Construction Spending, Labor & Materials Outlook AGC of California Board of Directors Half Moon Bay,...

Construction Spending, Labor & Materials Outlook

AGC of California Board of DirectorsHalf Moon Bay, CA, January 22, 2015

Ken SimonsonChief Economist, AGC of America

[email protected]

2

2006 2008 2010 2012 2014-20%

-10%

0%

10%

Total (11/13-11/14: 3.6%) Residential (5.6%)Nonresidential (2.4%)

2006 2008 2010 2012 2014-30%-15%

0%15%30%

Total (11/13-11/14: 2%) Res (-1%) Private Nonres (5%) Public (3%)

2006 2008 2010 2012 20140

1,5003,0004,5006,0007,500

Total employment, Jan. 2006-Nov. 2014thousands, seasonally adjusted

Construction spending & employment, 2006-14

Source: BLS, Census Bureau construction spending reports

12-month % change, Jan. 2006-Nov. 2014

2006 2008 2010 2012 2014$0

$250,000$500,000$750,000

$1,000,000$1,250,000

Total spending, Jan. 2006-Nov. 2014billion $, seasonally adjusted annual rate (SAAR)

11/14: $975 bil.

12-month % change, Jan. 2006-Nov. 2014

11/14: 6,109,000

3

Construction is growing, but unevenly3 trends helping many sectors and regions:• ‘Shale gale’—continuing despite oil price plunge• 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; NG-powered vehicles• Losers: coal; maybe wind, solar, nuclear & their 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-November 2014 (billion $, SAAR)

Multifamily (MF)

Single family (SF)

Improvements

Improvements: -25%

Single family: 13%

Multifamily: 27%

Total: -1%

Source: Census Bureau construction spending reports

12-month % change, Jan. 2011-November 2014

9

Housing outlook• SF: rising for now but tight credit, fear of lock-in,

demographic shifts may limit increases• MF: Upturn should last through 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 remains weak

• Improvements: down in ‘14 but should track SF sales

Source: Author

11/14 total(SAAR)

2014 vs. 2013 Jan-Nov YTD 2015 forecast

Nonresidential$617

billion 6 % 4-8%Power (incl. oil & gas structures, pipelines) 98 14 10+Highway and street 86 3 0 to -5Educational 79 1 5 to -5Commercial (retail, warehouse, farm) 60 11 0 to 5Manufacturing 59 14 10+Office 47 18 5+Transportation 42 4 2 to 5Health care 38 -7 0 to -5Sewage and waste disposal 24 3Lodging 18 18 10+Amusement & recreation 17 7Other (communication; water; public safety; conservation; religious): 8% of total -2

Nonres segments: 2014 year-to-date & 2015 forecast

Source: Census Bureau construction spending report; Author’s forecast

11

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)


Power (89% private)

Transportation facilities (72% public)

Manufacturing (99% private)

Public & private transportation facilities

Latest 12-mo. change: -5% (private -4%; public -15%)

Latest 12-mo. change: 5%


Latest 12-mo. change: private 6%; public 5%

Public

Private

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)


Highways (99.7% public)

Amusement & recreation (54% public)

Sewage/waste (99% public)

Water supply (96% public)

Latest 12-mo. change: 6% Latest 12-mo. change: 14%

Latest 12-mo. change: 5% Latest 12-mo. change: -2%

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)


Total healthcare (74% private)

Education (state & local K-12, higher; private)

Hospitals (private, state & local)


Latest 12-mo. change: -8% Latest 12-mo. change: private -10%; state & local -6%

S/L preK-12

Private

S/L higher ed

S/L

Private

Latest: state/local preK-12 0%, higher 8%; private 7%

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)


Retail (private)

Warehouse (private)

Office (83% private)

Lodging (private)

Latest 12-mo. change: -1%

Latest 12-mo. change: 58% Latest 12-mo. change: 11%

Latest 12-mo. change: 15% (private 18%; public 2%)

Private

Public

Total

Seattle

Major locations for data centers

Portland

SiliconValley

SouthernCalifornia

Las Vegas

Phoenix

Salt LakeCity

Denver

ColoradoSprings

Dallas

Houston

Kansas City

Omaha

Minneapolis

Des MoinesChicago

St. Louis

Atlanta

NorthernFlorida

NorthernVirginia

Boston

PhiladelphiaNorthernNew Jersey

Source: www.DataCenterKnowledge.com, from CBRE, ASHRAE

-2%

9%

1%

6%

4%

-2%

-1%

5%

-4%

5%

1%

16%

0.5%

-5%

2%

2%

8%

3%

5%

-0.1%

4%

7%

6%

4%

3%

-4%

-8% 6%

-1%

1%

3%

1%

5%

2%

9%

2%

-11%

8%

10%

HI-2%

1%

VT2%

CT3%

RI4%

DE4%

NJ-5%

MD1%

DC6%

NH1%

Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5%

MA2%

State construction employment change (U.S.: 3.6%) 11/13 to 11/14: 38 states + DC up, 12 down

5.1% to 10% Over 10%

Shading based on unrounded numbers

0%

Source: BLS state and regional employment report

7%

1990 1995 2000 2005 20100

250

500

750

1,000

In th

ousa

nds

1990 1995 2000 2005 20100

2,000

4,000

6,000

8,000

In th

ousa

nds

Construction Employment in United States, 1/90-11/14(seasonally adjusted; shading = recessions)

Construction Employment in California, 1/90-11/14(seasonally adjusted; shading = recessions)

Source: BLS

Peak: Apr. ‘06 -21% vs. peak

Peak: Feb. ‘06 -27% vs. peak

2008 2009 2010 2011 2012 2013 2014-3000%-2000%-1000%

0%1000%

Residential (11/13-11/14: 12.1%) Nonresidential (10.4%) Heavy & Civil (2.0%)Specialty Trade (5.4%)

2008 2009 2010 2011 2012 2013 2014-3000%-2000%-1000%

0%1000%

U.S. (11/13-11/14: 3.8%) California (6.3%)

12-m

onth

% c

hang

eConstruction employment change from one year earlier

1/08-11/14, seasonally adjusted

Employment change for CA construction segments1/08-11/14, not seasonally adjusted

Source: BLS

20

13

11

Construction employment change by CA metro, 11/13-11/14

Over -10%

-5.1% to -10%

-0.1% to -5%

0.1% to 5%

5.1% to 10%

Over 10%

Shading based on unrounded numbers

0%

Source: BLS state and regional employment report

6

1

27

1615

3

28

26

12

87

10

2

4

5

9

14

2522

1718

192021

2324

Metro area or division %

change Rank

(out of 339) 1 San Diego-Carlsbad-San Marcos 6% 1082 El Centro 16% 53 Santa Ana-Anaheim-Irvine Div. 10% 424 Riverside-San Bernardino-Ontario -2% 2885 Los Angeles-Long Beach-Glendale Div. 5% 1256 Oxnard-Thousand Oaks-Ventura 5% 1257 Santa Barbara-Santa Maria-Goleta -1% 2778 Bakersfield-Delano 10% 429 San Luis Obispo-Paso Robles 5% 125

10 Salinas 2% 19811 Hanford-Corcoran 0% 22512 Visalia-Porterville -2% 28813 Fresno 11% 3114 Madera-Chowchilla 0% 22515 Merced 6% 10816 Modesto 11% 3117 San Jose-Sunnyvale-Santa Clara 2% 19818 Santa Cruz-Watsonville 0% 22519 Stockton 5% 12520 Oakland-Fremont-Hayward Div. 8% 7121 San Francisco-San Mateo-Redwood City Div. 8% 7122 Santa Rosa-Petaluma 5% 12523 Napa 3% 17124 Vallejo-Fairfield 7% 9025 Sacramento--Arden-Arcade--Roseville 10% 4226 Yuba City 7% 9027 Chico -10% 33228 Redding 8% 71

December '10 December '140%

5%

10%

15%

20%

20.7%

8.3%

9.1%

5.4%

Construction Total

Change in construction (un)employment, 12/10-12/14

• Construction unemployment fell sharply in past 4 years• But industry employment rose much less• Thus, workers left for other sectors, school, retirement

Source: Author, from BLS

Unemployment rates(Not seasonally adjusted, Dec. 2010-Dec. 2014)

0.00

250,000.00

500,000.00

750,000.00

1,000,000.00

1,069,000

700,000

Change in unemployment & employment(Not seasonally adjusted, Dec. 2010-Dec. 2014)

369,000Workers who

have left industry

12-month change in construction employment and unemployment, Jan. 2011-2014 (not seas. adjusted)

2011 2012 2013 2014-200

-100

0

100

200

300

400

500

600

Chan

ge in

em

ploy

men

t (00

0)

Unemployment decrease

Employment gain/loss(-)

23

Hardest positions to fill(% of respondents who are having trouble filling)

Source: AGC Member Survey, Sept. 2014

Craft 83%Carpenters 66Roofers 64

Equipment operators 59Plumbers 54Electricians 52

Professional 61%Project managers/supervisors 48Estimators 32

24

Construction prices, materials costs, average hourly earnings (AHE)

Dec-11

Dec-12

Dec-13

Dec-14

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Nonresidential buildings

PPI for new nonres buildingsPPI for inputs to commercial structuresAHE for nonres building construc-tion

12-m

ont h

per

cent

cha

nge

Dec-11 Dec-12 Dec-13 Dec-14-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Highways

Nat Highway Construction Cost IndexPPI for inputs to other nonres (hwy/heavy)AHE for hwy, street & bridge construction

Source: Bureau of Labor Statistics: PPI, AHE; Federal Highway Administration: National Highway Construction Cost Index

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, 12/10-11/14 (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.: 2%

Latest 1-mo. change: 0.3%, 12-mo.: 11%

Latest 1-mo. change: 0.03%, 12-mo.: -3%


12/10

12/10 12/10

12/10

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, 12/10-11/14 (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: -4.2%, 12-mo.: -11%




Diesel fuel

12/10

12/10 12/10

12/10

27

AGC members’ expectations for 2015Net % who expect dollar volume of projects to be higher33% Retail/warehouse/lodging26% Manufacturing25% Private office24% Water/sewer; also Energy20% Hospital17% Power16% Highway15% Higher education13% Other transportation 8% K-12 school 5% Public building-6% Marine construction-16% Direct federal construction

Source: AGC Construction Outlook Survey, Jan. 2015 (912 total responses)

28

Trends: 2015-2017• Total construction spending: +6% to +10% per year– less SF housing, retail; flat public spending– new drivers: shale-based gas & oil; Panama Canal

widening; more elderly & kids, fewer young adults• Materials costs: 0 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

Source: 2013-14: Census, BLS; 2014-17: Author’s ests.

2013actual

2014 actual (a) or

forecast

2015-17annual averageforecast

Total spending 6% 5-7% 6-10%

Private – residential 20% 5-7% 1-10%

– nonresidential 1% 10-13% 1-10%

Public -3% -1 to +2% near 0

Materials PPI 1.3% -0.9% (a) 0-3%; rare spikes

Employment cost index 2.0% 2-2.5% 2.5-5%

30

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, surveys

mailto:[email protected]

http://www.agc.org/datadigest

http://www.agc.org/cs/industry_topics/construction_economics/agc_construction_economics

Construction Spending, Labor & Materials Outlook AGC of California Board of Directors Half Moon Bay,...

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