Construction Spending, Labor & Materials Outlook
January 2, 2014Ken Simonson
Chief Economist, AGC of [email protected]
2
2006 2007 2008 2009 2010 2011 2012 2013-30%
-15%
0%
15%
30%
12 m
onth
n%
cha
nge
12 m
onth
n%
cha
nge
2006 2007 2008 2009 2010 2011 2012 2013$0
$250,000
$500,000
$750,000
$1,000,000
$1,250,000
Billi
on $
Construction spending (seasonally adjusted annual rate—SAAR)Total construction, Jan. 2006-Nov. 2013 (billion $, SAAR)
Public: $275
Private Nonresidential: $314
Private Residential: $346
12-month % change, Jan. 2006-Nov. 2013
Public: 0%Private Nonresidential: 1%
Private Residential: 17%
Total: 6%
Source: Census Bureau construction spending reports
Nov. 2013 total: $934 bil.
3
Construction is growing, but unevenly3 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
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 2013-15%
0%
15%
30%
45%
60%
12 m
onth
n%
cha
nge
2011 2012 2013$0
$75,000
$150,000
$225,000
$300,000
$375,000
Billi
on $
Private residential spending is still rising—for nowPrivate residential spending, Jan. 2011-November 2013 (billion $, SAAR)
Multi-family
Single family
Improvements
12-month % change, Jan. 2011-November 2013
Improvements: 10%
Single family: 18%
Multi-family: 36%
Total: 17%
Source: Census Bureau construction spending reports
9
Housing outlook• SF: rising for now but tight credit, fear of lock-in,
demographic shifts may limit increases• MF: Upturn should last into late 2014, perhaps 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
11/13 Total 11/12-11/13 2014 ForecastNonresidential $583 billion 1% 4-8%
Power (incl. oil & gas structures, pipelines) 85 -21 10+Highway and street 82 4 near 0Educational 82 1 0 to -5Manufacturing 55 14 10+Commercial (retail, warehouse, farm) 55 17 -5 to 5Transportation 43 9 2 to 10Office 40 6 near 0Health care 40 0 near 0Sewage and waste disposal 21 -6 10+Communication 16 -11Lodging 15 31Other (Amusement & recreation; 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$0
$10,000
$20,000
$30,000
$40,000
2008 2009 2010 2011 2012 2013$0
$30,000
$60,000
$90,000
$120,000
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
$40,000
2008 2009 2010 2011 2012 2013$0
$30,000
$60,000
$90,000
$120,000
Construction spending: industrial, heavy (billion $, SAAR)
Source: Census Bureau construction spending reports
Power (84% private)
Private transportation facilities
Manufacturing (99% private)
Public transportation facilities
Latest 12-mo. change: -21% (private -24%; public -2%)
Latest 12-mo. change: 18%
Latest 12-mo. change: 14%
Latest 12-mo. change: 5%
PrivatePrivate
Public
12
2008 2009 2010 2011 2012 2013$0
$20,000
$40,000
$60,000
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
2008 2009 2010 2011 2012 2013$0
$20,000
$40,000
$60,000
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
Construction spending: institutional (private + state/local)
Source: Census Bureau construction spending reports
Total private education
Hospitals (79% private)
State & local higher education
State & local preK-12 education
Latest 12-mo. change: 7%
Latest 12-mo. change: -3% (private 0%; state/local -13%)
Latest 12-mo. change: 3%
Latest 12-mo. change: -1%
PrivateState/local
13
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
2008 2009 2010 2011 2012 2013$0
$30,000
$60,000
$90,000
Construction spending: public works (billion $, SAAR)
Source: Census Bureau construction spending reports
Highways (99.9% public)
Amusement & recreation (57% public)
Sewage/waste (99% public)
Water supply (95% public)
PublicPublic
Public
PrivatePublic
Latest 12-mo. change: 4% Latest 12-mo. change: -6%
Latest 12-mo. change: 6% (private 12%; public 1%) Latest 12-mo. change: 2%
14
2008 2009 2010 2011 2012 2013$0
$20,000
$40,000
$60,000
$80,000
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
$40,000
2008 2009 2010 2011 2012 2013$0
$10,000
$20,000
$30,000
$40,000
2008 2009 2010 2011 2012 2013$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: 24%
Latest 12-mo. change: 26% Latest 12-mo. change: 33%
Latest 12-mo. change: 6% (private 11%; public -13%)
Public
Private
3%
-0.1%
8%
5%
4%
-4%
5%
-0.2%
5%
7%
2%
8%
2%
2%
1%
1%
2%
4%
5%
10%
4%
4%
3%
2%
-3%
-1%
-1%
17% -3%
-3%
3%
1%
-0.5%
-1%
9%
7%
6%
5%
6%
4%
HI4%
6%
VT4%
CT11%
RI3%
DE-3%
NJ3%
MD4%
DC-4%
NH7%
Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5%
MA5%
State construction employment change (U.S.: 3.1%) 11/12 to 11/13: 39 states up, 10+ DC down, 1 unchanged
5.1% to 10% Over 10%
Shading based on unrounded numbers
0%
Source: BLS state and regional employment report
16
Construction employment, Nov. ’13 vs. peak• US: construction -24% (-1.9 million) below Apr. ‘06 peak• States: LA & ND at new peak in 2013, 44 states > 10% below• Metros: only 25 of 339 at new Oct. peak, not seas. adjusted
F
Peak in 2013
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)
18
Spending +23% but jobs only +8%. How do they do it?• Contractors charging slightly more: PPI +9% (industrial buildings)• More hours per worker: aggregate hours +12% (+4% per employee)• Implication: further spending growth will trigger bigger pickup in
hiring—but will workers be available?
Construction spending, labor & prices, 1/11-11/13
Spending Employment0%
5%
10%
15%
20%
25% 23%
8%
% ch
ange
1/1
1-10
/13
Spending Total hours worked0%
5%
10%
15%
20%
25%
12%%
chan
ge 1
/11-
10/1
3
23% total
9% price change
14% real
Source: Author, from Census Bureau (spending), BLS (employment, hours, PPI)
19
November '10 November '130%
5%
10%
15%
20%
18.8%
8.6%9.3%6.6%
Construction Total
Construction vs. overall (un)employment, 11/10-11/13
• Construction unemployment fell sharply in past 3 years• But industry employment has risen modestly• Thus, workers are leaving for other sectors, school, retiring
Source: Author, from Census Bureau (spending), BLS (employment, hours, PPI)
Unemployment rates(Not seasonally adjusted, Nov. 2010-Nov. 2013)
Nonfarm empl.
Const. empl.
Const. unem.
6,440,000
327,000
-890,000
Change in unemployment & employment(Not seasonally adjusted, Nov. 2010-Nov. 2013)
Percentage of firms having a hard time filling key professional &
craft worker positions
all prof. & craft 21%
Some prof. & craft 24%
prof. only 7%
no trouble 11%
nothiring
8%
craft only 28%
20Source: AGC Worker Shortage Survey, Aug. 2013
Craft - any 74%Laborers 35Carpenters 34Equipment operators 31No trouble/don’t employ crafts 26
Professional - any 53%Project managers/supervisors 49Estimators 35Engineers 15No trouble/not hiring 47
Hardest positions to fill(% of respondents that are
having trouble filling)
21
12/10 2011 2012 2013100
102
104
106
108
110
Dece
mbe
r 201
0 =
100
Material & labor costs vs. office bid prices since 12/10
Source: Author, based on Bureau of Labor Statistics for Producer Price Indexes (PPIs) and Employment Cost Index (ECI)
ECI9/12-9/13: 2.1%
PPI for offices11/12-11/13: 2.7%
PPI for materials11/12-11/13: 1.1%
22
2011 2012 201380
100
120
140
2011 2012 201380
100
120
140
2011 2012 201380
100
120
140
2011 2012 201380
100
120
140
Producer price indexes for key inputs, 1/11-11/13 (Jan. 2011=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: 0.8%, 12-mo.: -1%
Latest 1-mo. change: -1.6%, 12-mo.: 14%
Latest 1-mo. change: -1.1%, 12-mo.: -6%
Latest 1-mo. change: 1.4%, 12-mo.: 13%
23
2011 2012 201385
100
115
130
2011 2012 201385
100
115
130
2011 2012 201385
100
115
130
2011 2012 201385
100
115
130
Producer price indexes for key inputs, 1/11-11/13 (Jan. 2011=100)
Source: Author, based on BLS producer price index reports
No. 2 diesel fuel
Plastic construction products
Concrete products
Asphalt paving mixtures & blocks
Latest 1-mo. change: -3.9%, 12-mo.: -6%
Latest 1-mo. change: 0.4%, 12-mo.: -1%
Latest 1-mo. change: 0.1%, 12-mo.: 3%
Latest 1-mo. change: -0.1%, 12-mo.: 1%
24
Summary for 2013• Total construction spending: +4% to +7% (vs. 9% in ‘12)• Res +15% to +20% (vs. 15% in ‘12): MF very strong, SF ??• Private nonres +1% to +4% (vs. 16% in ‘12): more
manufacturing, warehouse, data centers; remodels of hotels, office, retail; flat power, health care, private ed
• Public: -2% to -4% (vs. -3% in ‘12): highways 0%, ed -8%; federal spending-down; states-level; local-small decline
• Materials costs: +1 to +2% Dec.-Dec. (vs. 1.4% in ‘12)• Labor costs: +2% to +2.5% Dec.-Dec. (vs. 1.6% in ‘12)• Labor supply: limited craft, professional shortages
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.
2012actual
2013est.
2014-17annualaverage
Total spending 9% 4-7% 6-10%
Private – residential 15% 15-20% 1-10%
– nonresidential 16% 1-4% 1-10%
Public -3% -2 to -4% 0 or less
Materials PPI 1.4% 1-2% 1-3%; rare spikes
Employment cost index 1.6% 2-2.5% 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