U.S. & N.C. Construction Spending, Labor & Materials Outlook
State Construction Conference
Raleigh, March 24, 2016
Ken Simonson
Chief Economist, AGC of America
0
1,500
3,000
4,500
6,000
7,500
9,000
2006 2008 2010 2012 2014 2016$0
$250
$500
$750
$1,000
$1,250
2006 2008 2010 2012 2014 2016
Total spending, Feb. ‘06 (peak)-Jan. ‘16 billion $, seasonally adjusted annual rate (SAAR)
Construction spending & employment, 2006-16
Total employment, Apr. ’06 (peak)-Feb. ‘16 thousands, seasonally adjusted
$1.21 trillion $1.14 trillion (5% below peak)
7.7 million
6.6 million
Private Residential
Total
Public
Private nonresidential
Nonres (9% below peak)
Residential (25% below peak)
Total (14% below peak)
January 2015-January 2016: total 10% private res. 8%, private nonres. 11%, public 13%
February 2015-February 2016: total 4.0% residential 6.4%, nonresidential 2.5%
Source: U.S. Census Bureau (spending); Bureau of Labor Statistics (employment)
-20%
0%
20%
40%
60%
2011 2012 2013 2014 2015 2016
12
mo
nth
% c
han
ge
12-month % change: January 2011 (-5.3%)-January 2016 (7.7%)
$0
$100
$200
$300
$400
$500
2011 2012 2013 2014 2015 2016
Bill
ion
$ (
$ B
)
seasonally adjusted annual rate (SAAR): Jan. ‘11 ($238 B)-Jan. ‘16 ($433 B)
Private residential spending: MF continues to outpace SF
Multifamily (MF) (Jan ‘16: $60 B)
Single family (SF) (Jan. ‘16: $230 B)
Improvements (Jan. ‘16: $143 B)
Improvements: 2% Single family: 7%
Multifamily: 30%
Total: 8%
Source: U.S. Census Bureau construction spending reports
2016 residential spending forecast: 5-9%
• SF: 6-9%; ongoing job gains add to demand; student debt, fears of lock-in, limited supply will cap growth
• MF: 8-12%; upturn should last through 2016
– low vacancies, high rent growth encourage investors
– millennials show continued preference for cities
– nearly all MF construction is rental, not condo
– public MF is growing but remains tiny (1% of total)
• Improvements: 0-10%; newly corrected Census data shows loose relationship to SF spending
Source: Author
Population change by state, July 2014-July 2015 (U.S.: 0.79%)
0.2%
1.5%
1.5%
0.9%
1.2%
0.9%
0.3%
1.9%
1.5%
1.9%
-0.02%
2.3%
0.6%
0.7%
0.3%
0.8%
1.8%
0.6%
0.5%
0.3%
0.5%
0.2%
-0.2%
0.1%
0.3%
0.3%
-0.04% 0.3%
0.1%
0.2%
0.1%
0.7%
1.0%
1.2%
1.8%
-0.1%
-0.3%
0.4%
1.7%
HI 0.8%
1.4%
VT -0.1%
CT -0.1%
RI 0.1%
DE 1.1%
NJ 0.2%
MD 0.5%
DC 1.9%
NH 0.2%
decrease 0-0.49% 0.5-0.99% 1.0-1.49%
MA 0.6%
1.5%+
Source: U.S. Census Bureau
0.8%
AGC members’ expectations for 2016
Net % who expect dollar volume of projects to be higher
34% All projects 12% K-12 school
21% Retail/warehouse/lodging 12% Public building
19% Private office 8% Water/sewer
19% Hospital 6% Highway
14% Multifamily 3% Other transportation
13% Higher education 1% Power
-1% Direct federal construction
Source: AGC Construction Outlook Survey, Jan. 2016 (1,580 total responses)
2015 vs. 2014
1/16 vs. 1/15
2016 and 2017 (per year)
Nonresidential total (public+private) 9 % 10 4-8 %
Highway and street 7 34 2 to 5
Power (incl. oil & gas field structures, pipelines) -14 8 5 to 10
Educational 7 12 3 to 6
Manufacturing 44 11 -10 to +10
Commercial (retail, warehouse, farm) 7 1 0 to 5
Office 22 20 5 to 15
Transportation 7 1 0 to 5
Health care 4 2 3 to 8
Sewage and waste disposal 7 1
Lodging 31 35 -10 to +10
Other--amusement; communication; religious; public safety; conservation; water: 11% of total
11 9
Nonresidential segments: 2015 actual, 2016-17 forecast
Source: U.S. Census Bureau construction spending report; Author’s forecast
'14 '15 '16
Power (89% public)
$0
$30
$60
$90
$120
'08 '10 '12
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16
Construction spending: industrial, heavy annual total, 2008-13; monthly, SAAR, 1/14-1/16; billion $
$0
$25
$50
$75
$100
'08 '10 '12 '14 '15 '16
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16
Jan. '15-Jan. '16 change: 8% (oil & gas 28%; electric 1%)
Electric
Oil & Gas
Manufacturing (99% public)
Jan. '15-Jan. '16 change: 11% (chemical 14%; other 8%)
Other
Chemical
Transportation facilities (70% public)
Jan. '15-Jan. '16 change: 1% (private 0.3%; public 1%)
Communication (99% private)
Jan. '15-Jan. '16 change: 27%
Public
Private
Key points: power, mfg., transportation
• Cutbacks in coal-fired plants, oil & gas fields have hit bottom; surge in gas-fired plants, pipelines into ‘18
• Mfg growth led by chemicals (petrochemical plants, ethane crackers, LNG) and transportation equipment (cars, trucks, jets, railcars, barges); but few new starts; cuts in plants tied to farming, mining, exports
• Private (mainly rail) investment in transportation will decline; small gains for public airports, ports, transit
Source: Author
'14 '15 '16
$0
$30
$60
$90
$120
'08 '10 '12
$0
$10
$20
$30
'08 '10 '12 '14 '15 '16
Construction spending: public works annual total, 2008-13; monthly, SAAR, 1/14-1/16; billion $
$0
$10
$20
$30
'08 '10 '12 '14 '15 '16
$0
$10
$20
$30
'08 '10 '12
Highways (99.7% public)
Jan. '15-Jan. '16 change: 34%
Sewage/waste (99% public)
Jan. '15-Jan. '16 change: 1%
Amusement & recreation (50% public)
Jan. '15-Jan. '16 change: 17% (private 29%; public 7%)
Water supply (98% public)
Jan. '15-Jan. '16 change: -8%
'14 '15 '16
Public
Private
Key points: roads, recreation, sewer/water
• Small rise in federal highway funding even with long-term bill; gradual pick-up in state funding & P3s
• Amusement & recreation spending is very “lumpy”—a few big stadiums at irregular intervals; but funding for local, state, federal parks keeps eroding
• Eastern & Midwestern cities under orders to make long-term upgrades to sewer systems that should boost spending; water utilities hurt by drought, conservation but may get money for lead abatement
Source: Author
$0
$20
$40
$60
$80
$100
'08 '10 '12 '14 '15 '16
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16
Construction spending: institutional (private + state/local) annual total, 2008-13; monthly, SAAR, 1/14-1/16; billion $
$0
$25
$50
$75
$100
'08 '10 '12 '14 '15 '16
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16
Total education (79% public)
Jan. '15-Jan. '16 change: 12%
Education (state & local K-12, higher; private)
Latest: state/local preK-12 19%, higher 1%; private 13%
S/L preK-12
Private
S/L higher ed
Total healthcare (78% private)
Jan. '15-Jan. '16 change: 2%
Hospitals (private, state & local)
Jan. '15-Jan. '16 change: private 18%; state & local -4%
State & Local
Private
Key points: education & health care
• Higher-ed enrollment is shrinking, so colleges need fewer dorms & classrooms; apts. (MF) replacing dorms (ed.)
• PreK-12 enrollment is flat; more children staying in cities and filling underused or charter schools, so construction no longer matches population growth
• Hospitals face more competition from standalone urgent care, outpatient surgery, clinics in stores; more investment in small facilities, short stays
Source: Author
'14 '15 '16
$0
$20
$40
$60
$80
'08 '10 '12
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16
Construction spending: developer-financed annual total, 2008-13; monthly, SAAR, 1/14-1/16; billion $
$0
$20
$40
$60
$80
'08 '10 '12 '14 '15 '16
$0
$10
$20
$30
$40
'08 '10 '12 '14 '15 '16
Retail (private)
Jan. '15-Jan. '16 change: -7%
Office (88% private)
Jan. '15-Jan. '16 change: 20% (private 25%; public -8%)
Public
Private Total
Warehouse (private)
Jan. '15-Jan. '16 change: 14%
Lodging (private)
Jan. '15-Jan. '16 change: 37%
Key points: retail, warehouse, office, hotel
• Retail now tied to mixed-use buildings & renovations, not standalone stores or shopping centers; consumer pivot to online buying will continue
• Warehouse market largely built out for now but may heat up if Panama Canal leads to distribution shifts
• Employment sets records each month but office space per employee keeps shrinking; growth mainly in cities & renovations, not suburban office parks
• Ongoing RevPAR gains still driving hotel growth but market is vulnerable to sudden reversals
Source: Author
Seattle
Major locations for data centers
Portland
Silicon Valley
Southern California
Las Vegas
Phoenix
Salt Lake City
Denver
Colorado Springs
Dallas
Houston
Kansas City
Omaha
Minneapolis
Des Moines Chicago
St. Louis
Atlanta
Northern Florida
Northern Virginia
Boston
Philadelphia Northern New Jersey
Source: www.DataCenterKnowledge.com, from CBRE, ASHRAE
0
75
150
225
300
1990 1995 2000 2005 2010 2015
In t
ho
usa
nd
s
0
2,000
4,000
6,000
8,000
1990 1995 2000 2005 2010 2015
In t
ho
usa
nd
s Construction Employment in United States, 1/90-1/16
(seasonally adjusted; shading = recessions)
Construction Employment in North Carolina, 1/90-1/16 (seasonally adjusted; shading = recessions)
Source: BLS
Peak: Apr. ‘06 -14% vs. peak
-23% vs. peak Peak: Jun. ‘07
-20%
-15%
-10%
-5%
0%
5%
10%
2008 2010 2012 2014 2016
12
-mo
nth
% c
han
ge
Construction Employment Change from Year Ago 1/08-1/16 (not seasonally adjusted)
North Carolina 6.7% (42 out of 51)
U.S. 4.1%
Source: BLS
Over -10%
-5.1% to -10%
-0.1% to -5%
0.1% to 5%
Construction employment change by NC metro, 1/15-1/16
5.1% to 10%
Over 10%
Shading based on unrounded numbers
0%
Source: BLS state and regional employment report
Asheville
Hickory- Lenoir- Morganton
Burlington
Charlotte- Concord- Gastonia, NC-SC
Durham- Chapel Hill
Fayetteville
Greensboro- High Point
Greenville Raleigh
Rocky Mount
Wilmington
Myrtle Beach-Conway- North Myrtle Beach, SC-NC
Virginia Beach- Norfolk- Newport News, VA-NC
Winston- Salem
Change in construction employment, 1/15-1/16 not seasonally adjusted (NSA)
Source: AGC rankings, calculated from BLS state and area employment reports
Metro area or division 12-mo. empl. change (NSA)
Rank (out of 358)
Statewide (construction) 6%
Statewide (Const/mining/logging)* 6%
Asheville* 0% 244
Burlington* 0% 244
Charlotte-Concord-Gastonia, NC-SC* 6% 117
Durham-Chapel Hill* 7% 99
Fayetteville* -2% 294
Greensboro-High Point* 9% 64
Greenville* 0% 244
Hickory-Lenoir-Morganton* 0% 244
Raleigh* 5% 148
Rocky Mount* -5% 316
Wilmington* 2% 214
Winston-Salem* 3% 184
Myrtle Beach-Conway-North Myrtle Beach, SC-NC* 8% 78
Virginia Beach-Norfolk-Newport News, VA-NC* 2% 214 *The Bureau of Labor Statistics reports employment for construction, mining and logging combined for metro areas in which mining and logging have few employers. To allow comparisons between states and their metros, the table shows combined employment change for these metros. Not seasonally adjusted statewide data is shown for both construction-only and combined employment change.
CT 4%
2%
6%
2%
9%
11%
1%
-2%
9%
5%
8%
-3%
-8%
10%
0.2%
7%
7%
1%
2%
13%
6%
4%
2%
2%
8%
2%
6%
3% 5%
1%
8%
-0.2%
4%
5%
7%
3%
-7%
11%
5%
HI 16%
7%
VT 5%
MD 4%
DC 3%
NH 2%
Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5%
MA 7%
State construction employment change (U.S.: 4.2%) 12/14 to 12/15: 44 states + DC up, 6 down
5.1% to 10% Over 10%
Shading based on unrounded numbers
0%
Source: BLS state and regional employment report
1% NJ 7%
DE 10%
RI -1%
4%
Hardest positions to fill
34%
43%
55%
52%
60%
63%
65%
73%
79%
0% 25% 50% 75% 100%
Engineers
Estimators
Project mgrs/supervisors
ALL Salaried professionals
Electricians
Concrete workers
Sheet metal installers
Carpenters
ALL Hourly craft professionals
% of respondents who are having trouble filling
Source: AGC Member Survey, Sept. 2015
4%
23%
23%
48%
16%
23%
29%
56%
0% 10% 20% 30% 40% 50% 60%
Paying more overtime
Increasing contributions/benefits
Providing incentives/bonuses
Raising base pay
Increasing compensation
Hourly
Salaried
How contractors are coping with worker shortages
0% 10% 20% 30% 40% 50% 60%
Building information modeling (BIM) 7%
Unions 9%
Offsite prefabrication 9%
Lean construction 13%
Labor-saving equipment, tools, machinery 19%
Staffing company 33%
Subcontractors 43%
Increasing use of:
Source: AGC Member Survey, Sept. 2015
Unemployed construction workers, Dec. 2000-Dec. 2015 (not seasonally adjusted)
0
300,000
600,000
900,000
1,200,000
1,500,000
1,800,000
2,100,000
2000 2002 2004 2006 2008 2010 2012 2014
Source: BLS monthly employment situation report
75
100
125
150
2011 2012 2013 2014 2015 2016
75
100
125
150
2011 2012 2013 2014 2015 2016
75
100
125
150
2011 2012 2013 2014 2015 2016
75
100
125
150
175
2011 2012 2013 2014 2015 2016
Flat glass
Producer price indexes for key inputs, 1/11-1/16 (Jan. 2011=100)
Source: Author, based on BLS producer price index reports
Copper & brass mill shapes
Aluminum mill shapes
Latest 1-mo. change: 3.9%, 12-mo.: -2%
Latest 1-mo. change: 1.1%, 12-mo.: 6%
Latest 1-mo. change: -1.6%, 12-mo.: -18%
Latest 1-mo. change: 0.6%, 12-mo.: -12%
Gypsum products
75
100
125
150
2011 2012 2013 2014 2015 2016
75
100
125
150
2011 2012 2013 2014 2015 2016
75
100
125
150
2011 2012 2013 2014 2015 2016
75
100
125
150
2011 2012 2013 2014 2015 2016
Paving mixtures
Producer price indexes for key inputs, 1/11-1/16 (Jan. 2011=100)
Source: Author, based on BLS producer price index reports
Concrete products
Steel mill products
Latest 1-mo. change: -7.9%, 12-mo.: -35%
Latest 1-mo. change: 2.6%, 12-mo.: -4%
Latest 1-mo. change: 0.3%, 12-mo.: 3%
Latest 1-mo. change: -0.3%, 12-mo.: -19%
Diesel fuel
Summary for 2014-15, 2016-17 forecast
Source: 2014, 2015: Census, BLS; 2016-17: Author’s ests.
2014 actual
2015 actual
2016-17 annual average
forecast
Total spending 9.6% 10.5% 6-10 %
Private – residential 14.4% 12.8% 5-10 %
– nonresidential 11.3% 11.9% 5-10 %
Public 1.9% 5.7% 2-5%
Materials PPI -0.9% -4.0% 0-2 %
Employment cost index 1.8% 2.2% 3-4.5 %
AGC economic resources (email [email protected])
• The Data DIGest: weekly 1-page email (subscribe at http://store.agc.org)
• monthly press releases: spending; PPI; national, state, metro employment
• state and metro data, fact sheets: www.agc.org/learn/construction-data
• Webinars: May 5 w/ Kermit Baker, AIA; Alex Carrick, CMD