construction spending, labor & materials outlook agc austin chapter july 21, 2015 ken simonson...

Construction Spending, Labor & Materials Outlook

AGC Austin ChapterJuly 21, 2015Ken Simonson

Chief Economist, AGC of [email protected]

2006 2008 2010 2012 2014-75%-50%-25%

0%25%50%

Total: -17% Residential: -29%Nonresidential: -8%

2006 2008 2010 2012 2014-75%-50%-25%

0%25%50%

Total as of 5/15: -15% Residential: -46%Private nonres: 38% Public: 13%

2006 2008 2010 2012 20140

1,5003,0004,5006,0007,500

Total employment, April ‘06 (peak)-June ‘15thousands, seasonally adjusted

Construction spending & employment, 2006-15

Source: BLS, Census Bureau construction spending reports

2006 2008 2010 2012 2014$0

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

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

$1,036 bil.(-15%)

Total spending, March 2006 (peak)-May 2015billion $, seasonally adjusted annual rate (SAAR)

Spending change from March 2006 Employment change from April 2006

7.7 million

6.4 mil.(-17%)

$1.2 trillion

Construction is growing, but unevenly3 trends helping many sectors and regions:• ‘Shale gale’—mainly downstream after 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

F

Shale plays in lower-48 states

Current play – oldest stacked play

Current play – intermediate depth/ age stacked playCurrent play – shallowest/ youngest stacked play

Prospective play

Basin

F

Source: U.S. Energy Information Administration, based on data from various published studies

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

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

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

2011 2012 2013 2014 2015$0

$75,000

$150,000

$225,000

$300,000

$375,000

Billi

on $

Private residential spending, Jan. 2011-May 2015 (billion $, SAAR)

2011 2012 2013 2014 2015-20%

0%

20%

40%

60%

12 m

onth

% c

hang

e

12-month % change, Jan. 2011-May 2015

Residential spending: MF, SF gains offset weak improvements

Multifamily (MF)

Single family (SF)

Improvements

Improvements: -3%

Single family: 11%Multifamily: 21%

Total: 8%

Source: Census Bureau construction spending reports

2015 residential spending forecast: 1-14%• SF: +5 to +10%; rising for now but tight credit, fear of

lock-in, demographic shifts may limit increases• MF: +10 to +20%; 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: -10 to +10%; reported 2014-15 decline is not credible; should track SF sales

Source: Author

-0.1%

1.3%

1.1%

1.0%

1.3%

0.9%

0.2%

1.7%

1.5%

1.6%

-0.1%

2.2%

0.9%

0.7%

0.3%

0.6%

1.7%

0.6%

0.5%

0.3%

0.4%

0.3%

-0.1%

0.1%

0.4%

0.3%

0.1% 0.3%

0.2%

0.3%

0.05%

0.7%

1.0%

1.0%

1.5%

0.1%

-0.2%

0.3%

1.4%

HI0.8%

1.3%

VT-0.05%

CT-0.1%

RI0.2%

DE1.1%

NJ0.3%

MD0.6%

DC1.5%

NH0.3%

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

MA0.5%

Population change by state, July 2013-July 2014 (U.S.: 0.75%)

1.5%+

Source: U.S. Census Bureau News

0.8%

2014 totalJan.-May YTD 2015 vs. 2014 2015 forecast

Nonresidential$618

billion 6 % 6-9%Power (incl. oil & gas structures, pipelines) 101 -27 -10 to 0Highway and street 84 -0.4 -5 to 0Educational 80 2 0 to 5Commercial (retail, warehouse, farm) 63 14 5 to 10Manufacturing 58 55 15 to 30Office 46 21 10 to 15Transportation 42 9 5 to 10Health care 38 2 0 to 5Sewage and waste disposal 23 17Amusement & recreation 17 25Lodging 16 22 10 to 20Other (communication; water; public safety; conservation; religious): 8% of total

Nonresidential segments: 2014 total & 2015 forecast

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

2008 2009 2010 2011 2012 2013 2014 2015$0

$20,000$40,000$60,000$80,000

$100,000Power (90% private)

2008 2009 2010 2011 2012 2013 2014 2015$0

$20,000$40,000$60,000$80,000

$100,000Manufacturing (99% private)

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000$20,000$30,000$40,000$50,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000$20,000$30,000$40,000$50,000

Construction spending: industrial, heavy (billion $, SAAR)


Transportation facilities (70% public) Public & private transportation facilities

Latest 12-mo. change: 5% Latest 12-mo. change: private 2%; public 13%

Public

Private

Latest 12-mo. change: -23% (oil & gas -6%; electric -30%)

Electric

Oil & Gas

Total

Latest 12-mo. change: 70% (other 21%; chemical 158%)

Other

Chemical

Total

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000

$20,000

$30,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000

$20,000

$30,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000

$20,000

$30,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$30,000

$60,000

$90,000

Construction spending: public works (billion $, SAAR)


Highways (99.4% public)

Amusement & recreation (52% public)

Sewage/waste (99% public)

Water supply (96% public)

Latest 12-mo. change: 2% Latest 12-mo. change: 13%

Latest 12-mo. change: 30% Latest 12-mo. change: -7%

2008 2009 2010 2011 2012 2013 2014 2015$0

$20,000$40,000$60,000$80,000

$100,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000$20,000$30,000$40,000$50,000

Total education (80% public)

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000$20,000$30,000$40,000$50,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$20,000$40,000$60,000$80,000

$100,000

Construction spending: institutional (private + state/local)


Total healthcare (77% private)

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

Hospitals (private, state & local)

Latest 12-mo. change: 2%

Latest 12-mo. change: 3% Latest 12-mo. change: private 11%; state & local -0.3%

S/L preK-12

Private

S/L higher ed

S/L

Private

Latest: state/local preK-12 -5%, higher 18%; private -4%

2008 2009 2010 2011 2012 2013 2014 2015$0

$20,000

$40,000

$60,000

$80,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000

$20,000

$30,000

$40,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000

$20,000

$30,000

$40,000

2008 2009 2010 2011 2012 2013 2014 2015$0

$20,000

$40,000

$60,000

$80,000

Construction spending: developer-financed (billion $, SAAR)


Retail (private)

Warehouse (private)

Office (84% private)

Lodging (private)

Latest 12-mo. change: 13%

Latest 12-mo. change: 22% Latest 12-mo. change: 30%

Latest 12-mo. change: 25% (private 27%; public 14%)

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

CT5%

6%

12%

1%

7%

12%

5%

-2%

8%

2%

8%

-2%

5%

4%

-1%

3%

3%

3%

0.5%

6%

3%

-1%

4%

7%

10%

-0.1%

4%

-7% 2%

-2%

4%

6%

4%

2%

7%

-3%

-12%

6%

4%

HI2%

5%

VT3%

MD5%

DC4%

NH6%

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

MA4%

State construction employment change (U.S.: 4.5%) 5/14 to 5/15: 40 states up + DC, 10 down

5.1% to 10% Over 10%

Shading based on unrounded numbers

0%

Source: BLS state and regional employment report

5%NJ8%

DE1%

RI-5%

9%

1990 1995 2000 2005 2010 20150

200

400

600

800

In th

ousa

nds

1990 1995 2000 2005 2010 20150

2,000

4,000

6,000

8,000

In th

ousa

nds

Construction Employment in United States, 1/90-5/15(seasonally adjusted; shading = recessions)

Construction Employment in Texas, 1/90-5/15(seasonally adjusted; shading = recessions)

Source: BLS

Peak: Apr. ‘06 -17% vs. peak

Peak: Apr. ‘08 -2% vs. peak

2008 2009 2010 2011 2012 2013 2014 2015-2000%

-1500%

-1000%

-500%

0%

500%

1000%

1500%

12-m

onth

% c

hang

e

Texas 3% (31 out of 51)

U.S. 5%

Construction Employment Change from Year Ago1/08-5/15 (seasonally adjusted)

Austin-Round Rock 3%(139 out of 339)

Source: BLS

Over -10%

-5.1% to -10%

-0.1% to -5%

0.1% to 5%

Construction employment change by TX metro, 5/14-5/15

5.1% to 10%

Over 10%

Shading based on unrounded numbers

0%

Source: BLS state and regional employment report

El Paso

Amarillo

Lubbock

Odessa

San Angelo

Midland

Abilene

Wichita Falls

Brownsville-HarlingenMcAllen-Edinburg-Mission

Laredo

San Antonio-New Braunfels

Austin-Round Rock-

Killeen-Temple

Waco

Corpus Christi

Victoria

Houston-The Woodlands-Sugar Land

Beaumont-Port Arthur

College Station-Bryan

LongviewTyler

Sherman-Denison

Dallas-Plano-

Irving Div.

Fort Worth-Arlington

Div.

Texarkana, TX-AR

Change in construction employment, 5/14-5/15not seasonally adjusted (NSA)

Metro area or division12-mo. empl. change (NSA)

Rank (out of 339) Metro area or division

12-mo. empl. change (NSA)

Rank (out of 339)

Statewide (Construction only) 3% Laredo* 2% 162Statewide* (Const/mining/logging) 1% Longview* 3% 139Abilene* -2% 266 Lubbock* -3% 285Amarillo* 3% 139 McAllen-Edinburg-Mission* 1% 184Austin-Round Rock* 3% 139 Midland* 5% 98Beaumont-Port Arthur* 17% 8 Odessa* 3% 139Brownsville-Harlingen* 3% 139 San Angelo* 5% 98College Station-Bryan* 1% 184 San Antonio-New Braunfels 12% 25Corpus Christi* 7% 67 Sherman-Denison* -7% 336Dallas-Plano-Irving Div.* 3% 139 Texarkana, TX-AR* 0% 206El Paso* -9% 345 Tyler* 5% 98Fort Worth-Arlington Div.* 0% 205 Victoria* 2% 162Houston-The Woodlands-Sugar Land 1% 184 Waco* 3% 139Killeen-Temple* 6% 83 Wichita Falls* 0% 206*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.

Source: AGC rankings, calculated from BLS state and area employment reports

Construction wages as a % of private sector average, 1990-2014

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20122013

2014100%

105%

110%

115%

120%

125%

130%

135%

140%

Production and nonsupervisory workers

Construction Residential buildingNonresidential building Heavy and civil engineering constructionSpecialty trade contractors

Source: AGC of America, from www.bls.gov/ces 22

Unemployed construction workers, June 2000-June 2015 (not seasonally adjusted)

2000 2002 2004 2006 2008 2010 2012 20140

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

Source: BLS

24

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

2011 2012 2013 2014 201575

100

125

150

Steel pipe and tube

2011 2012 2013 2014 201575

100

125

150

2011 2012 2013 2014 201575

100

125

150

2011 2012 2013 2014 201575

100

125

150

Producer price indexes for key inputs, 12/10-6/15 (Dec. 2010=100)

Source: Author, based on BLS producer price index reports

Steel mill products Copper & brass mill shapes

Aluminum mill shapes

Latest 1-mo. change: -1.0%, 12-mo.: -12%




12/10

12/10 12/10

12/10

2011 2012 2013 2014 201575

100

125

150

2011 2012 2013 2014 201575

100

125

150

2011 2012 2013 2014 201575

100

125

150

2011 2012 2013 2014 201575

100

125

150

Producer price indexes for key inputs, 12/10-6/15 (Dec. 2010=100)

Source: Author, based on BLS producer price index reports

Plastic construction products

Concrete products

Architectural coatings


Latest 1-mo. change: 0.2%, 12-mo.: 2%

Latest 1-mo. change: -0.2%, 12-mo.: 4%


Diesel fuel

12/10

12/10 12/10

12/10

AGC members’ expectations for 2015 Net % who expect dollar volume of projects to be higher

33% Retail/warehouse/lodging 15% Higher education26% Manufacturing 13% Other transportation25% Private office 8% K-12 school24% Water/sewer 5% Public building24% Energy -6% Marine construction20% Hospital -16% Direct federal construction17% Power16% Highway

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

Trends: 2015-2017• Total construction spending: +6% to +10% per year– weak SF housing, retail; flat 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

Summary for 2014, 2015-17 forecast

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

2014actual

Jan.-May YTD ‘15 vs. ‘14

2015-17annual averageforecast

Total spending 5% 6% 6-10%

Private – residential 4% 6% 1-10%

– nonresidential 11% 8% 1-10%

Public 2% 3% near 0

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

Employment cost index 1.8% (Q1) 1.8% 3-5%

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, custom presentations

mailto:[email protected]

http://store.agc.org/

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

construction spending, labor & materials outlook agc austin chapter july 21, 2015 ken simonson...

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