Tag Archive for 'Associated Builders and Contractors'

ABC’s Construction Backlog Indicator Rebounds in 2017, Gains in All Categories During First Quarter

Associated Builders and Contractors (ABC) today reported that its Construction Backlog Indicator (CBI) rose to 9 months during the first quarter of 2017, up 8.1 percent from the fourth quarter of 2016.  CBI is up by 0.4 months, or 4 percent, on a year-over-year basis.

“This was a terrific report,” said ABC Chief Economist Anirban Basu. “For the first time in the series’ history, every category—firm size, industry and region—registered quarterly growth in CBI. Among the big winners were firms in the western United States and those with annual revenues between $30 million and $50 million per annum.

“However, some contractors have expressed concerns regarding construction conditions in 2019 or 2020,” said Basu. “These concerns are rooted in a number of factors, including the already lengthy duration of the economic recovery, evidence of saturation in certain commercial real estate markets, weak momentum in numerous public spending categories and tightening monetary conditions. However, first quarter 2017 CBI strongly suggests that rumors of the business cycle’s demise are exaggerated, at least thus far.

“Because of these and other emerging concerns, ABC’s CBI measure is arguably more important than usual,” said Basu. “Backlog is a leading indicator, and meaningful declines in CBI could potentially confirm fears that the current construction spending expansion cycle is winding to a close.”

Highlights by Region

  • Surging financial markets helped support activity in financial centers like New York, Philadelphia and Boston. Expanding cyber-security and life sciences activity supported markets as geographically diverse as Washington/Baltimore; Austin, Texas; Silicon Valley, Calif., and Seattle.
  • Though backlog is slightly lower in the South on a year-over-year basis, it continues to report the lengthiest backlog, at 9.8 months. A number of markets remain extraordinarily active with respect to commercial construction, including Atlanta and Miami and Tampa, Fla. Distribution center construction also continues to be active due to a combination of busier seaports and the ongoing online retail boom.
  • Backlog in the West was up by a remarkable 26 percent during the quarter.  Part of this was due to statistical payback after a surprisingly weak fourth quarter. However, this is also a reflection of the rapid commercial growth in Seattle, Denver, Silicon Valley, San Diego, Phoenix and other population growth hotspots.
  • Higher oil and natural gas prices helped to drive CBI higher in the Middle States. Backlog in the region expanded by a more-than-respectable 10 percent during the first quarter, and now stands at a healthy 8.5 months.  Chicago continues to be a weak spot, however, registering slow job growth relative to other major U.S. metropolitan areas in recent quarters.
  • Backlog in the Northeast rose to 8.7 months during the first quarter. Backlog is up by almost precisely half a month over the past year. The New York and Boston metropolitan areas remain particularly active.

 

Highlights by Industry 

  • Backlog in the commercial/institutional segment rose by more than 11 percent during the first quarter, and now stands at nearly 9 months. Backlog also expanded in the heavy industrial and infrastructure categories during the first three months of the year.
  • Average backlog in the heavy industrial category rose to 5.88 months, but remains well below levels registered during much of the history of the series.  Excluding the fourth quarter of 2016, this represents the lowest reading since the fourth quarter of 2014. There are many forces at work, including slowing auto sales, downward pressure on prices in a number of key manufacturing segments and soft exports.
  • Backlog in the infrastructure category expanded during the first quarter and remains above historic levels. Actual infrastructure spending has been unimpressive in many categories recently, including wastewater, water supply, dams/levies and highway/street. Available survey data hint at a bit of a pickup in activity during the quarters ahead.
  • Commercial/institutional backlog expanded to 8.9 months, matching its highest level since the third quarter of 2014. Though there are growing concerns regarding overbuilding in a number of metropolitan areas, and retail stores continue to close in large numbers, increases in office and hotel construction are helping to propel this category forward.

Highlights by Company Size

  • Backlog for each of the four company size categories increased to start the year.  Firms with revenues of $30 million to $50 million, many of which are in the commercial/institutional segments, were the clear outperformers in terms of expanding backlog during the first quarter of 2017. Backlog for this group of firms expanded by more than two months, indicating growing confidence among developers and other purchasers of construction services
  • Backlog among firms with annual revenues of less than $30 million increased by 5.3 percent during the quarter. Over the course of time, the nonresidential construction recovery has broadened enough to encompass many of the smallest firms.
  • The largest firms, those with annual revenues above $100 million and which are disproportionately represented in the infrastructure category, report the lengthiest backlog at 11.8 months. This was up by more than 9 percent during the quarter.  Backlog for this group is approaching the one-year mark, which is considered to be a sign of significant health.

 

 

 

 

 

 

 

 

 

CBI is a leading economic indicator that reflects the amount of construction work under contract, but not yet completed.

CBI is measured in months, with a lengthening backlog implying expanding demand for construction services. More charts and graphs are available on abc.org

ABC Comments: President Trump’s Apprenticeship Expansion Helps All Americans Build America

Associated Builders and Contractors applauded President Donald J. Trump on today’s executive action on apprenticeships, which is an important step toward building new career opportunities for all Americans.

If fully implemented, the order will allow industries to build innovative workforce development systems that address glaring skills gaps in our workforce.  With the construction industry currently facing a workforce shortage of as many as 500,000 jobs, this order is an important first step to allow more entryways into becoming a construction professional.

“Associated Builders and Contractors looks forward to working with the secretaries of labor, commerce and education to implement the executive order and develop new, innovative and effective models to train an expanding American workforce,” said ABC President and CEO Mike Bellaman.  “With our industry in need of half a million workers today and even more in the future, we need to expand upon current apprenticeship methods that have left us with a worker shortage and embrace an all-of-the-above training approach to meet the needs of a 21st century workforce. ”

ABC and its 70 chapters are doing their part to train construction professionals using state-of-the-art and flexible learning models like “earn while you learn,” just-in-time task training, competency-based progression, work-based learning and government-registered apprenticeships to build a safe, skilled and productive workforce.

In addition to an annual investment of $1.1 billion dollars into work-based training by ABC member companies, ABC local chapters and affiliated training centers offer more than 800 apprenticeship, craft, safety and management training programs around the country, including Department of Labor-approved apprenticeship programs.  In partnership with the industry-recognized curriculum and credentials developed by NCCER, a not-for-profit 501(c)(3) education foundation, ABC offers this training at over 1,400 locations across America.

ABC is looking forward to working with President Trump and Secretaries Acosta, Ross and DeVos to craft industry programs that expand the U.S. Department of Labor’s definition of registered apprenticeship and offer all Americans the opportunity to achieve their dreams and build a fulfilling career.

Learn more about how ABC is building the people who build America at workforce.abc.org.

ABC Reports: Construction Input Prices Flat, but Crude Petroleum Prices Plummet in May

Construction input prices remained unchanged in May, ending five consecutive months of price expansion, according to analysis of  Bureau of Labor Statistics data released today by Associated Builders and Contractors.  expanded 3.4 percent on a year-over-year basis.

Nonresidential construction input prices also remained unchanged on a monthly basis but increased by 3.1 percent on a yearly basis. Only crude petroleum prices experienced a significant month-over-month change in May, with prices falling 19.6 percent from April’s level. Natural gas prices remain significantly higher—up 66 percent—from the same time one year ago.

“Since March 2016, construction input prices have generally been on the rise,” said ABC Chief Economist Anirban Basu. “Many commodity prices established their cyclical nadir during last year’s first quarter, with prices then surging higher for a time. There were a number of factors at work, including stronger growth in parts of Europe and Asia and coordinated efforts by producers to curtail production and support higher prices.

“These factors are no longer strong enough to drive commodity and construction input prices higher,” said Basu. “The U.S. economy in particular does not appear positioned for the rate of growth many had anticipated at the beginning of the year. The Organization for Economic Cooperation and Development recently revised America’s growth outlook downward from 2.4 percent to 2.1 percent for the current year. Stronger U.S. economic growth has been expected to be a major driver of overall global economic improvement.

“The role of technology and previous investments in productive capacities is just as important,” said Basu. “As shale and other producers become more efficient, the price for certain items will tend to fall absent a countervailing increase in demand. With global economic growth remaining below par, commodity prices are no longer rising. This strongly implies that the trend of rising construction materials prices that was so apparent in 2016 will be less so during the current year.”

According to ABC, Jobs Report Offers Reasons for Hope and Concern for Construction Industry

National construction employment added 11,000 net new jobs on a seasonally adjusted basis in May according to analysis of U.S. Bureau of Labor Statistics data released today by Associated Builders and Contractors (ABC).

The nonresidential construction sector added 4,400 net new jobs in May after losing 1,000 net jobs in April (revised down from a net increase of 3,200 jobs), while the residential sector added 7,100 net jobs for the month. Overall construction employment expanded 2.9 percent on yearly basis, well above the year-over-year growth rate of 1.6 percent for all nonfarm industries.

“Today’s jobs numbers supply a mixture of good and bad news,” said ABC Chief Economist Anirban Basu. “Overall nonresidential construction industry employment was up, but much of that was due to the heavy and civil engineering component, which can be associated with volatile employment levels from month-to-month. Nonresidential specialty trade contractors collectively shed employment, which is consistent with the weak construction spending numbers released yesterday. Those statistics indicated ongoing softening in construction spending in both private and public segments.

“More worrisome perhaps are statistics related to labor force participation and the construction industry unemployment rate,” said Basu. “The labor force participation fell to 62.7 percent in May, a multi-month low. There is also evidence that the construction labor market continues to tighten, which implies construction firms will continue to struggle to find workers, particularly at higher skill levels. This means that construction spending growth is decelerating even as labor becomes more expensive. None of this is good from the perspective of profit-margins or aggregate industry profitability.

“The hope is that the observed weakness in spending is brief and largely a result of lingering uncertainty that would be associated with any major political transition,” said Basu. “Financial markets continue to perform brilliantly, implying that investors continue to view economic conditions favorably. With the construction unemployment rate remaining so low one further hopes that more job seekers will be induced to seek employment in the construction trades. Unfortunately, to date that has not happened at sufficient levels. That said, economists remain confident that the next two quarters will be associated with more robust growth, which could help to reinvigorate construction spending momentum.”

The construction industry unemployment rate, which fell 2.1 percentage points last month, declined further in May and now stands at 5.3 percent. The construction industry unemployment rate is only available on a non-seasonally adjusted basis. Due to seasonal factors, the industry unemployment rate almost always plummets from March to April and continues to decline in May. The national unemployment rate inched down from 4.4 percent in April to 4.3 percent in May. The last time the unemployment rate was this low was in May 2001.

According to ABC Construction Unemployment Rates Improve in 22 States

April not seasonally adjusted (NSA) construction unemployment rates were down in 22 states and unchanged in two (Arkansas and California) on a year-over-year basis, according to analysis released today by Associated Builders and Contractors (ABC). However, the national NSA construction unemployment rate of 6.3 percent was up 0.3 percent from April 2016, according to data from the U.S. Bureau of Labor Statistics.

Since these industry-specific rates are not seasonally adjusted, national and state-level unemployment rates are best evaluated on a year-over-year basis.

“Despite the year-over-year increase, this was the third lowest national not seasonally adjusted April construction unemployment rate on record and the second lowest rate since April 2000,” said Bernard M. Markstein, Ph.D., president and chief economist of Markstein Advisors, who conducted the analysis for ABC. “Further evidence of the construction industry’s economic health can be found in the 160,000 more workers employed in the industry compared to April 2016.”

Since the beginning of the data series in January 2000, the monthly movement in the national NSA construction unemployment rate from March to April has always been a decline. This year was no exception with a 2.1 percent rate plunge in the NSA rate from March. All but two states (Georgia and Kansas) posted a decline in their April estimated rate from March.

View states ranked by their construction unemployment rate, their year-over-year change in construction unemployment, their monthly change in construction unemployment, a regional breakdown of states’ construction unemployment rates and their April unemployment rates for all industries

The Top Five States
The states with the lowest estimated NSA construction unemployment rates in order from lowest rate to highest were:
1. North Dakota
2. Nebraska
3. South Dakota
4. Idaho, Indiana and New Hampshire (tied)

Two states—Nebraska and North Dakota—were also among the top five in March.

North Dakota (1.3 percent) had the lowest construction industry rate among the states. This was the state’s lowest April NSA rate since the beginning of the estimates in 2000 and the largest year-over-year drop among the states, down 3.2 percent.

Nebraska (1.6 percent) had the second lowest rate in April, matching 2008 for the state’s lowest estimated April rate on record.

South Dakota (1.9 percent) had the third lowest April rate, matching 2015 for the state’s lowest April rate on record. Additionally, the state’s 2.8 percent year-over-year decline was the second best among the states.

Idaho, Indiana and New Hampshire each posted (2.6 percent) tied for the fourth lowest rate in April. For all three states this was their respective lowest estimated April rate on record. All three also experienced notable improvements from their March rankings—Idaho up from 12th lowest, Indiana up from 14th lowest and New Hampshire from tied with Florida for 21st lowest.

The Bottom Five States
The states with the highest NSA construction unemployment rates in order from lowest to highest rates were:
46. Pennsylvania
47. Louisiana
48. Illinois
49. New Mexico
50. Alaska

Three of these states—Alaska, New Mexico and Pennsylvania—were also among the five states with the highest construction unemployment rates in March.

Alaska had the highest estimated NSA construction unemployment rate in April (16.8 percent) for the eighth month in a row. Since these are NSA construction unemployment rates, it is often the case from fall through spring that Alaska has among the highest rates in the nation. However, the state posted the largest year-over-year increase (up 5.4 percent) in April.

New Mexico (11.6 percent) had the second highest construction unemployment rate in April, the same ranking as in March.
Illinois (8.8 percent) had the third highest rate in April. However, this was the state’s second lowest April rate (after 8.6 percent in 2015) since April 2006 (6.7 percent).

Louisiana, which had the 11th highest rate in March, had the fourth highest rate in April (8.7 percent).

Pennsylvania had the fifth highest rate in April (8.5 percent), an improvement over its ranking as fourth highest rate in March.

Connecticut and Rhode Island, which in March ranked third and fifth highest, respectively, moved to the middle of the rankings in April, 25th and 24th lowest, respectively. For Connecticut, its 6 percent rate was its lowest April rate since the 4.1 percent in 2001. Rhode Island’s rate (5.9 percent) was its second lowest April rate since 2006. The state also had the third largest year-over-year improvement (down 2.6 percent).

Further, Connecticut had the third largest monthly decline (down 6.2 percent) and Rhode Island had the fourth largest monthly decline (down 6 percent).

To better understand the basis for calculating unemployment rates and what they measure, see the article Background on State Construction Unemployment Rates.