Tag Archive for 'residential'

ABC Reports : Nonresidential Construction Down in March, Says ABC Private Sector Falters, Public Sector Unchanged

Nonresidential construction spending declined 0.3 percent in March, according to an Associated Builders and Contractors (ABC) analysis of U.S. Census Bureau data released today. Nonresidential spending, which totaled $740.9 billion on a seasonally adjusted, annualized basis, has expanded 2.5 percent on a year-over-year basis. February’s spending estimate was revised roughly $10 billion higher, from $732.8 billion to $742.8 billion, rendering the March decline less meaningful.

Private sector nonresidential construction spending fell 0.4 percent on a monthly basis but rose 2.2 percent from a year ago. Public sector nonresidential spending remained unchanged in March, but it is up 2.9 percent year-over-year.

“The nonresidential construction spending data emerging from the Census Bureau continue to be a bit at odds with other data characterizing growth in the level of activity,” said ABC’s Chief Economist Anirban Basu. “For instance, first quarter GDP data indicated brisk expansion in nonresidential investment. Data from ABC’s Construction Backlog Indicator, the Architecture Billings Index and other leading industry indicators have also been suggesting ongoing growth. Despite that, private nonresidential construction spending is up by roughly the inflation rate, indicating that the volume of services delivered over the past year has not expanded in real terms.

“That said, most economists who follow the industry presumed that March data would be somewhat soft,” said Basu. “The Northeast and Midwest were impacted by unusually persistent storm activity in March. The same phenomenon impacted March’s employment estimates, which indicated that construction actually lost 15,000 jobs that month. Other weather-sensitive industries, including retail trade, also experienced slow to negative job growth in March.

“The upshot is that CEOs and other construction leaders should remain upbeat regarding near-term prospects despite today’s construction spending report,” said Basu. “Leading indicators, including a host of confidence measures, collectively suggest that business investment will be on the rise during the months ahead. Improved state and local government finances should also support additional nonresidential construction activity.

“At the same time, construction industry leaders must remain wary of a sea of emerging risks to the ongoing economic and construction industry expansions,” said Basu. “Interest rates are on the rise. Materials prices, including those associated with softwood lumber, steel, and aluminum, are expanding briskly. Wage pressures continue to build. There are also issues related to America’s expanding national debt, increasingly volatile financial markets, the geopolitical uncertainty that has helped to propel fuel prices higher, and lack of transparency regarding America’s infrastructure investment intentions. The challenge for construction CEOs and others, therefore, is to prepare for growing activity in the near-term, but for something potentially rather different two to three years from now.”

Wells Fargo Reports: Housing Construction Continued to Strengthen in November

Housing starts rose 3.3 percent in November to a 1.297 million-unit pace after a downwardly revised 1.256 million-unit pace in October. Strength in the West and South pushed single-family starts to a decade high.

Residential Building Up in the South and West

  •  Revisions pushed some of the building activity first reported in October into November. Housing starts were at a 1.297 million- unit pace in November and single-family building reached a new cycle-high of 930,000 units.
  •  Residential starts were up in the South and West, but declined in the Midwest and Northeast. Multifamily was behind the slowdown in the Northeast, which has seen completions surge.

Residential Investment to Still Boost Q4 GDP

  • Revisions post-storm pushed the bulk of building activity into November. The building trend is clearly on the rise, particularly compared with earlier this year. Solid readings for both October and November bode well for Q4 GDP growth.
  • Construction is likely to strengthen further in coming months. The latest NAHB/Wells Fargo survey of homebuilders posted solid gains in December, reaching its highest level since 1999.

ABC Says, U.S. Economic Growth Accelerates in Second Quarter; Nonresidential Fixed Investment Maintains Momentum

Real gross domestic product (GDP) expanded by 2.6 percent on a seasonally adjusted annualized basis during the year’s second quarter, according to Associated Builders and Contractors’ analysis of data released today by the Bureau of Economic Analysis. Nonresidential fixed investment, a category of GDP embodying nonresidential construction activity, expanded at a 5.2 percent seasonally adjusted annual rate. This follows a 7.2 percent expansion during the first quarter.

The expansion in nonresidential fixed investment indicates that growth in business outlays continues to support the ongoing economic recovery, now in its ninth year.  The expansion of nonresidential fixed investment contributed more than sixth-tenths of a percentage point to GDP growth.  This was due in large measure to an uptick in investment in construction equipment.  The other two components of nonresidential fixed investment—investment in structures and intellectual property—also expanded, but at a slower pace.

“This was a good report from the perspective of the nation’s nonresidential construction firms, particularly those primarily engaged in private as opposed to public construction,” said ABC Chief Economist Anirban Basu.  “The uptick in investment in construction equipment is particularly noteworthy because it signals a general belief that construction activity will continue to recover in America.  Backlog among many nonresidential construction firms is already healthy, and today’s report suggests that backlog is not set to decline in any meaningful way anytime soon.

“One might wonder why construction firms remain so busy in an economic environment still characterized by roughly 2 percent growth,” said Basu.  “There are many factors at work, including the ongoing boom of the e-commerce economy, which has continued to trigger demand for massive fulfillment and distribution centers even as stores close in massive numbers at America’s malls.  The influx of global investment to a number of segments, including hotel and office construction, also helps explain disproportionate growth in certain private categories.  With global fixed-income yields remaining so low, investors from around the world, including from the United States, are likely to continue to seek out opportunities for higher rates of return in commercial real estate, which thus far has had the impact of increasing property values and triggering construction.

“For the broader economy to accelerate, policymakers in Washington, D.C., will need to begin to make progress on corporate tax relief and infrastructure,” said Basu.

Source: Bureau of Economic Analysis

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 Reports: U.S. Labor Market Resurgent in June; Construction Adds 16,000 Jobs

National construction employment added 16,000 net new jobs on a seasonally adjusted basis in June, according to an analysis of data from the U.S. Bureau of Labor Statistics by Associated Builders and Contractors (ABC).  Overall construction employment expanded 3.1 percent on a year-over-year basis, easily outpacing the year-over-year growth rate of 1.6 percent for all nonfarm industries.

The nonresidential construction sector added 10,300 net new jobs in June after adding 4,900 in May (revised upward from 4,400 jobs), while the residential sector added 6,000 net jobs for the month.

The construction industry unemployment rate, which fell 1 percentage point in May, declined further in June and now stands at just 4.5 percent.  Construction unemployment tends to decline in the summer.  However, the decline in unemployment is still significant because industry unemployment now stands near lows achieved in 2006.

“This jobs report is just what the doctor ordered,” said ABC Chief Economist Anirban Basu.  “June’s employment gains impressed along every dimension.  In addition to a robust headline of 222,000 jobs created, the labor force participation rate ticked higher to 62.8 percent from 62.7 percent and the employment-to-population ratio edged higher to 60.1 percent from 60.0 percent.  While the labor force participation rate is only a bit higher than it was a year ago, the employment-to-population ratio is up 0.5 percent.  Idleness has been on the decline in America, at least based upon the latter measure.

“Construction job growth represents an important part of the story.  The majority of construction job gains in June were in nonresidential construction, though performance within the nonresidential building and heavy/civil engineering segments was subdued.  Within nonresidential construction, nonresidential specialty trade contractors represented more than 100 percent of job gains,” continued Basu.

Prior to June, the nation had failed to add 200,000 or more jobs in five of eight months.  June was a welcome respite from an emerging trend of softening job growth.  However, the acceleration in job creation may not last.  Job gains in June were likely aided by high school and post-secondary graduations, resulting in a surge in new job seekers and more opportunities to fill available job openings.  America continues to face structural shortfalls in skilled human capital, something that construction industry leaders know all too well.”

June 2017 Construction Employment

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.