A Sustainable Workforce Starts With You

AGC's Data DIGest: Dec. 24, 2015-Jan. 6, 2016

Click on image to view more information.

Contractors show optimism about most segments in AGC poll; November spending dips

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 optimistic, on balance, about the outlook for nonresidential and multifamily construction, based on the 1,580 responses to a survey that AGC released Wednesday. About 44% expect the available dollar volume of projects they compete for in 2016 to be higher than in 2015, while 9% expect the volume to be lower, for a net positive reading of 34%. Among 13 market segments, the net was highest for retail, warehouse and lodging construction, 21%; followed by hospital and private office, 19% each; multifamily, 14%; higher education, 13%; K-12 school and public building, 12% each. There was less optimism about water/sewer, 8%; manufacturing, 7%; highway, 6%; other transportation, 3%; and power, 1%. Respondents registered a 1% net negative reading regarding the outlook for federal construction. However, the survey was completed before the recent enactment of federal tax bills with favorable terms for direct federal projects, highway and transit funds, and tax-subsidized wind and solar power construction. Only 6% of respondents expect their firms to reduce headcount in 2016 vs. 71% who expect an increase. About 70% say they are having a hard time filling key salaried or hourly craft positions and 69% say it will be as hard or harder to do so in 2016. These results were broadly similar to those of AGC's September 2015 workforce survey and January 2015 outlook survey. Of 14 issues listed as answers to a question regarding "the biggest concerns to you and your business," 52% picked worker shortages; 45% chose worker quality; 40%, rising direct labor costs; 43%, increased competition for projects; and 39%, growth in federal regulations. The 2016 survey was sponsored by software firm Sage and included several questions about contractors' use of information technology among other topics.

Construction spending in November totaled $1.122 trillion at a seasonally adjusted annual rate, 0.4% below the upwardly revised October rate but 10% higher than a year before, the Census Bureau reported on Monday. Census said figures "for January 2005 through October 2015 have been revised to correct a processing error in the tabulation of data on private residential improvement spending," which led to identical revisions in all totals that include it. The correction added more than $30 billion to the seasonally adjusted annual rate totals for each month from May 2014 through September 2015. Spending patterns diverged widely by segment and time period. Private residential spending increased for the eighth-straight month, by 0.3%, and 11% year-over-year (y/y). In contrast, private nonresidential spending slipped 0.7% for the month to a level lower than in May, although it was still up 14% y/y. Public construction declined for the third month in a row, by 1.0%, but was up 6.0% y/y. New multifamily construction dropped 0.7% for the month but rose 25% y/y; new single-family construction gained 0.6% and 9.3%, respectively; and residential improvements rose 0.1% and 8.3%. Among private nonresidential segments, in descending order of November size, manufacturing construction slumped 4.0% for the month to a seven-month low but was up 29% y/y; power fell 0.9% to an eight-month low but was up 5.6% y/y (comprising a 29% y/y jump in oil and gas pipelines and field structures offsetting a 4.7% drop in electric power facilities); commercial (retail, warehouse and farm) slid 0.9% for the month and 0.4% y/y; and office increased for the 9th consecutive month, by 1.7% and 23% y/y, to its highest level in seven years. Of the two largest public segments, highway and street construction fell 1.3% for the month but was up 5.6% y/y, while educational reached a four-year high, rising 5.0% from October and 15% y/y.

"Employers added 15.3 million square feet of office space in the fourth quarter, more than in any other quarter since the third quarter of 2007, according to real-estate research service Reis Inc.," the Wall Street Journal reported on Tuesday. Among 79 markets tracked by Reis, rents during 2015 rose most steeply in Seattle, 8.1%; San Francisco, 6.1%; and the San Jose area (including Silicon Valley), 6.0%. "On the other end of the spectrum...low oil prices are taking a toll on the Houston market. Companies there have dumped millions of square feet onto the sublease market while a rash of new construction is adding supply. Houston's vacancy rate rose to 15.6% from 14.5% a year earlier, according to Reis."

United Van Lines reported on Friday, "For the third consecutive year, Oregon holds on to the No. 1 spot as 'Top Moving Destination,' as Americans continue to pack up and head west and south. Those are the results of [the firm's] 39th Annual National Movers Study, which tracks customers' state-to-state migration patterns over the past year." State population estimates issued by Census on December 22 "show a noticeable expansion of Sun Belt migration gains observed in the previous year," according to a Brookings Institution article posted on Tuesday. "The Sun Belt states gained well over half million migrants in 2014-2015, coming close to matching the 600,000 Snow Belt to Sun Belt migration peak in 2004-2005. [Florida] gained 202,000 net migrants last year alone—leading all states in domestic migration gains for the first time since the years 2000 to 2005....Texas, Colorado, Arizona, South Carolina, North Carolina, Oregon and Georgia [each] received more migrants last year than the year before....Among the eight largest out-migrant states, New York, Illinois, California, New Jersey, Pennsylvania, Michigan, Ohio, and Connecticut all except [New York] showed greater migration losses last year than the year before....International migration has picked up substantially in the last two years. The net gain of 1.15 million in 2014-2015 is the largest since 2001. Sixty percent of these immigrants accrue to Sun Belt states with California, Texas, and Florida accounting for more than half." Unlike immigration and natural increase (births less deaths), migration may offset increased demand for construction and workers in some states with equal decreases elsewhere.

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.