november 4, 2021 u.s. & washington construction outlook

©2019 The Associated General Contractors of America, Inc.

Ken Simonson Chief Economist, AGC of America [email protected]

U.S. & Washington Construction Outlook:Pandemic Impacts, Policy Initiatives, Project Implications

November 4, 2021


©2019 The Associated General Contractors of America, Inc.2 |

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

Total Nonfarm & Construction Employment, Feb. 2020-Sep. 2021cumulative change (seasonally adjusted)

Residential Construction

Total Nonfarm

2/20 3/20 5/204/20 6/20 7/20 8/20 9/20

Change to 9/21 from:

2/20 9/20

2.7% 4.7%

-3.3% 4.0%Nonresidential Construction -6.0% 1.3%

10/20 11/2012/20 1/21


2/21 3/21 4/21 5/21 6/21 7/21

Source: BLS current employment statistics, https://www.bls.gov/ces/

8/21 9/21


US & WA Construction Employment Cumulative change, Jan 2020-Sep 2021, seasonally adjusted


-20%

-15%

-10%

-5%

0%

5% WA

4/20 6/20 8/20 10/20 12/20

% changeJan 2020-Sep 2021:

US -2.2%

2/21 4/212/20 6/21 8/21

4.7%

Source: BLS


State construction employment change, Feb. 2020-Sep. 202114 states and DC up, 1 state flat, 35 states down (U.S.: -2.6%)

Note: Shading based on unrounded numbers Source: BLS state and area employment, www.bls.gov/sae

Top 5Idaho 9.3%Utah 8.2%South Dakota 7.9%Delaware 5.6%Rhode Island 3.9%

Bottom 5Louisiana -16.1%Wyoming -15.7%New York -11.6%West Virginia -8.1%Vermont -7.8%


http://www.bls.gov/sae


Metro construction employment change, Sep. 2020-Sep. 2021258 metros up, 33 metros unchanged, 67 metros down (U.S.: 2.8%)

Note: Shading based on unrounded numbers Source: BLS state and regional employment report ©2021 The Associated General Contractors of America, Inc.


Washington Metro Area Construction Employment January 2019–September 2021, not seasonally adjusted

©2021 The Associated General Contractors of America, Inc. Source: BLS

Sep 2021 change from:

0

50,000

100,000

150,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sep 2021 [110,000]

Sep 2020 [102,200]

Sep 2020: 8%Sep 2019: 4%

Seattle-Bellevue-Everett division0

10,000

20,000

30,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Sep 2020 [25,500]

Sep 2020: 2%Sep 2019: 0%

Sep 2021 [26,100]

Tacoma-Lakewood division

Sep 2021 change from:

©2019 The Associated General Contractors of America, Inc.7 | Source: 2021 AGC Workforce Development Survey

Need to fill open positions

2021 AGC Workforce Survey Results (responses: US 2,136, WA 88)

90%96%

US 62%WA 61%

0% 20% 40% 60% 80% 100%

Hourly craft position

Salaried positions

Hourly craftpositions

Salaried positions

US 74%WA 72%

0% 20% 40% 60% 80% 100%

Firms expect to hire in the next 12 months

Expect to hire in the next 12 months

Hiring expectation


©2019 The Associated General Contractors of America, Inc.8 | Source: 2021 AGC Workforce Development Survey

We are having a hard time filling some or all positions

2021 AGC Workforce Survey Results

US 89% WA 91%

US 86%WA 92%

0% 20% 40% 60% 80% 100%

Hourly craft position

Salaried positions

Hourly craftpositions

Salaried positions

Difficulty finding quality workers

US 72%WA 73%

0% 20% 40% 60% 80% 100%

Firms expect to hire in the next 12 monthsAvailable candidates do not meet

industry requirements

Construction delays

US 61%WA 59%

0% 20% 40% 60% 80% 100%

Delays due to shortage of workersDelays due to shortage of

workers


0%

3%

6%

9%

12%

15%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Sep 2021 [7.8%]

2 concerns about construction worker supply• Low vaccination rate: 57% for construction workers, 81% for other occupations• Shrinking “premium” for construction wages relative to total private sector

Average hourly earnings in excess of total private sector, March 2006-September 2021


• Total 7%; private residential 25% (single-family 37%; multi 18%); private nonres -6%; public -6%

Largest segments (in descending order of 2021 year-to-date spending)• Power -3% (electric -1%; oil/gas fields & pipelines -8%)

• Education -11% (primary/secondary -8%; higher ed -16%)

• Highway and street -1%• Commercial 0% (warehouse 12%; retail -13%)

• Office -9%

• Mfg. -0.2% (chemical 6%; transp. equip. 2%; food/beverage/tobacco 20%; electronic/electric -16%)• Transportation -6% (air -11%; freight rail/trucking -6%; mass transit 2%)

• Health care -1% (hospital 0.4%; medical building -4%; special care -3%)

• Lodging -32%

Year-to-date construction spending: Jan-Sep 2021 vs. Jan-Sep 2020(not seasonally adjusted)

Source: Author ©2021 The Associated General Contractors of America, Inc.


-5%

0%

5%

10%

15%

20%

25%

30%

Construction input and ‘bid price’ producer price indexes (PPIs)cumulative change in PPIs, April 2020 -September 2021 (not seasonally adjusted)

Inputs to construction April 2020-September 2021: 26.7%

4/21 6/214/20

‘Bid price’ (new nonres building construction) April 2020-September 2021: 5.1%

6/20 8/20 10/20 12/20


2/21

Source: Bureau of Labor Statistics, producer price indexes, www.bls.gov/ppi

8/21

http://www.bls.gov/ppi


PPIs for construction and selected inputscumulative change in PPIs, April 2020 -September 2021 (not seasonally adjusted)

8/218/20 10/20 2/21


-20%

0%

20%

40%

60%

80%

100%

120%

140%

% changeApr 2020-Sep 2021:

Lumber and plywood 35%32%Plastic construction products

‘Bid price’ (new nonres building construction)

5%

65%

122%

Copper and brass mill shapes

Steel mill products

6/214/21

Gypsum products 22%

Aluminum mill shapes 39%

Source: Bureau of Labor Statistics, producer price indexes, www.bls.gov/ppi

4/20 6/20 12/20


©2019 The Associated General Contractors of America, Inc.13 | ©2021 The Associated General Contractors of America, Inc. Source: Source: Bureau of Labor Statistics, www.bls.gov/ppi, producer price indexes for goods inputs to nonresidential construction (material costs) and new warehouse construction (bid prices)

Cost squeeze on contractors can last two years or more

Difference between year-over-year change in materials costs vs. bid prices, Jun 2020-Sep 2021

= period when change in costs exceeded change in bid price

-12%

-6%

0%

6%

12%

18%

24%

2009 2018 20212013 2015201220112010 201720162014 2019 20202006 2007 2008

Difference between year-over-year change in materials costs vs. bid prices, Jan 2006-Sep 2021



• Economic recovery looks more certain but virus risks remain, especially for construction: low worker vaccination rate; possible pullback by owners on project starts

• Slower rebound than for other sectors as owners, investors/lenders, institutions, and public agencies face uncertainty about future demand, project costs, and completion times

• Continuing cost and supply challenges may lead to more project deferrals• If the Senate-passed infrastructure bill becomes law, that will be a huge boost for

transit funding but also private electric vehicles; mixed impact on transit demand• Infrastructure funds will take time to distribute and award to individual projects,

muting the medium-term impact on labor and materials supply• Population movements within and between states may differ from recent past

Medium-term impacts as recovery begins


©2019 The Associated General Contractors of America, Inc.15 | Source: U.S. Census Bureau, Dec. 2020 estimates, www.census.gov/popest

AK -0.3%

1.0%

0.6%

-0.2%

2.1%

1.0%

0.4%

1.5%

1.8%

0.9%

0.3%

0.2%

0.6%

0.3%

0.04%

0.5%

1.3%

0.3%

0.1%

0.2%

-0.3%

0.1%

-0.6%

-0.2%

0.4%

0.1%

-0.4% 0.3%

-0.03%

-0.6%

-0.1%

0.4%

0.9%

0.8%

1.1%

0.3%

-0.6%

0.3%

1.5%

HI-0.6%

1.2%

VT-0.1%

CT-0.3%

RI-0.1%

DE1.0%

NJ-0.1%

MD0.01%

DC0.6%

NH0.4%

Decrease 0-0.49% 0.5-0.99% 1.0-1.49%

MA-0.02%

1.5%+

0.8%

Population change by state, July 2019–July 2020 (U.S.: 0.35%)

Top 5ID 2.1%AZ 1.8%NV 1.5%UT 1.5%TX 1.3%

Bottom 5NY -0.6%

IL -0.6%

HI -0.6%

WV -0.6%

MS -0.4%


http://www.census.gov/popest


• Nonresidential construction spending and employment are likely to start increasing in 2022

• But the sector faces continuing challenges from volatile prices, supply-chain bottlenecks, competition for labor

• Owners such as transit agencies should expect higher (and possibly fewer) bids as contractors try to pass on materials and labor cost increases

• Owners can cushion the shock with price adjustment clauses, earlier buying of materials, flexibility about materials and design changes

• Too early to say how mix of core city/fringe/non-metro growth will change, but overall population growth is slowing

Conclusions



• The Data DIGest: weekly 1-page email (subscribe at http://store.agc.org)• Construction Inflation Alert: https://www.agc.org/learn/construction-data/agc-construction-inflation-alert• ConsensusDocs Price Escalation Resource Center:

https://www.consensusdocs.org/price-escalation-clause/• Autodesk-AGC of America Workforce Survey results• State and metro data, fact sheets: www.agc.org/learn/construction-data• Monthly press releases: construction spending; producer price indexes;

national, state, metro employment with rankings

AGC economic resources(email [email protected])


http://store.agc.org/

https://www.agc.org/learn/construction-data/agc-construction-inflation-alert

https://www.agc.org/learn/construction-data/agc-construction-inflation-alert

https://www.consensusdocs.org/price-escalation-clause/

https://www.consensusdocs.org/price-escalation-clause/

https://www.agc.org/news/2021/09/01/construction-workforce-shortages-reach-pre-pandemic-levels-even-coronavirus-0

http://www.agc.org/learn/construction-data

mailto:[email protected]

november 4, 2021 u.s. & washington construction outlook

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