ConstructConnect’s Starts Continue Winning Trend in April

Article source: ConstructConnect

ConstructConnect announced today that April’s level of U.S. construction starts, excluding residential work, was $30.1 billion, a further climb of +8.1% month to month on top of March’s leap of +14.0%. Since the usual or long-term average gains in March and April, due to seasonality, are +2.5% and +12.0%, the kick-off to 2016’s spring has been more than kind to the construction sector.

Comparing April of this year with what was an admittedly lackluster same fourth month of last year, the change was an outsized +30.7%. That’s approaching one-third higher. The level of year-to-date starts in 2016 has been +14.5% versus the January to April time frame of 2015.

The starts figures throughout this report are not seasonally adjusted (NSA). Nor are they altered for inflation. They are expressed in what are termed ‘current’ as opposed to ‘constant’ dollars.

‘Non-residential building’ plus ‘engineering/civil’ work accounts for a considerably larger share of total construction than residential activity. The former’s combined proportion of total put-in-place construction in the Census Bureau’s March report was 60%; the latter’s was 40%.

ConstructConnect’s construction starts are leading indicators for the Census Bureau’s capital investment or put-in-place series. Also, the reporting period for starts (i.e., April 2016) is one month ahead of the reporting period for the investment series (i.e., March 2016.)

The Bureau of Labor Statistics (BLS) says in its latest Employment Situation Summary that construction hiring stalled in April, at only +1,000 jobs, after March’s substantial rise of +41,000. The pace of year-over-year employment in the sector, however, at +4.1%, is still faster than in any other industrial sub-category. ‘Professional and business services’ and ‘education and health’ are tied for second, each at +3.1%. The economy-wide jobs total is +1.9% year over year.

The unemployment rate in construction has now dropped to only 6.0%. That’s quite noteworthy considering that only rarely, in historical records, does it ever fall below 5.0%. A year ago, in April 2015, it was 7.5%. While hard to believe, construction’s unemployment rate deteriorated to an abysmal 27.1% in February 2010, in the aftermath of 2008-2009’s Great Recession.

Before there can be on-site construction activity, projects must be contemplated and planned by owners and rendered into working drawings by design professionals. The total jobs figure in architectural and engineering services has mildly retreated in each of the past two periods, -0.1% month over month in March and -0.2% in April. Year over year, though, it is still better by a respectable +1.9%, the same as for all private sector work. Also interesting to note is the staffing change at retailers selling building materials and supplies, where payrolls have shot up +4.0%.

The month-to-month total starts upturn in April of +8.1% found its leader in the civil/heavy engineering sub-category, which bounded ahead by +46.6%, or nearly half. Institutional work recorded a decently commendable step forward, +6.5%. Meanwhile, commercial starts fell back, -17.5, although not to nearly the degree that was experienced by industrial starts, -64.4%. The usually smaller-volume category of industrial can display wild swings from one month to the next depending on whether or not there has been a go-ahead for a mega project or two.

The +30.7% total starts upsurge in April of this year compared with April of last year arose from improvements in all the major type-of-structure categories, led by engineering (+36.8%), with a big helping hand from commercial (+28.3%) as well. Nor was institutional (+24.0%) far behind. The industrial starts level, while still distantly trailing the others, was up by double (+105.1%).

April’s year-to-date starts increase of +14.5% was also broadly based, with the commercial type-of-structure category (+23.8%) as the frontrunner, followed by institutional (+18.3%) and civil/heavy work (+13.6%). Only industrial (-54.7%) has faltered, down by more than half.

Within commercial, ‘private offices’ and ‘retail/shopping’ are currently the largest sub-components. The former turned in a weak month-to-month performance in April (-69.1% m/m), but was better year-on-year (+14.1% y/y) and buoyant year to date (+49.2% ytd). The latter showed strength according to all three measures: +43.3% m/m; +49.4% y/y; and +17.5% ytd.

Three other important cogs in the commercial category had disappointing m/m results, but considerably better y/y and ytd percent changes to boast about in April. ‘Hotel/motel’ starts were -34.8% m/m, but +17.2% y/y and +39.0% ytd. ‘Government offices’ were -7.7% m/m, but +5.6% y/y and +43.6% ytd. And ‘warehouses’ were -17.7% m/m, but +24.5% y/y and +19.2% ytd.

The ‘school/college’ sub-category has accounted for 60% of total institutional starts so far this year and its percentage changes were uniformly positive in April (+31.7% m/m; +27.4% y/y; and +9.6% ytd). ‘Hospital/clinic’ starts have been a distant second to educational facilities within institutional and they had a rocky m/m (-62.2%), but pretty good y/y (+16.6%) and nothing-to-complain-about ytd (+32.9%, which was a bounce higher by nearly one-third).

The ‘road/highway’ sub-category has dominated heavy engineering in 2016 and its April percentage changes were all solidly on the plus side: +37.4% m/m; +24.8% y/y; and +15.5% ytd. Second-place ‘water/sewage’ work expanded even more rapidly: +119.2% m/m; +72.7% y/y; and +27.3% ytd. ‘Bridges’ struggled a bit: +36.7% y/y and +18.3% ytd; but -18.5% m/m.

Table 2 on page three re-orders and provides more detail on some of the type-of-structure categories in Table 1. The reasons for this ‘second view’ are set out in the footnote.

In the ‘Top 10’ list on page four, New York, Washington state and California stand out for contributing two projects each. There were no individual landmark jobs that matched or exceeded $1 billion.

Most of the slopes in the trend graphs on page 5 of this report are heading upwards.

Wide-spread anecdotal reports of worker shortages in the construction sector, that have led to some pay scale increases, are still not being reflected in the official earnings data from the BLS.

In April, there was a straightforward national benchmark against which to compare all other results. Year-over-year average hourly and weekly wage hikes, both including and excluding supervisory personnel, were the exact same +2.5%. Only with respect to weekly earnings, including bosses, did construction beat that yardstick, with an uptick of +2.8%. In hourly earnings, including bosses, it fell short at +2.3%. Construction’s non-supervisory personnel also lagged at +2.0% for average hourly earnings and +2.3% for average weekly earnings.

The value of construction starts each month is summarized from ConstructConnect’s database of all active construction projects in the U.S. Missing project values are estimated with the help of RSMeans’ building cost models.

ConstructConnect’s non-residential starts series, because it is comprised of total-value estimates for individual projects, some of which are ultra-large, has a history of being more volatile than many other leading indicators for the economy.

A “start” is determined by taking the announced bid date and adding a short time lag (30 to 60 days). ConstructConnect continues to follow the project via its network of researchers. If it is abandoned or re-bid, the start date is updated to reflect the new information.

TABLE 1: VALUE OF UNITED STATES
CONSTRUCTION STARTS – APRIL 2016
YEAR TO DATE
(CONSTRUCTCONNECT)

Source: ConstructConnect Research Group and ConstructConnect.
Table: ConstructConnect.

TABLE 2: VALUE OF UNITED STATES
CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION
– APRIL 2016
Arranged to match the alphabetical category drop-down menus in INSIGHT

Table 1 conforms to the type-of-structure ordering adopted by many firms and organizations in the industry. Specifically, it breaks non-residential building into ICI work (i.e., industrial, commercial and institutional), since each has its own set of economic and demographic drivers. Table 2 presents an alternative, perhaps more user-friendly and intuitive type-of-structure ordering that matches how the data appears in ConstructConnect’s on-line product ‘Insight’.

Source: ConstructConnect.
Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES
NATIONAL
CONSTRUCTION STARTS – APRIL 2016 – CONSTRUCTCONNECT

Data Source and Table: ConstructConnect.

TABLE 4: U.S. YEAR-TO-DATE REGIONAL STARTS
NON-RESIDENTIAL CONSTRUCTION
* — CONSTRUCTCONNECT

*Figures above are comprised of non-res building and engineering (i.e., residential is omitted).

Data Source and Table: ConstructConnect.

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Tags: Alex Carrick, build, Canada, CMDGroup, construct, ConstructConnect, Economy, house, market, residential, US

Category: CMD Group

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