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AGC's Data DIGest: December 14-18, 2015

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Construction employment rises from year ago in 44 states, D.C.; housing shows gains

Editor’s note:  Construction Citizen is proud to partner with AGC America to bring you AGC Chief Economist Ken Simonson's Data DIGest. Check back each week to get Ken's expert analysis of what's happening in our industry.

Seasonally adjusted construction employment rose in 44 states and the District of Columbia from November 2014 to November 2015 and declined in six states, an AGC analysis of Bureau of Labor Statistics (BLS) data released today showed. The number of places with year-over-year (y/y) gains was the most since February. The top three states for jobs added were again California (41,000 jobs, 5.9%), New York (30,500, 8.9%) and Florida (29,300, 7.2%). The steepest percentage gains were in Hawaii (12%, 3,900 jobs), Nevada (12%, 7,800), South Dakota (12%, 2,700) and Arkansas (12%, 5,600). West Virginia had the steepest percentage and numerical losses (-15%, -4,600). Construction employment also shrank in Rhode Island, North Dakota, New Mexico, Pennsylvania and Maine. For the month, there were gains in 38 states, losses in 12 and no change in D.C. (BLS combines mining and logging with construction in D.C., Hawaii, South Dakota and four other states.)

Housing starts jumped 16% y/y from November 2014 to November 2015 and 11% year-to-date (YTD) for the first 11 months of each year combined, the Census Bureau reported on Wednesday. Single-family starts leaped 15% y/y and 10% YTD. Multifamily (buildings with 5 or more units) starts soared 21% y/y and 13% YTD. Building permits, a fairly reliable predictor over time of near-term starts, especially single-family, increased 19% y/y and 13% YTD overall, with single-family permits rising 9.0% and 9.3%, respectively, and multifamily up 39% y/y and 20% YTD. Multifamily permits YTD (413,000) far exceed starts (360,000), suggesting more projects may begin soon. Single-family permits YTD (639,000) trail starts (663,000).

The Architecture Billings Index (ABI) November score slid to 49.3 from 53.1 in October (any score over 50 indicates billings growth), the American Institute of Architects reported on Wednesday. The index measures the percentage of surveyed architecture firms that reported higher billings than a month earlier less the percentage reporting lower billings. "Since architecture firms continue to report that they are bringing in new projects, this volatility in billings doesn't seem to reflect any underlying weakness in the construction sector," said Chief Economist Kermit Baker. "Rather, it could reflect the uncertainty of moving ahead with projects given the continued tightness in construction financing and the growing labor shortage problem gripping the entire design and construction industries." Based on three-month moving averages, firms with different practice specialties showed divergent trends: multifamily residential, 53.8, up from 52.5 in October; institutional, 52.0, up slightly from 51.8; commercial/industrial, 51.0, down from 52.6; and mixed practice, 47.6, down from 50.4.

Securities research firm Sanford C. Bernstein & Co. on November 30 described the outlook for construction as "still positive, but now with reason for more caution. This note presents the findings of our 10th proprietary survey of U.S. construction companies, which we've been conducting since 2009. This time around, we completed 411 valid interviews with construction companies over the past six weeks and examined current sentiment and future expectations both on an aggregate level and according to three subcomponents: residential (generally multi-family such as apartment buildings), commercial, and institutional. Current sentiment among Residential and Commercial construction companies picked up (again), while Institutional construction companies became less positive vs. six months ago. Expectations for future conditions among all three construction types declined vs. six months ago (from very high levels), but remain elevated for Residential and Commercial. On the other hand, expectations at Institutional construction companies are the least positive they've been in three years, which points to coming deceleration in construction growth rates....It's important to point out that we are not turning negative on construction—we still expect mid-single digit growth for the near to medium term in the U.S."

"When seasonal variations are removed from the data, [January-March 2016 hiring] intentions are relatively stable compared to Quarter 4 2015 and to one year ago at this time," ManpowerGroup reported on December 8 in releasing its latest quarterly survey of 11,000 U.S. employers. Employers in all 13 industry sectors included in the survey have a positive outlook for the first quarter. Construction is one of five sectors in which employers "anticipate a slight decrease in employment nationwide,...a moderate decrease [in the Midwest], a moderate hiring increase [in the Northeast], relatively stable hiring expectations [in the South and a] slight decrease in hiring plans" in the West.

Moderate demand growth continued in the third quarter of 2015 (3Q15) for income-producing properties, real-estate analyst Dividend Capital Research reported on November 25 in its quarterly Cycle Monitor analyzing conditions in more than 50 metro areas. Office occupancy rose 0.2% in 3Q15 and was up 0.6% y/y. "Completions were barely more than half demand growth...with New York, Dallas, Houston and Seattle leading the pack." Industrial occupancies increased 0.1% in 3Q15 and 0.5% y/y. "Completions were slightly higher than absorption, led by the Inland Empire." The national apartment occupancy average was flat in 3Q15 and rose "only 0.1% year-over-year as most markets were at their cyclical peak....Downtowns have both the majority of demand and construction...Many downtown markets are now seeing construction of sub-500 square foot apartments." Retail occupancies were up 0.1% in 3Q15 and 0.5% y/y. "Downtown retail has seen the strongest demand." Hotel occupancies increased an average of 0.1% in 3Q15 and 1.5% y/y. "Room demand growth moderated slightly in the third quarter which many consider a seasonal and cyclical trend. The increased use of Airbnb.com is moderating occupancy growth and putting pressure on hotels to keep room rates competitive."

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