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AGC's Data DIGest: January 19-26, 2015

Contractors, corporate economists show optimism; 2014 Dodge starts rose moderately

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.

Contractors are more optimistic about the overall state of construction in 2015 than in the previous five years, according to an annual Construction Outlook Survey that AGC released on Wednesday. Of the 912 respondents from AGC member companies, 80% said they expect an increase in their firms' headcount in 2015, while only 7% expect a decrease. About 60% expect the construction market to grow in 2015, while 21% expect growth to resume in 2016. Respondents were asked if they expect the dollar volume that they compete for to be higher or lower in 2015. Predictions of higher volume outnumber lower volume in 12 of 14 market segments, led by retail/warehouse/lodging (45% said "higher," vs. 12% "lower," for a net positive reading of 33%). The net positive reading was also strong for manufacturing construction, 26%; private office, 25%; water/sewer and energy, 24% each. The only net negative scores were for federally funded categories: marine construction, -6%; and direct federal construction, -16%. Labor availability is a major concern: among firms that are hiring (86% of respondents), 87% say they are having trouble filling craft worker positions (76%) and/or professional positions such as project manager/supervisor or estimator (62%). Roughly 60% of respondents' firms are increasing pay and/or benefits to retain and/or recruit craft and professional workers.

On balance, businesses in all sectors expect to increase headcount, wages and capital spending in the first quarter, according to the quarterly Business Conditions Survey of 93 corporate economists released today by the National Association for Business Economics. Of the 64 respondents who reported on their firms' expected spending on structures in the first quarter compared with the fourth quarter of 2014, 30% expect rising spending and 8% expect falling spending; the net positive reading of 22% is double that of the survey released in October.

The value of new construction starts slumped 16% at a seasonally adjusted annual rate in December following a 13% spurt in November, Dodge Data & Analytics (formerly McGraw Hill Construction) reported on Friday, based on data it collected. "Both nonresidential building and nonbuilding construction in December witnessed substantial percentage declines relative to their robust November amounts [-23% and -32%, respectively]. At the same time, residential building managed a modest gain [3%] in December with the help of further growth by multifamily housing. For 2014 as a whole, total construction starts climbed 7%," following increases of 9% in 2013 and 10% in 2012. Residential building construction, the largest of three categories, increased 8% for all of 2014 (vs. 26% in 2013 and 31% in 2012). Nonresidential building jumped 17% for the year, while nonbuilding construction fell 6%. "'The nonresidential building sector showed more growth for commercial building, the first increase for institutional building after five years of decline, and a surge of manufacturing plant projects,'" stated chief economist Robert Murray. "'Residential building was supported by the strengthening multifamily market, but was not able to offer the same upward push as in 2012 and 2013 given the flat performance by single-family housing. Nonbuilding construction showed a slower pace for public works, and while electric utilities lost further momentum, the decline was much less severe than in 2013. Looking ahead to 2015, nonresidential building should benefit from more private investment directed at commercial building and more financing for school construction given the passage of recent bond measures. However, the rate of increase for nonresidential building will be dampened by a slower pace for energy-related manufacturing projects. Residential building should see more multifamily housing while renewed growth for single family housing will need the banking industry to provide potential homebuyers with greater access to home mortgages. Nonbuilding construction will be helped by the fact that federal spending levels for fiscal 2015 were set in December, but Congress needs to address the stopgap federal transportation legislation that expires at the end of May.'"

Housing starts increased 4.4% at a seasonally adjusted annual rate in December from November and 5.2% from December 2013, the Census Bureau reported on Wednesday. Single-family starts rose 7.2% and 7.9%, respectively. The often-volatile multifamily (buildings with 5 or more units) starts dropped 4.2% for the month but inched up 0.3% year-over-year. For 2014 as a whole, total starts increased 8.8%, with single-family up 4.9% and multifamily up 17%. Building permits slipped 1.9% for the month and edged up 1.0% from December 2013, as single-family permits rose 4.5% and 8.1%, respectively, while multifamily permits plunged 12% for the month but climbed 9.9% year-over-year. For all of 2014, total permits increased 4.2%, with single-family permits up 1.4%, and multifamily permits rising 10%.

"In 2014, the union membership rate—the percent of wage and salary workers who were members of unions—was 11.1%, down 0.2 percentage point from 2013," the Bureau of Labor Statistics reported on Friday. "The number of wage and salary workers belonging to unions, at 14.6 million, was little different from 2013." In the private sector, 6.6% of employees were union members in 2014 (vs. 6.7% in 2013). The construction industry had 6,968,000 employees in 2014, of whom 968,000 (13.9%) were union members (vs. 14.1% in 2013) and 1,023,000 (14.7%) were represented by unions—workers who report no union affiliation but whose jobs are covered by a union or an employee association contract (vs. 14.9% in 2013).

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at www.agc.org/datadigest.

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