruptly to worker shortages in parts of the industry, such as welders and pipefitters.”

Construction employment in May totaled 5,804,000, an increase of 189,000 or 3.4 percent over the past year. Aggregate weekly hours of all new and existing construction employees expanded by 5.2 percent from a year earlier. The unemployment rate for workers who last worked in construction dropped to 10.8 percent from 14.2 percent in May 2012, not seasonally adjusted, and the number of unemployed construction workers shrank over the year by 259,000 to 891,000. The latest numbers were the best May figures for each series since May 2008, Simonson noted.

Employment expanded in both residential and nonresidential construction in May, Simonson observed. Residential building and specialty trade contractors added 5,500 workers for the month and 94,400 (4.6 percent) over 12 months. Nonresidential building, specialty trade and heavy and civil engineering construction firms grew by 1,700 workers in May and 95,500 (3.7 percent) from a year earlier. In a positive indicator for future construction growth, architectural and engineering services employers added 2.1 percent to their workforces over the year.

Association officials said there was still time to avoid some of the future worker shortages that will come if the industry continues to add jobs over the coming months. They urged education officials to rebuild skills-based, or vocational, educational programs designed to help prepare students for careers in construction and manufacturing. And they urged Congress and the administration to reject the arbitrary caps on construction workers that are currently included in proposed immigration legislation.

More positive momentum for architecture billings

AIAThe latest Architecture Billings Index (ABI) shows a steady upturn in design activity.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.  The American Institute of Architects (AIA) reported the March ABI score was 51.9, down from a mark of 54.9 in February.  This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings).  The new projects inquiry index was 60.1, down from the reading of 64.8 the previous month.

“Business conditions in the construction industry have generally been improving over the last several months,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “But as we have continued to report, the recovery has been uneven across the major construction sectors so it’s not a big surprise that there was some easing in the pace of growth in March compared to previous months.”

Key March ABI highlights:

  • Regional averages: Northeast (54.6), Midwest (53.9), South (53.6),  West (51.9)
  • Sector index breakdown: multi-family residential (56.9), commercial / industrial (53.5),  mixed practice (53.3), institutional (50.6)
  • Project inquiries index: 60.1
  • The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

Construction employment increases in 30 states

Associated General Contractors of AmericaConstruction employment rose in 30 states in March as the industry expanded, although at a slower pace than in February, according to an analysis by the Associated General Contractors of America of Labor Department data. Construction employment nationwide rose for the 10th consecutive month in March, by 18,000, following an increase of 49,000 in February.

According to Ken Simonson, the association’s chief economist, residential and private nonresidential construction is expanding, but investment in infrastructure and public buildings is still on a downward path. This affects employment in states with a large federal presence.  Those states remain vulnerable to construction cutbacks from newly enacted and proposed decreases in federal funding for infrastructure.

Simonson noted that hiring for recovery work from Hurricane Sandy may be the reason New York had the largest increase in construction employment between February and March (6,000 jobs, 1.9 percent) and Connecticut had the largest percentage increase (5.7 percent, 2,900 jobs). Florida added the second-largest number of construction jobs for the month (5,500, 1.6 percent), while Arkansas was second in percentage increase (4.5 percent, 2,000 jobs).

Twenty states and the District of Columbia lost construction jobs between February and March. The largest losses occurred in Missouri (-3,400 jobs, -3.2 percent). Ohio had the second-highest loss of jobs (-3,300, -1.9 percent), followed by Michigan, which had the second-highest percentage decline (-2.4 percent, -3,100 jobs).

Simonson reported that 31 states and D.C. added construction jobs from March 2012 to March 2013 and 19 states lost workers. Alaska led all jurisdictions in the percentage of new construction jobs (11.4 percent, 1,900 jobs); followed by Hawaii (10.7 percent, 3,100 jobs); Utah (8.7 percent, 6,000 jobs) and Louisiana (8.6 percent, 10,700 jobs). California added the most new construction jobs over the past 12 months (41,000, 7.1 percent), followed by Texas (39,800 jobs, 6.9 percent).

Among the 19 states losing construction jobs during the past year, Rhode Island lost the highest percentage (-9.6 percent, -1,600 jobs); followed by Montana (-8.1 percent, -1,900 jobs) and South Dakota (-7.7 percent, -1,700 jobs). Ohio lost the most jobs (-9,500 jobs, -5.2 percent); followed by Illinois (-8,500 jobs, -4.4 percent) and North Carolina (-5,300 jobs, -3.0 percent).

Association officials said the cuts in federal funding for construction enacted in March would push employment totals lower in states with large military and federal civilian facilities. They urged policy makers to make infrastructure investment a priority even while cutting other categories of federal spending to bring down deficits.

View the state employment data by rank and by state.

Construction spending rebounds in February

Associated General Contractors of AmericaConstruction spending rebounded in February with gains from depressed January levels in residential, private nonresidential and public investment, according to an analysis of new Census Bureau data by the Associated General Contractors of America. Association officials cautioned that the rise in public investment was likely to be short-lived and urged policy makers in Washington to make infrastructure investment a priority.

Construction put in place totaled $885 billion in February, up 1.2 percent from the downwardly revised January level. The February 2013 total was 7.9 percent higher than in February 2012. Private residential construction jumped 2.2 percent for the month and 20 percent year-over-year. Private nonresidential spending rose 0.4 percent for the month and 6.1 percent year-over-year. Public construction spending increased 0.9 percent for the month but slipped 1.5 percent over 12 months.

New single-family construction rose 4.3 percent from January’s level and 34 percent from a year ago. New multifamily construction fell 2.2 percent for the month but was 52 percent above the February 2012 mark.

The largest private nonresidential category, power construction—which includes oil and gas fields and pipelines as well as power plants, alternative energy and transmission lines—increased 0.7 percent for the month and 4.0 percent over 12 months. Manufacturing construction rose 0.3 percent and 9.9 percent, respectively. Private transportation construction slumped 2.4 percent in February but climbed 17 percent year-over-year. Warehouse construction soared 8.3 percent and 19 percent. New and remodeled private office construction rose 0.3 percent and 25 percent.

Association officials said federal infrastructure investment has been plunging even as several states have passed funding increases for projects. Federal investment in construction dropped 1.1 percent in February and 10 percent from a year ago, while state and local investment rose 1.1 percent for the month and was nearly level—down 0.5 percent—year-over-year. They urged the federal government to fund vitally needed investments in infrastructure projects.