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AGC Data DIGest: Dec. 27, 2022-Jan. 5, 2023

Contractors are upbeat but less than a year ago, AGC-Sage survey finds; November spending rises

Contractors are generally optimistic about the outlook for nonresidential and multifamily construction in 2023, but optimism is less widespread than a year ago, based on the 2023 AGC-Sage Construction Hiring and Business Outlook Survey, which AGC released on Wednesday. The survey included 1,032 responses submitted November 7-December 9. Respondents were asked whether the dollar value of projects they compete for would be higher or lower in 2023. The net reading (the percent of respondents expecting a higher dollar value less the percent expecting a lower amount) was positive for 14 out of 17 project types. The broadest optimism was for highway and bridge projects and transportation facilities; for both segments, the net reading was positive by 42 percentage points. There were also relatively high net readings for water and sewer projects, 38; federal agency work, 37; power and other health care (such as clinics, labs, and testing facilities), 28 each; and hospital and public building construction, 23 each. But only the last had a higher net reading than in the 2020 survey. The largest declines, 31 percentage points each, were in the net readings for warehouse construction (from 41 in the 2022 survey to 10) and multifamily projects (from 32 to 1). Net readings were negative for lodging (-4, down from 6 last year), private office (down from -8 to -21) and retail construction (down from -8 to -22). Two-thirds (69%) of firms expect to add employees in 2023, down slightly from 74% a year ago. Only 5% of firms reported having worked on new projects funded by the 2021 Infrastructure Investment and Jobs Act, while 6% said they had won bids but have not started work. Breakouts of the answers by respondents in 18 states, the four Census regions, three revenue sizes, and by union/open-shop showed broadly similar results.

Construction spending (not adjusted for inflation) totaled $1.81 trillion in November at a seasonally adjusted annual rate, up 0.2% from the upwardly revised October rate and up 8.5% year-over-year (y/y), the Census Bureau reported on Tuesday. However, without a deflator, it is impossible to say how much of the y/y gain is in units vs. price. Private residential construction decreased for the sixth-straight month, by 0.5%, with single-family homebuilding down 2.9%, multifamily construction spending up 2.4%, and owner-occupied improvements up 1.3%. Private nonresidential construction spending climbed 1.7%. The largest private nonresidential segment (at the seasonally adjusted November rate)—manufacturing construction—jumped 6.5% (including computer/electronic/electrical, up 16%, and chemical and pharmaceutical, up 0.2%). Commercial construction was flat (consisting of warehouse, down 1.5%; retail, up 1.5%; and farm, up 3.2%). Power rose 1.2% (with electric power up 1.0% and oil and gas field structures and pipelines up 2.0%). Private office and data center construction fell 0.1%. Public construction spending fell 0.1%. The largest public segment, highway and street construction, slid 1.0%. Public education rose 0.1%. Public transportation construction declined 0.2%.

There were 344,000 job openings in construction, not seasonally adjusted, at the end of November, an increase of 21,000 (6.5%) y/y and the largest November total in the 22-year history of the data, the Bureau of Labor Statistics (BLS) reported on Wednesday in its monthly Job Openings and Labor Turnover Survey (JOLTS) release. Hires fell by 102,000 (-30%) y/y to 234,000 and the hire rate, 3.0% of the month’s employment, was the lowest yet for November. BLS does not break out residential from nonresidential construction in the JOLTS report; however, the Census report on spending is consistent with a drop in residential hiring and an increase in nonresidential openings. Layoffs and discharges totaled 164,000 (2.1% of employees), the lowest November total and rate in series history. Quits fell by 91,000 (47%) to 102,000.

Contractors “are anticipating construction support staff wage increases to average 4.5% by year end, up from the 2021 actual increase of 4.4%” and 3.8% in 2020, construction pay consultancy PAS reported on December 27, based on its survey of 209 firms. “When we factor in those contractors who are freezing pay, the projected 2022 increase is 4.3%. Looking forward, we think 2023 support staff increases will likely mimic 2022 activity.”

“Through November, about $33 billion in new auto-factory investment has been pledged in the U.S., including money for the construction of new assembly plants and battery-making facilities, according to the Center for Automotive Research,” the Wall Street Journal reported Tuesday. “The 11-month total adds to the $37 billion in new auto-factory spending committed in 2021,” up from $9 billion in 2017. Locations in the South account for about two-thirds of the 2021 and 2022 investment announcements, although there have also been projects in Michigan, Ohio, Kansas, and elsewhere. The Census spending release showed a 26% y/y jump in transportation equipment plant construction.