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.
The Tax Cuts and Jobs Act will have diverse impacts on contractors' after-tax income and on demand for construction. In general, contractors taxed as C corporations will benefit immediately from a reduction in the top corporate tax rate from 35% to 21%. The impact on pass-through entities (S corporations, partnerships and sole proprietorships) will depend on the full set of tax changes for their owners/partners. The tax changes may boost demand in 2018, compared to prior law, for manufacturing plants and income-producing properties, including multifamily housing, but may be mixed or negative for public, institutional and single-family construction. AGC will hold a webinar on January 30 that will explore multiple aspects of the new law.
Seasonally adjusted construction employment rose in 42 states year-over-year (y/y) from December 2016 to December 2017, declined in eight states and held steady in the District of Columbia, an AGC analysis of Bureau of Labor Statistics (BLS) data released on Tuesday showed. The largest percentage gains again were in Nevada (13%, 10,400 jobs) and Rhode Island (11%, 2,100), followed by Oklahoma (11%, 8,200) and Oregon (11%, 10,000). The most jobs again were added in California (56,000, 7.1%), Florida (43,900, 9.1%) and Texas (27,900, 4.0%). The steepest percentage losses again occurred in Iowa (-9.2%, -7,500 jobs), Missouri (-7.2%, -8,800) and North Dakota (-4.1%, -1,300). Missouri and Iowa again lost the most construction jobs, followed again by North Carolina (-2,100, -1.0%). For the month, employment rose in 32 states and D.C., fell in 15, and was flat in Hawaii, Idaho and New York. California added the most jobs for the month (7,000, 0.8%), followed by Minnesota (5,700, 4.7%). Montana had the largest percentage gain for the month (5.5%, 1,500 jobs), followed by Minnesota. New Jersey had the largest and steepest job losses for the month (-4,300, -2.7%). Massachusetts, Oklahoma and Texas reached record highs. (AGC's rankings are based on seasonally adjusted data, which in D.C., Maryland and five other states is available only for construction, mining and logging combined.)
Construction data providers Dodge Data & Analytics and ConstructConnect posted totals on Thursday for the value of starts in 2017, based on their separate data collection. Both firms count the full value of a project in the month they deem it to start, whereas the Census Bureau spreads spending over the time construction occurs. The value of construction startsincreased 11% in 2017, ConstructConnect reported. The changes by category and major subcategory (in descending size) show heavy engineering/civil starts jumped 26%: roads, 7.6%; water and sewage treatment, 5.4%; and bridges, 41%. Residential starts climbed 13%: single-family, 7.4%, and multifamily, 25%. Nonresidential building starts rose 3.5%: educational, -3.8%; industrial, 43% (manufacturing, 70%, and warehouses, 26%); medical, -1.4% (hospitals/clinics, -21%; nursing homes, 12%; and medical miscellaneous, 34%); and commercial, -6.9% (private offices, -0.2%). The firm also posted totals for each state.
The value of new construction starts in December climbed 12% at a seasonally adjusted annual rate, following a 12% drop in November, Dodge reported. "Nonbuilding construction (public works and electric utilities/gas plants) jumped 43%, lifted by the start of the $2.3 billion I-66 Corridor Improvements Project in northern Virginia. Nonresidential buildingrose 10%, aided by the start of two large data center projects, while residential building edged up 1%. For all of 2017, total construction starts grew 3%..., which followed the 6% increase reported for 2016. The full year 2017 gain was dampened by a 35% downturn for the electric utility/gas plant category. If electric utilities and gas plants are excluded, total construction starts for 2017 would be 5% higher than the corresponding amount for 2016. [Chief economist Robert Murray stated,] 'On the positive side for 2017, institutional building assumed a leading role in keeping the nonresidential building expansion [up 7% from 2016] going, reflecting elevated activity for transportation terminal starts [up 121%] and further improvement by educational facilities [up 6%]. Manufacturing plant construction starts strengthened [up 21%], ending a two-year decline, and commercial building was able to stay close to its heightened 2016 amount [down 3%]. Residential building in 2017 showed more growth for single-family housing [up 8%], offsetting a downturn for multifamily housing [down 12%]. And public works construction in 2017 was able to strengthen [up 10%], helped by the start of several very large pipeline projects and a moderate gain for highway and bridge construction [up 7%].'"
Inflation-adjusted gross domestic product (real GDP)—the value of all goods and services produced in the U.S., net of imports—increased at a 2.6% seasonally adjusted annual rate in the fourth quarter of 2017 (2017Q4), following a 3.2% rise in Q3, the Bureau of Economic Analysis reported today. Real private fixed investment in nonresidential structures gained 1.4% (vs. a 7.0% slide in Q3). The category includes mining exploration, shafts, and wells, which climbed 17%; investment in other private nonresidential structures declined 2.1% (commercial and health care, 0.5%; manufacturing, -11%; power and communications, -11%; and other, 10%. Other "consists primarily of religious, educational, vocational, lodging, railroads, farm, and amusement and recreational structures, net purchases of used structures, and brokers' commissions on the sale of structures.") Real residential investment jumped 12% (vs. a 4.7% drop in Q3), with single-family up 9.5% and multifamily down 4.2%. Real government gross investment in structures soared 18% (vs. -8.1% in Q3), with federal investment up 50% (national defense structures, up 59%, nondefense structures, up 48%) and state and local investment up 17%. These estimates are adjusted for inflation, unlike the Census Bureau's spending put-in-place data. The GDP price index rose 2.4% (vs. 2.1% in Q3). The price index for private new nonresidential structures investment increased 2.1% (vs. 4.5% in Q3). Theprice index for new residential investment also increased 2.1% (vs. 3.0% in Q3). The price index for gross government structures investment increased 2.3% (vs. 4.8% in Q3).
The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at http://store.agc.org.