Tag Archive for 'ABC'

2019 Will Be …

By Greg Sitek

Prospects for the coming year are positive. Inertia alone should keep the economy going and growing. So much has been put in motion that most of the influencing factors have not yet had a chance to take effect.

According to the Equipment Leasing & Finance Foundation A strong labor market and healthy consumer spending are positive factors, “Indeed, preliminary estimates of consumer spending on Black Friday and Cyber Monday reveal that online spending was up nearly 20% from last year, setting a record that underscores the current sentiment of U.S. consumers. Overall, recent data suggest that consumer spending should continue to drive economic growth in 2019.” The Foundation also points out that there are factors that have the potential of causing problems, most notably increased trade pressures and tightening of global credit.  You can find more of what the Foundation and other leading industry organizations predict for 2019 in the national section of this issue.

There are numerous organizations that have published forecast and other that will be published after the New Year has started. We will keep you informed on these as they become available.  Meanwhile here are glimpses into what a couple leading industry associations are forecasting.

ABC

Associated Builders and Contractors (ABC) Chief Economist Anirban Basu forecasts another strong year for construction sector performance, yet warns about inflationary pressures.

Job growth, high backlog, and healthy infrastructure investment all spell good news for the industry. However, historically low unemployment has created a construction workforce shortage of an estimated 500,000 positions, which is leading to increased compensation costs.

“U.S. economic performance has been brilliant of late. Sure, there has been a considerable volume of negativity regarding the propriety of tariffs, shifting immigration policy, etc., but the headline statistics make it clear that domestic economic performance is solid,” said Basu. “Nowhere is this more evident than the U.S. labor market. As of July, there were a record-setting 6.94 million job openings in the United States, and construction unemployment reached a low of 3.6 percent in October.”

While the U.S. economy is thriving, Basu cited the potential long-term impact of rising interest rates and materials prices—up 7.9 percent on a year-over-year basis in October—on the U.S. construction market. In addition, the workforce shortage will continue to influence the market in the coming year.

That said, Basu stressed that a recession is unlikely in 2019, even with recent financial market volatility. Indicators such as the Conference Board’s Leading Economic Index, which often signals an economic downturn, have continued to tick higher, implying current momentum will continue for at least two to three more quarters.

While optimistic for next year, Basu warned that “Contractors should be aware that recessions often follow within two years of peak confidence. The average contractor is likely to be quite busy in 2019, but beyond that, the outlook is quite murky.”

https://www.abc.org/News-Media/Newsline/entryid/15940/abc-predicts-construction-sector-will-remain-strong-in-2019

PCA Forecasts Less Growth in 2019 and 2020

The Portland Cement Association (PCA) Market Intelligence Group forecast for cement consumption over the next two years, shows less growth compared with 2018. This year’s rate of change is 2.9 percent. Growth ebbs to 2.6 percent in 2019 and to 1.6 percent in 2020.

“We are expecting relatively modest but sustained interest rate increases after 10 years of low and stable rates,” said PCA Senior Vice President and Chief Economist Ed Sullivan. “The Federal Reserve’s actions will gradually slow the construction sector’s growth due to, among other things, the higher mortgage rates for residential buildings and higher borrowing cost for nonresidential buildings.”

Sullivan added, “While the tax cuts passed at the end of 2017 have helped to boost the overall economy, the rising debt will frame the discussion of future federal public infrastructure spending.”

PCA’s overall projection for the U.S. economy suggests considerable strength that will take time to unravel. The seeds of a gradual softening will arise from rising interest rates, the emergence of fiscal difficulties at the state level at a time of relative prosperity, and the aging of the recovery. PCA forecasts the GDP growth rate to be 3.1 percent this year, 2.7 percent in 2019 and 2.2 percent in 2020. The unemployment rate now below 4 percent, is expected to trend down – intensifying labor shortages and leading to stronger wage gains.

“America’s economy is unquestionably strong and resilient,” said Sullivan. “The real GDP growth is healthy, wage growth is up, and both the unemployment rate and consumer household debt are at near record lows. While interest rates are rising, they have not reached a threshold that would cause a significant adjustment to the positive overall growth projections.” https://www.cement.org/newsroom/2018/11/15/pca-forecasts-less-growth-in-2019-and-2020

Have a happy and prosperous New Year.

ABC Reports: Construction Adds 19,000 Jobs as Unemployment Plummets in July

The U.S. construction industry added 19,000 net new jobs in July after adding 13,000 net new jobs in June, according to an Associated Builders and Contractors analysis of data supplied by the U.S. Bureau of Labor Statistics. The industry has added 308,000 net new jobs since the first of the year, a robust increase of 4.4 percent.

The construction industry unemployment rate dove to 3.4 percent in July, recording its lowest level in the 18-year history of the series. The national unemployment rate for all industries inched down to 3.9 percent.

Nonresidential construction employment increased by 13,200 net jobs in July. Nonresidential specialty trade contractors added 8,600 net new jobs in July and have collectively added 60,300 net new jobs through the first seven months of the year. To put this in perspective, this is nearly double the amount added through the first seven months of 2017 (+32,200).

“While many observers will focus intensely on the headline employment growth number of 157,000, which was below expectations, today’s employment numbers provide more evidence that demand for workers remains elevated,” said ABC Chief Economist Anirban Basu. “Employment growth estimates for both May and June were revised higher. The official rate of unemployment fell to 3.9 percent. Nominal wage growth remains steady. Both construction and manufacturing continue to add jobs in America.

“The issue, therefore, is not really about demand for human capital, but supply,” said Basu. “There may well have been times during the nation’s history when construction industry unemployment was even lower, but relevant statistics characterizing those periods do not exist. What we know for sure is that contractors will continue to scramble for workers in the context of aggressive spending on structures and other forms of construction.

“The real mystery is how the construction industry has managed to find 308,000 net new workers over the past year given all the narratives regarding a lack of available carpenters, electricians, welders, glass installers, etc.,” said Basu. “One hope is that more workers are gravitating toward construction, which offers increasingly rare opportunities for people to enter the middle class without taking on student debt. The other hope—and there is evidence to suggest this is already occurring—is that companies will invest heavily in the capabilities of these people inducing more of them to stay in the industry even during the next downturn.”

Visit ABC Construction Economics for the Construction Backlog Indicator, Construction Confidence Index and state unemployment reports, plus analysis of spending, employment, GDP and the Producer Price Index.

ABC, Industry Groups Urge President Trump to Reverse Obama-era Policy on Project Labor Agreements

Associated Builders and Contractors joined a coalition of construction and business associations urging President Trump to eliminate government-mandated project labor agreements and allow all qualified contractors to compete for federal and federally assisted taxpayer-funded construction projects.

In a letter sent to President Trump this week, the coalition stressed that such regulatory reform would create a level playing field in the procurement of government construction contracts, increase competition, curb constructions costs and help small businesses grow. The coalition also said it is “imperative to cut regulations that stand in the way of creating career pathways into the construction industry,” which has an estimated 500,000 open positions.

“With the current construction boom contributing to a severe shortage of skilled labor, a new fair and inclusive policy encouraging all Americans to compete to rebuild their community’s schools and infrastructure would be a win-win for taxpayers and the U.S. economy,” said ABC Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “And with a projected 10-year, $2 trillion infrastructure investment gap in the United States, a policy ensuring taxpayers get the best possible infrastructure at the best possible price is essential to rebuilding America.”

The coalition highlighted that studies of hundreds of taxpayer-funded school construction projects found that PLA mandates increased the cost of construction 12 percent to 18 percent compared to similar non-PLA projects. In addition, PLAs unfairly discourage competition from quality contractors and their nonunion workers, who comprise of 86 percent of the U.S. private construction industry, according to recent U.S. Bureau of Labor Statistics data.

ABC and industry groups have repeatedly petitioned President Trump to rescind President Obama’s Executive Order 13502, which allows state and local recipients of federal dollars to mandate PLAs and encourages federal agencies to require PLAs on federal contracts to build projects of $25 million or more on a case-by-case basis. ABC and the coalition have advocated to replace the Obama-era policy with Executive Orders 13202 and 13208, which would prohibit PLAs from being required on federal and federally assisted construction projects, respectively. Two dozen states have enacted fair and open competition legislation that welcomes all contractors to bid on construction projects.

Associated Builders and Contractors (ABC) Visit abc.org

 

Coalition members:

American Fire Sprinkler Association (AFSA)
American Road & Transportation Builders Association (ARTBA) Associated Builders and Contractors (ABC)
Business Coalition for Fair Competition (BCFC)
Construction Industry Round Table (CIRT)
Independent Electrical Contractors Association (IEC)
National Association of Home Builders (NAHB)
National Black Chamber of Commerce (NBCC)
NFIB
National Ready Mixed Concrete Association (NRMCA)
Small Business and Entrepreneurship Council (SBEC)

ABC Reports: Construction Employment Retains Momentum in June, Says ABC; Unemployment Rate Increases as Labor Force Grows

Construction Employment Retains Momentum in June, Says ABC; Unemployment Rate Increases as Labor Force Grows
The U.S. construction industry added 13,000 net new jobs in June after adding 29,000 net new jobs in May (revised upward from 25,000+), according to an analysis by the Associated Builders and Contractors of data from the U.S. Bureau of Labor Statistics. The industry has added 282,000 net new jobs during the past calendar year, a 4.1 percent increase.

Nonresidential construction employment increased by 8,600 net jobs for the month. The majority of that growth came from the heavy and civil engineering subsector, which added 6,100 net jobs. The nonresidential building subsector lost 200 net jobs in June after losing 5,000 net jobs in May.

The construction industry unemployment rate increased to 4.7 percent in June, 0.3 percentage points higher on a monthly basis and 0.2 percentage points higher on a yearly basis. The national unemployment rate for all industries increased to 4 percent largely due to an expanding labor force.

“Today’s employment report represents a source of encouragement for most contractors,” said ABC Chief Economist Anirban Basu. “There is evidence of ongoing hiring in both public and private construction categories. Perhaps most encouraging was the 6,100 net new jobs added in the heavy and civil engineering component, an indication of stepped-up infrastructure spending. This comes as little surprise since the ongoing economic expansion has helped to strengthen the balance sheets of state and local governments, positioning them to spend more aggressively on capital projects.

“Most private construction segments were also associated with net job creations in June,” said Basu. “While the construction spending data indicates some loss of momentum in certain private construction segments, the employment data do not seem to indicate any meaningful turbulence. During the past year, nonresidential specialty trade contractors, many of which are engaged in private construction projects, have expanded their collective payrolls by more than 100,000 positions, or by 4.3 percent. Many contractors continue to say that their backlogs remain robust and that their leading challenge is securing enough trained workers to deliver forthcoming construction services.

“The overall economy continues to produce jobs at a pace that exceeds consensus expectations,” said Basu. “Despite all the focus on rising interest rates, mounting inflationary pressures, tariffs and trade wars, the U.S. economy continues to deliver new opportunities for businesses and job seekers alike. In short, economic momentum persists. This strongly suggests that contractors will remain busy, and that additional opportunities to bid for work are in the cards.”

 

 

 

Visit ABC Construction Economics for the Construction Backlog Indicator, Construction Confidence Index and state unemployment reports, plus analysis of spending, employment, GDP and the Producer Price Index.

Associated Builders and Contractors (ABC) is a national construction industry trade association established in 1950 that represents more than 21,000 members. For more information visit abc.org.

ABC Reports: Nonresidential Construction Spending Remains Elevated in May, But Private Sector Falters

Nonresidential Construction Spending Remains Elevated in May, But Private Sector Falters, Says ABC
Nonresidential construction spending inched 0.1 percent higher on a monthly basis in May, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data released today. Spending, which totaled $749 billion on a seasonally adjusted annual rate for the month, is up 3 percent from the same time last year.

Public nonresidential spending increased 0.6 percent for the month and 4.9 percent for the year, while the private sector contracted 0.3 percent for the month but increased 1.8 percent year-over-year. The dip in private sector is spending is largely attributable to a 2.3 percent decrease in manufacturing-related spending.

“The prediction has been that publicly financed construction spending would rise in America,” said ABC’s Chief Economist Anirban Basu. “The logic of this is rooted in two basic factors. The first is that the ongoing economic expansion, now in its 10th year, has steadily improved fiscal conditions in state and local government.  With more money to spend, more communities are empowered to deal with deferred maintenance and even to expand the capacity of certain key infrastructure, whether roads, mass transit, wastewater treatment plants or water systems.

“The other factor relates to a political cycle,” said Basu. “Increasingly, policymakers have been making the case—and much of the electorate seems convinced—that stepped-up infrastructure investment is needed. Accordingly, in recent years, 31 states have expanded their transportation funding, including 24 of them by raising state gas taxes. Not surprisingly, public construction spending is higher on month-over-month and year-over-year bases.

“What has been less clear is whether privately financed construction would continue to rise,” said Basu. “While the economy remains strong, a number of headwinds have formed, particularly concerns regarding tariffs and trade wars. Construction material prices have already begun to surge, in part because of trade disputes involving materials such as softwood lumber, steel, and aluminum. This increases project costs without offering developers and their financiers any offsetting commercial benefit.

“Moreover, fears of a full-blown trade war between the United States and NAFTA partners, the European Union and/or China have likely resulted in some businesses and investors adopting a wait-and-see attitude,” said Basu. “This helps explain the recent dip in construction spending related to manufacturing. With key interest rates, like the prime rate, also on the rise, the motivation to move forward with projects may be waning. Rising borrowing costs make it less likely that a project will satisfy a given investor’s hurdle rate. Rising labor costs contribute further to this calculus.

“The upshot is that contractors would likely be primary beneficiaries of a less precarious policymaking environment,” said Basu. “Businesses, markets, developers and financiers each prefer certainty. They also prefer input costs that aren’t surging. This strongly suggests that, while private construction spending should remain sturdy during the months ahead given healthy backlog and current economic momentum, the outlook for construction spending may be rather different in a few quarters.”

 

 

Visit ABC Construction Economics for the Construction Backlog Indicator, Construction Confidence Index and state unemployment reports, plus analysis of spending, employment, GDP and the Producer Price Index.

Associated Builders and Contractors (ABC) is a national construction industry trade association established in 1950 that represents more than 21,000 members. Founded on the merit shop philosophy, ABC and its 70 chapters help members develop people, win work and deliver that work safely, ethically and profitably for the betterment of the communities in which ABC and its members work. Visit abc.org