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AGC's Data DIGest: January 18-25, 2021

Nonresidential, multifamily activity dives, Dodge, AIA, NABE, and Census data show; steel prices leap

Total construction starts (dollars) declined 5% from November to December at a seasonally adjusted annual rate, Dodge Data & Analytics reported on Tuesday. “Nonresidential building starts fell 11% during the month, while nonbuilding starts were 5% lower. Residential starts were essentially flat….For the full year, total construction starts fell 10%...Nonresidential building starts saw the steepest drop, losing 24% [to]—the lowest level since 2015. Commercial starts tumbled 26% over the year, with warehouse construction eking out a 1% gain in 2020. Institutional starts fell 13% last year, while manufacturing start dropped 59%. [N]onbuilding starts lost 14%....Significant pullbacks in starts were seen in the utility/gas plant category as well as in miscellaneous nonbuilding. Environmental public works starts dropped 5% in 2020, while the highway and bridge category saw an 8% increase in starts. [R]esidential starts were 4% higher than in 2019….Single-family starts were up 11%, while multifamily starts were 11% lower.”

The Architecture Billings Index (ABI) slumped to a seasonally adjusted level of 42.6 in December from 46.3 in November, the American Institute of Architects reported on Wednesday. AIA says, “The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months.” 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 below 50 means that firms with decreased billings outnumbered firms with increased billings. The December reading was the lowest since August and the monthly decline was the steepest since the record plunge from February to March. All four ABI scores by practice specialty (based on three-month moving averages) were below 50 for the second-straight month: mixed practice, 48.0 (down from 49.0 in November); commercial/industrial, 47.2 (up slightly from 46.9); residential (mostly multifamily), 46.1 (down from 48.4); and institutional, 38.5 (down from 40.1). An index of the value of new signed design contracts held nearly steady, at 48.5, compared to 48.6 in November.

More than two-thirds (69%) of the 92 corporate economists responding to the National Association for Business Economics’ latest Business Conditions Survey expect that inflation-adjusted gross domestic product (real GDP) will increase by 3.0% or more from the fourth quarter (Q4) of 2020 to Q4 2021, NABE reported today. However, of the 62 respondents who reported on capital spending on structures at their firms, 26% reported such investment had decreased in the past three months, compared to only 10% who reported an increase. Their expectations for Q1 also are negative, on balance: 26% expect a decline, compared to 5% who expect an increase.

Housing starts (units) rose 5.8% at a seasonally adjusted annual rate from November to December and 5.2% year-over-year (y/y) from December 2019, the Census Bureau reported on Thursday. Multifamily (five or more units) starts plunged 15% for the month and 40% y/y. Single-family starts rose 12% and 28%, respectively. Single-family starts in December were at the highest rate since 2006. For all of 2020, starts rose 7.0% from 2019, with single-family starts up 12% and multifamily starts down 4.2%. Residential permits increased 4.5% from November and 17% y/y, with single-family permits up 7.8% and 30%, respectively, and multifamily permits down 2.0% for the month and 7.8% y/y. For the full year, permits rose 4.8%, with single-family up 13% and multifamily down 11%.

Steel prices have soared in recent weeks. One analyst wrote on Wednesday, “Flat-rolled steel prices [not inflation-adjusted,] are at the highest levels seen since I have been involved in the steel business (1977). Supply is the issue. There are limited foreign steel tonnage available due to Section 232 tariffs (25%) and anti-dumping and countervailing duties. Imports are down about 75% from peak. Domestic mills have been consolidating with only two integrated producers left….These two producers do not have all of their blast furnaces running and are restricting supply. The [electric arc furnace mills, which supply most construction steel] are running at full capacity (at least on flat-rolled). Commodity prices have been rising—iron ore and scrap in particular are high due to strong business out of China and elsewhere. Demand has been high with every market except energy (which may also be rebounding with oil prices above $50/barrel).” On Friday, Nucor Steel’s American Buildings Company notified customers, “We acknowledge you just received our most recent price increase earlier this week. We are announcing a further price increase today of 10% (+/-), effective on all building orders quoted on or after February 1.” Readers are invited to send price announcements to ken.simonson@agc.org.

Union membership in the construction industry declined by 62,000 (5.9%) from an annual average of 1,055,000 in 2019 to 993,000 in 2020, the Bureau of Labor Statistics reported on Friday. However, total construction industry employment declined even more, from 8,352,000 to 7,829,000, a drop of 523,000 (6.3%). As a result, the union share of employment inched up from 12.6% to 12.7% after rounding. In contrast, 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—declined by 83,000 (7.3%), from 1,133,000 (13.6%) in 2019 to 1,050,000 (13.4%) in 2020. BLS cautioned, “Data on union members for 2020 reflect the impact on the labor market of the coronavirus (COVID-19) pandemic and efforts to contain it. Comparisons with union membership measures for earlier years, including metrics such as the union membership rate and the median usual weekly earnings of union members, should be interpreted with caution.”

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.