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AGC Data DIGest: January 19-24, 2022

Total construction starts were virtually unchanged from November to December at a seasonally adjusted annual rate, data firm Dodge Construction Network reported on Tuesday. For 2021 as a whole, starts rose 12% from 2020. Residential construction starts gained 4% in December 2021 and 20% for the year, with single-family starts up 3% and 18%, respectively, and multifamily starts up 5% and 25%. Nonresidential building starts rose 3% for the month and 12% for the year. For the month, the “commercial sector advanced 12% due to gains in retail, office, and hotel starts while parking structures lost ground. Institutional starts fell 17% in December as healthcare pulled back following a strong November. Manufacturing starts, meanwhile, posted a significant gain due to the start of a large project.” For the full year, commercial starts rose 8%; institutional starts, 5%; and manufacturing starts, 89%. Nonbuilding starts declined 12% for the month and inched up 0.4% for the year. Within nonbuilding, environmental public works gained 40% and 21%, respectively. Utilities/gas plants fell 79% for the month but rose 6% for the year. Miscellaneous nonbuilding dropped 23% and 16%, respectively. Highway and bridge starts fell by less than 1% in December and 6% for the year.

The Architecture Billings Index (ABI), which the American Institute of Architects calls “a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months,” increased to 52.0 in December from 51.0 in November, the 11th consecutive reading above the breakeven mark of 50 and far above the December 2020 score of 42.3, AIA reported on Wednesday. The ABI is derived from the share of responding architecture firms that report a gain in billings over the previous month less the share reporting a decline in billings, presented on a 0-to-100 scale. Any score above 50 means that firms with increased billings outnumbered firms with decreased billings. Scores by practice specialty (based on three-month moving averages) varied greatly: the score for mixed-practice firms reached the highest level since April 2005, 60.2 (up from 59.2 in November). In contrast, other specialties all slipped below 50: commercial/industrial and multifamily residential, both 49.2 (down from 50.4); and institutional, 47.6 (down from 48.8).

Housing starts (units) climbed 1.4% at a seasonally adjusted annual rate from November to December and 2.5% year-over-year (y/y) from the December 2020 level, the Census Bureau reported on Wednesday. For the year, starts rose 16% from 2020. Single-family starts declined 2.3% for the month and 11% y/y but increased 13% for the year. Multifamily (five or more units) starts increased 14% for the month, 56% y/y, and 22% for the year. Residential permits increased 9.1% from November, 6.5% y/y, and 17% for the year. Single-family permits increased 2.0% for the month and 13% for the year despite an 8.5% decrease y/y. Multifamily permits jumped 46% for the month, 43% y/y, and 26% for the year. The number of authorized multifamily units that have not started—an indicator of potential near-term starts—soared 53% y/y.

Recent reports from the Construction Labor Research Council and construction compensation consultancy PAS provide perspectives on construction compensation trends. “The first year of new union settlements reached during 2021 had an average increase of 3.0%...based on the total package (wages, fringe benefits and other employer payments),” compared to 2.9% in 2020 and 3.0% in 2019, CLRC reported on Tuesday. “Based on already known negotiated increases, past trends, and other relevant factors, CLRC projects a continuation of the slow but steady increase trend in the size of union total package rates as a percentage. Principal factors in union pay rates continue to include covid-19, union craft labor shortages, higher construction costs and the ever-present challenges to union market share.” Among the nine Census regions, the largest increase was in the Northwest (4.0%, down from 4.4% in 2020); the smallest, in the South Central region (2.0%, up from 1.7%). Across 16 crafts, “all but three crafts were within 0.4 percent[age points] of the mean in 2021.” Glaziers were the craft with the largest increase (3.4%, up from 2.3%); the smallest was for ironworkers (2.3%, up from 2.1%). Combining new settlements with the 2021 increase in prior-year settlements, the “average total package increase in 2021for all contract years for union crafts in construction was 2.8%. CLRC projects a relatively flat trend, with a slight uptick of 0.1% through 2023, bringing the percentage increase back to where it was in 2019.”

PAS reported on December 22, “Based on 199 companies in this 18th edition of the Construction Support Staff Salary Survey, excluding 0% projections, contractors are anticipating construction support staff wage increases to average 3.6%. This is down from the 2020 actual increase of 3.8%. When we factor in those contractors who are freezing pay, the projected 2021 increase is 3.5%....In 2021 the percentage of firms improving their benefit programs was 27.1%. The percentage of firms reducing their level of benefits in 2021 was 0.6%. Benefit costs remain at 25%, shown as a percent of base pay.”

Union membership in the construction industry rose by 31,000 (3.1%) from an annual average of 993,000 in 2020 to 1,024,000 in 2021, the Bureau of Labor Statistics reported on Tuesday. However, the 2020 figures reflect a steep decline in employment that affected union and non-unionized firms differently. Union membership in 2019 was 1,055,000. Total construction industry employment averaged 8,157,000 in 2021, a rise of 328,000 (4.2%) from 2020 but still 195,000 (2.3%) below the 2019 average of 8,352,000. As a result, the rate of unionization was nearly flat: 12.6% in 2019 and 2021, 12.7% in 2020. The number of employees represented by unions—including workers who report no union affiliation but whose jobs are covered by a union or an employee association contract—totaled 1,112,000 (13.6% of all construction industry employees) in 2021; 1,050,000 (13.4%) in 2020; and 1,133,000 (13.6%) in 2019.