Construction Spending,
Labor & Materials Outlook
Austin Chapter-AGC
March 17, 2014
Ken Simonson
Chief Economist, AGC of America
simonsonk@agc.org
2014 AGC Construction Outlook Survey Results
Compared to 2013, do you expect the available dollar volume of project you compete for in 2014 to be:
Category
Net
Higher
Lower
Same
Manufacturing
+28%
44%
16%
40%
Retail, warehouse, lodging
+28
43
16
41
Private office
+28
43
14
43
Hospital/higher education
+25
42
17
41
Power
+25
40
15
45
Water/sewer
+17
35
17
48
Highway
+10
31
21
49
Public buildings
+5
30
25
45
K-12 school
+4
29
25
47
Other transportation
+3
24
21
18
21
Marine construction
-2%
Source: AGC Outlook Survey, January 2014
55
61
2
Construction spending (seasonally adjusted annual rate—SAAR)
Total construction, Jan. 2006-Jan. 2014 (billion $, SAAR)
$1,250
Billion $
$1,000
$943 billion
$750
$500
$250
$0
2006
2007
2008
2009
2010
2011
2012
2013
2014
12 month n% change
12-month % change, Jan. 2006-Jan. 2014
30%
Private Residential: 15%
15%
Private Nonresidential: 10%
0%
Total: 9%
Public: 2.5%
-15%
-30%
2006
2007
2008
2009
Source: Census Bureau construction spending reports
2010
2011
2012
2013
2014
3
Construction is growing, but unevenly
3 trends helping many sectors and regions:
• ‘Shale gale’
• Panama Canal expansion
• Residential revival
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
4
One (or many) bright spot(s): the shale ‘gale’
Bakken
Marcellus
Niobrara
Haynesville
Permian
Eagle Ford
Source: U.S. Energy Information Administration
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
Seattle & Tacoma
Columbia River at
Mouth, OR & WA
NY-NJ
Oakland
Baltimore
Norfolk
Los Angeles/
Long Beach
San Diego
Houston
Mobile
New Orleans
Charleston
Savannah
Jacksonville
Miami
Source: U.S. Army Corps of Engineers
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
Private residential spending is still rising—for now
Private residential spending, Jan. 2011-January 2014(billion $, SAAR)
$375
Multi-family
Billion $
$300
$225
Single family
$150
$75
$0
2011
Improvements
2012
2013
2014
12 month n% change
12-month % change, Jan. 2011-January 2014
60%
45%
Multi-family: 28%
30%
Single family: 21%
Total: 15%
Improvements: 4%
15%
0%
-15%
2011
2012
Source: Census Bureau construction spending reports
2013
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, add to demand
– Condos have been slower to revive than rentals
– Government-subsidized market likely to worsen
• Improvements: should benefit from rising SF sales
Source: Author
10
Nonres segments, 2013 & 2014 forecast (billion $, SAAR)
1/14 Total 2013 vs. 2012 2014 Forecast
Nonresidential
$579billion
Highway and street
88
Power (incl. oil & gas structures, pipelines)
84
Educational
78
Commercial (retail, warehouse, farm)
52
Manufacturing
51
Transportation
43
Office
42
Health care
39
Communication
21
Sewage and waste disposal
20
Lodging
17
Other (Amusement & recreation; water; public safety;
conservation; religious): 8% of total
Source: Census Bureau construction spending report; Author’s forecast
-2%
1
-11
-6
6
5
8
0
-3
-11
-1
26
4-8%
near 0
10+
0 to -5
0 to 5
10+
2 to 5
near 0
near 0
10+
-3
11
Construction spending: developer-financed (billion $, SAAR)
$80
Retail (private)
$80
$60
$60
$40
$40
$20
$20
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: 14%
$40
Warehouse (private)
$40
$20
$20
$10
$10
Source: Census Bureau construction spending reports
Private
Latest 12-mo. change: 11% (private 17%; public -10%)
$30
Latest 12-mo. change: 33%
Total
$0 Public
2008 2009 2010 2011 2012 2013 2014
$30
$0
2008 2009 2010 2011 2012 2013 2014
Office (82% private)
Lodging (private)
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: 48%
12
Construction spending: industrial, heavy (billion $, SAAR)
$100
$80
$60
$40
$20
$0
Power (85% private)
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: 2% (private 1%; public 9%)
Transportation facilities (72% public)
Manufacturing (99% private)
$100
$80
$60
$40
$20
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: -7%
Public & private transportation facilities
$50
$40
$30
$20
$10
$0
2008 2009 2010 2011 2012 2013 2014
$50
$40
$30
$20 Public
$10
Private
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: 8%
Latest 12-mo. change: (private 8%; public 8%)
Source: Census Bureau construction spending reports
13
Construction spending: institutional (private + state/local)
Total education (79% public)
$100
$80
$60
$40
$20
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: -2%
Healthcare (75% private)
Institutional
$100
$80
S/L PreK-12
$60
$40
S/L higher ed
$20
$0 Private
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. Change: (Private 2%;
State/Local higher -7%; State/Local PreK-12 -2%)
Hospitals (private, state & local)
$50
$40
$30
$20
$10
$0
2008 2009 2010 2011 2012 2013 2014
$50
$40
$30 Private
$20
$10 S/L
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: -4%
Latest 12-mo. change: (private -6%; public -5%)
Source: Census Bureau construction spending reports
14
Construction spending: public works (billion $, SAAR)
$90
Highways (99.96% public)
$30
$60
$20
$30
$10
$0
2008 2009 2010 2011 2012 2013 2014
Sewage/waste (99% public)
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: 15%
Latest 12-mo. change: 2%
Amusement & recreation (55% public)
Water supply (94% public)
$30
$30
$20
$20
$10
$10
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: -4%
Source: Census Bureau construction spending reports
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: -8%
15
Construction spending: developer-financed (billion $, SAAR)
$80
Retail (private)
$80
$60
$60
$40
$40
$20
$20
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: 14%
$40
Warehouse (private)
$40
$20
$20
$10
$10
Source: Census Bureau construction spending reports
Private
Latest 12-mo. change: 11% (private 17%; public -10%)
$30
Latest 12-mo. change: 33%
Total
$0 Public
2008 2009 2010 2011 2012 2013 2014
$30
$0
2008 2009 2010 2011 2012 2013 2014
Office (82% private)
Lodging (private)
$0
2008 2009 2010 2011 2012 2013 2014
Latest 12-mo. change: 48%
16
State construction employment change (U.S.: 2.1%)
12/12 to 12/13: 34 states up, 15+ DC down, 1 unchanged
Over -10%
-5.1% to -10%
-0.1% to -5%
0%
0.1% to 5%
5.1% to 10%
0.2%
-2%
2%
5%
7%
7%
-0.3%
8%
-0.3%
5%
2%
0%
5%
-2%
-0.1% -5%
6%
4%
2%
-1%
1%
4%
2%
-0.2%
CT
12%
RI
5%
-2%
DE
-1%
NJ
-3%
5%
MD
3%
DC
-5%
-1%
3%
-3%
-1%
3%
18%
4%
1%
7%
1%
8%
HI
5%
Source: BLS state and regional employment report
MA
3%
-3%
1%
NH
2%
VT
4%
2%
2%
Over 10%
Shading based on
unrounded numbers
In thousands
8,000
Construction Employment in United States, 1/90-11/13
(seasonally adjusted; shading = recessions)
7,000
6,000
Aug. ‘97
5,000
4,000
1990
In thousands
800
1995
2000
2005
2010
Construction Employment in Texas, 1/90-11/13
(seasonally adjusted; shading = recessions)
600
400
200
0
1990
Source: BLS
1995
2000
2005
2010
Construction Employment Change from Year Ago
1/08-11/13 (seasonally adjusted)
12-month % change
10%
U.S. 3.1%
Texas 2.2%
34 out of 51
0%
-10%
-20%
-30%
2008
Source: BLS
2009
2010
2011
2012
2013
Construction employment, Dec. ’13 vs. peak
• US: construction -25% (-1.9 million) below Apr. ‘06 peak
• States: LA & ND at new peak in 2013, 45 states > 10% below
• Metros: only 21 of 339 at new Dec. peak, not seas. adjusted
Peak in 2013
Within 10% of peak
>10% below peak
F
Source: Author, from BLS national and state & area employment data
(www.bls.gov/ces. www.bls.gov/sae)
20
Construction spending, labor & prices, 1/11-1/14
Spending +25% but jobs only +9%. How do they do it?
• Contractors charging slightly more: PPI +9% (industrial buildings)
• More hours per worker: aggregate hours +12% (+3% per employee)
• Implication: further spending growth will trigger bigger pickup in
hiring—but will workers be available?
25%
20%
15%
9%
10%
5%
0%
Spending
% change 1/11-1/14
% change 1/11-1/14
25%
25%
25% total
20%
9% price
change
15%
12%
10%
5%
15% real
0%
Employment
Source: Author, from Census Bureau (spending), BLS (employment, hours, PPI)
Spending
Total hours worked
22
Construction vs. overall (un)employment, 2/11-2/14
• Construction unemployment fell sharply in past 3 years
• But industry employment has risen modestly
• Thus, workers are leaving for other sectors, school, retiring
Unemployment rates
Change in unemployment & employment
(Not seasonally adjusted, Feb. 2011-Feb. 2014)
25%
20%
(Not seasonally adjusted, Feb. 2011-Feb. 2014)
Const. unem.
21.8%
-834,000
15%
10%
5%
477,000
Const. empl.
12.8%
9.5%
7.0%
Nonfarm empl.
6,678,000
0%
February '11
Construction
February '14
Total
Source: Author, from Census Bureau (spending), BLS (employment, hours, PPI)
-1 0
1
2
3
4
5
6
7
In Millions
23
Hardest positions to fill
(% of respondents who are having trouble filling)
Craft
Equipment operators
49%
Carpenters
44
Laborers
37
Professional
Project managers/supervisors
49%
Estimators
41
Source: AGC Worker Shortage Survey, Aug. 2013
24
Material & labor costs vs. office bid prices since 12/10
110
PPI for materials
2/13-2/14: 0.6%
PPI for offices
2/13-2/14: 2.9%
December 2010 = 100
108
106
ECI
12/12-12/13: 2.0%
104
102
100
12/10
2011
2012
2013
Source: Author, based on Bureau of Labor Statistics for Producer Price Indexes (PPIs)
and Employment Cost Index (ECI)
25
Producer price indexes for key inputs, 1/11-2/14 (Jan. 2011=100)
Steel mill products
Copper & brass mill shapes
140
140
120
120
100
100
80
2011
2012
2013
2014
80
2011
2013
Latest 1-mo. change: 0.7%, 12-mo.: 2%
Latest 1-mo. change: -1.5%, 12-mo.: -7%
Gypsum products
Lumber & plywood
140
140
120
120
100
100
80
2011
2012
2012
2013
2014
Latest 1-mo. change: 4.1%, 12-mo.: 12%
Source: Author, based on BLS producer price index reports
80
2011
2012
2013
2014
2014
Latest 1-mo. change: 1.8%, 12-mo.: 7%
26
Producer price indexes for key inputs, 1/11-2/14 (Jan. 2011=100)
No. 2 diesel fuel
Concrete products
130
130
115
115
100
100
85
2011
2012
2013
2014
85
2011
2013
Latest 1-mo. change: 4.4%, 12-mo.: -6%
Latest 1-mo. change: 0.9%, 12-mo.: 4%
Plastic construction products
Asphalt paving mixtures & blocks
130
130
115
115
100
100
85
2011
2012
2012
2013
2014
Latest 1-mo. change: 0.7%, 12-mo.: 0%
Source: Author, based on BLS producer price index reports
85
2011
2012
2013
2014
2014
Latest 1-mo. change: -0.2%, 12-mo.: 2%
27
Best prospects for 2014
•
•
•
•
•
•
•
Multifamily
Manufacturing, esp. petrochemical, oil/gas supply
Oil & gas fields
Pipelines
Warehouses
Lodging (hotels & resorts)
Rail
Source: Author
28
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
29
Summary for 2013, 2014-17
2012
actual
Total spending
2013
actual
2014-17
ann. avg.
forecast
9%
5%
6-10%
Private – residential
15%
18%
1-10%
– nonresidential
16%
-1%
1-10%
Public
-3%
-3%
0 or less
Materials PPI
1.4%
1.3%
1-3%; rare spikes
Employment cost index
1.6%
2.0%
2.5-5%
Source: 2012: Census, BLS; 2013-17: Author’s ests.
30
AGC economic resources
(email simonsonk@agc.org)
• 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
• webinar April 17 with AIA, Reed
• website: http://www.agc.org/Economics
31