Construction Spending, Labor & Materials Outlook
October 15, 2014Ken Simonson
Chief Economist, AGC of [email protected]
2
2006 2008 2010 2012 2014-20%
-10%
0%
10%
Total (8/13-8/14: 3.9%)Residential (5.6%)
2006 2008 2010 2012 2014-30%-15%
0%15%30%
Total (8/13-8/14: 5%) Res (3%) Private Nonres (9%) Public (2%)
2006 2008 2010 2012 20140
1,5003,0004,5006,0007,500
Total employment, Jan. 2006-August 2014thousands, seasonally adjusted
Construction spending & employment, 2006-14
Source: BLS, Census Bureau construction spending reports
12-month % change, Jan. 2006-August 2014
2006 2008 2010 2012 2014$0
$250,000$500,000$750,000
$1,000,000$1,250,000
Total spending, Jan. 2006-August 2014billion $, seasonally adjusted annual rate (SAAR)
8/14: $961 bil.
12-month % change, Jan. 2006-August 2014
8/14: 6,063,000
3
Construction is growing, but unevenly3 trends helping many sectors and regions:• ‘Shale gale’ • Panama Canal expansion• Residential revival, especially multifamily
3 trends holding down construction growth:• Government spends less on schools, infrastructure• Consumers switch from stores to online buying• Employers shrink office space per employee
Source: Author
One (or many) bright spot(s): the shale ‘gale’
4Source: U.S. Energy Information Administration
Haynesville
Eagle Ford
Bakken
Marcellus
Niobrara
Permian
5
Shale’s direct and indirect impacts on construction
• Onsite: Each well requires access road, site prep, pad, storage pond, support structures, pipes
• Nearby: Products, water require trucking, rail, pipeline, processing
• Local spending by drilling firms, workers, royalty holders• Upstream: orders for fracking sand, rigs, compressors,
pumps, pipe, tanks, trucks, railcars, processing facilities • Downstream: Petrochemical, power, steel plants; LNG
export terminals, fueling stations; LNG-powered vehicles• Losers: coal; maybe wind, solar, nuclear & suppliers
Source: Author
6
U.S. ports affected by Panama Canal expansion
Source: U.S. Army Corps of Engineers
Baltimore
NY-NJ
Norfolk
Seattle & Tacoma
Charleston San Diego
Oakland
Miami
Savannah Jacksonville
Mobile
Columbia River at Mouth, OR & WA
Los Angeles/ Long Beach
New OrleansHouston
7
Panama Canal expansion’s impacts on construction
• Ports: investing in dredging, piers, cranes, land access• Nearby: Storage, warehouse, trucking, rail facilities• Bridge, tunnel, highway improvements• Inland: possible changes in distribution, manufacturing
Source: Author
8
2011 2012 2013 2014-15%
0%
15%
30%
45%
60%
12 m
onth
% c
hang
e
2011 2012 2013 2014$0
$75,000
$150,000
$225,000
$300,000
$375,000
$450,000
Billi
on $
Private residential spending: MF still soaring, SF slowingPrivate residential spending, Jan. 2011-August 2014 (billion $, SAAR)
Multifamily (MF)
Single family (SF)
Improvements
Improvements: -10%
Single family: 8%
Multifamily: 36%
Total: 4%
Source: Census Bureau construction spending reports
12-month % change, Jan. 2011-August 2014
9
Housing outlook• SF: rising for now but tight credit, fear of lock-in,
demographic shifts may limit increases• MF: Upturn should last into 2015– Vacancy rates near multi-year lows in most cities– Preference for urban living adds to demand– Condos have been slower to revive than rentals– Government-subsidized market likely to worsen
• Improvements: should generally track SF sales
Source: Author
10
8/14 Total 2013 vs. 2012 2014 Forecast
Nonresidential $604billion -1 % 4-8%Power (incl. oil & gas structures, pipelines) 102 -7 10+Highway and street 83 1 0 to -5Educational 79 -8 0 to -5Manufacturing 57 0 10+Commercial (retail, warehouse, farm) 55 8 0 to 5Office 44 0 0 to 5Transportation 40 5 2 to 5Health care 39 -2 0 to -5Sewage and waste disposal 24 -3Amusement & recreation 17 0Lodging 16 25 10+Other (Communication; water; public safety; conservation; religious): 8% of total -2
Nonres segments, 2013 & 2014 forecast (billion $, SAAR)
Source: Census Bureau construction spending report; Author’s forecast
11
2008 2009 2010 2011 2012 2013 2014$0
$10,000
$20,000
$30,000
2008 2009 2010 2011 2012 2013 2014$0
$10,000
$20,000
$30,000
2008 2009 2010 2011 2012 2013 2014$0
$10,000
$20,000
$30,000
2008 2009 2010 2011 2012 2013 2014$0
$30,000
$60,000
$90,000
Construction spending: public works (billion $, SAAR)
Source: Census Bureau construction spending reports
Highways (99.94% public)
Amusement & recreation (58% public)
Sewage/waste (99% public)
Water supply (95% public)
Latest 12-mo. change: -0.2% Latest 12-mo. change: 4%
Latest 12-mo. change: 2% Latest 12-mo. change: -2%
12
2008 2009 2010 2011 2012 2013 2014$0
$15,000
$30,000
$45,000
$60,000
2008 2009 2010 2011 2012 2013 2014$0
$30,000
$60,000
$90,000
$120,000
2008 2009 2010 2011 2012 2013 2014$0
$15,000
$30,000
$45,000
$60,000
2008 2009 2010 2011 2012 2013 2014$0
$15,000
$30,000
$45,000
$60,000
Construction spending: industrial, heavy (billion $, SAAR)
Source: Census Bureau construction spending reports
Power (88% private)
Transportation facilities (72% public)
Manufacturing (99% private)
Public & private transportation facilities
Latest 12-mo. change: 16% (private 17%; public 10%)
Latest 12-mo. change: 3%
Latest 12-mo. change: 14%
Latest 12-mo. change: private 3%; public 3%
Public
Private
13
2008 2009 2010 2011 2012 2013 2014$0
$20,000$40,000$60,000$80,000
$100,000$120,000 Total education (79% public)
2008 2009 2010 2011 2012 2013 2014$0
$10,000$20,000$30,000$40,000$50,000
2008 2009 2010 2011 2012 2013 2014$0
$20,000$40,000$60,000$80,000
$100,000
2008 2009 2010 2011 2012 2013 2014$0
$10,000$20,000$30,000$40,000$50,000
Construction spending: institutional (private + state/local)
Source: Census Bureau construction spending reports
Total healthcare (74% private)
Education (state & local K-12, higher; private)
Hospitals (private, state & local)
Latest 12-mo. change: 2%
Latest 12-mo. change: -7% Latest 12-mo. change: private -5%; state & local -16%
S/L preK-12
Private
S/L higher ed
S/L
Private
Latest: state/local preK-12 -4%, higher 6%; private -1%
2008 2009 2010 2011 2012 2013 2014$0
$20,000
$40,000
$60,000
$80,000
2008 2009 2010 2011 2012 2013 2014$0
$10,000
$20,000
$30,000
$40,000
2008 2009 2010 2011 2012 2013 2014$0
$10,000
$20,000
$30,000
$40,000
2008 2009 2010 2011 2012 2013 2014$0
$20,000
$40,000
$60,000
$80,000
Construction spending: developer-financed (billion $, SAAR)
Source: Census Bureau construction spending reports
Retail (private)
Warehouse (private)
Office (80% private)
Lodging (private)
Latest 12-mo. change: 3%
Latest 12-mo. change: 48% Latest 12-mo. change: 10%
Latest 12-mo. change: 19% (private 19%; public 20%)
Private
Public
Total
-2%
4%
1%
6%
0%
-1%
2%
13%
-4%
4%
-0.5%
9%
-2%
2%
4%
3%
4%
3%
3%
-0.4%
7%
3%
6%
3%
6%
-0.4%
-7% 3%
-1%
1%
5%
3%
4%
4%
12%
7%
-5%
6%
11%
HI-0.3%
2%
VT5%
CT6%
RI4%
DE11%
NJ-8%
MD4%
DC-1%
NH0%
Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5%
MA0.2%
State construction employment change (U.S.: 3.9%) 8/13 to 8/14: 36 states up, 12 + DC down
5.1% to 10% Over 10%
Shading based on unrounded numbers
0%
Source: BLS state and regional employment report
7%
16
Construction employment, Aug. ‘14 vs. peak• US: construction -21% (-1.7 million) below Apr. ‘06 peak• States: La. and N.D. at new peak in 2014, 43 states > 10%
below• Metros: only 31 of 339 at new July peak, not seas. adjusted
F
Peak in 2014
Within 10% of peak
>10% below peak
Source: Author, from BLS national and state & area employment data (www.bls.gov/ces. www.bls.gov/sae)
Spending +21% but jobs only +10%. How do they do it?• Contractors charging more: PPI +11% (nonresidential buildings)• More hours per worker: aggregate hours +14% (+3% per employee)• Implication: further spending growth will trigger larger pickup in
hiring—but will workers be available?
Spending Total hours worked0%
5%
10%
15%
20%
25%
14%
% c
hang
e 8/
10-8
/14
9% real
Construction spending, labor & prices, 8/10-8/14
Spending Employment0%
5%
10%
15%
20%
25%21%
10%
% c
hang
e 8/
10-8
/14 21% total
11% price change
Source: Author, from Census Bureau (spending), BLS (employment, hours, PPI)
19
September '10 September '140%
5%
10%
15%
20%
17.2%
7.0%9.2%
5.7%
Construction Total
Change in construction (un)employment, 9/10-9/14
• Construction unemployment fell sharply in past 4 years• But industry employment rose much less• Thus, workers left for other sectors, school, retiring
Source: Author, from BLS
Unemployment rates(Not seasonally adjusted, Sept. 2010-Sept. 2014)
0.00
250,000.00
500,000.00
750,000.00
1,000,000.00
860,000
576,000
Change in unemployment & employment(Not seasonally adjusted, Sept. 2010-Sept. 2014)
284,000Workers who
have left industry
20
Hardest positions to fill(% of respondents who are having trouble filling)
Source: AGC Member Survey, Jan. 2014
Craft
Equipment operators 48%Carpenters 44Laborers 37
Professional
Project managers/supervisors 48%Estimators 41
21
2011 2012 2013 2014100
102
104
106
108
110
112
Dec
embe
r 201
0 =
100
Material & labor costs vs. nonresidential building prices 12/10-8/14
Source: Author, based on Bureau of Labor Statistics for Producer Price Indexes (PPIs) and Employment Cost Index (ECI); Federal Highway Administration for NHCCI
ECI (empl. cost)6/13-6/14: 1.3%
PPI for nonres buildings8/13-8/14: 3.3%
PPI for materials8/13-8/14: 1.7%
12/10
22
2011 2012 2013 201480
100
120
140
2011 2012 2013 201480
100
120
140
2011 2012 2013 201480
100
120
140
2011 2012 2013 201480
100
120
140
Producer price indexes for key inputs, 12/10-8/14 (Dec. 2010=100)
Source: Author, based on BLS producer price index reports
Steel mill products
Gypsum products
Copper & brass mill shapes
Lumber & plywood
Latest 1-mo. change: 0.3%, 12-mo.: 4%
Latest 1-mo. change: -0.9%, 12-mo.: 8%
Latest 1-mo. change: -0.7%, 12-mo.: -1%
Latest 1-mo. change: 1.5%, 12-mo.: 11%
12/10
12/10 12/10
12/10
23
2011 2012 2013 201480
100
120
140
2011 2012 2013 201480
100
120
140
2011 2012 2013 201480
100
120
140
2011 2012 2013 201480
100
120
140
Producer price indexes for key inputs, 12/10-8/14 (Dec. 2010=100)
Source: Author, based on BLS producer price index reports
Plastic construction products
Concrete products
Asphalt paving mixtures & blocks
Latest 1-mo. change: -0.3%, 12-mo.: -4%
Latest 1-mo. change: 0.5%, 12-mo.: 2%
Latest 1-mo. change: 0.5%, 12-mo.: 4%
Latest 1-mo. change: 0.8%, 12-mo.: 2%
Diesel fuel
12/10
12/10 12/10
12/10
24
Best prospects for 2014-15• Multifamily• Manufacturing, esp. petrochemical, oil/gas supply• Oil & gas fields• Pipelines• Warehouses• Lodging (hotels & resorts)• Rail• Data centers
Source: Author
25
Trends: 2014-2017• Total construction spending: +6% to +10% per year– less SF housing, retail; declining public spending– new drivers: shale-based gas & oil; Panama Canal
widening; more elderly & kids, fewer young adults• Materials costs: +1 to +3% (similar to CPI); rare spikes• Labor costs: +2.5% to + 5%• Labor supply: widespread shortages possible due to
retirements, competition from other sectors, fewer vets
Source: Author
26
Summary for 2013, 2014-17
Source: 2012: Census, BLS; 2013-17: Author’s ests.
2013actual
2014forecast
2015-17ann. avg.forecast
Total spending 6% 6-9% 6-10%
Private – residential 20% 6-10% 1-10%
– nonresidential 1% 12-15% 1-10%
Public -3% -1 to +2% 0 or less
Materials PPI 1.3% 1-2% 1-3%; rare spikes
Employment cost index 2.0% 1.5-2.5% 2.5-5%
27
AGC economic resources (email [email protected])
• The Data DIGest: weekly 1-page email (subscribe at www.agc.org/datadigest)
• monthly press releases: spending; PPI; national, state, metro employment
• state and metro data, fact sheets• website: http://www.agc.org/Economics• webinars: Nov. 20 (email for details)
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