ConstructConnect announced today that its April construction starts, excluding residential activity, were -7% versus March. The usual seasonal pattern is for a 12% increase month to month at this time of year, as blustery winter mellows into gentler spring.
April of this year compared with average April results over the prior five years, 2012-2016, was +17.6%. Year-to-date starts so far in 2017 have been -2% compared with the same first four months of last year.
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.
‘Nonresidential 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 57%; the latter’s was 43%.
Employment in construction advanced only slowly in March, +6,000 jobs, according to the latest Employment Situation Report from the Bureau of Labor Statistics (BLS). Thanks to strong gains in January (+34,000) and February (+59,000), however, the average monthly climb in on-site work through the first quarter of this year, at +33,000, has been +29% relative to last year’s Q1.
Year-over-year employment in construction is presently +2.6%, which is a significant retreat from a recent high of +6.1% in late 2014, but it is well ahead of the all-jobs gain of +1.5%. By way of comparison, manufacturing and retail employment are only +0.3% and +0.4% year over year respectively. ‘Professional and business services’ employment, though, is better at +3.2%. The NSA jobless rate in construction is now 8.4%, somewhat tighter than March of 2016’s 8.7%.
Among the many data series appearing in Table B-1 of the monthly Employment Situation Report are several with construction connections. The total number of jobs in architectural and engineering services in the latest month was +3.3% year over year. Staffing in the ‘real estate’ sector, which includes developers, was +3.5% year over year. The payrolls of ‘building material and supplies dealers’ was a quiet +1.2%. And note should also be made that in the resource sector, the number of workers engaged in ‘oil and gas extraction’, while still down year over year (-1.3%), was finally headed back up month over month, +1.0% in both February and March.
February’s big step forward in starts (+17.8%), month-to-month (m/m), arose from increases in all three major type-of-structure categories. Institutional (+28.6%) was out front, with commercial (+12.4%) and heavy engineering/civil (+11.0%) following and almost in a tie. The smaller-volume category of industrial, which can display extreme percentage-change volatility brought on by the presence or absence of a mega project or two, was +94.5%.
The year over year (y/y) decline in starts (-5.9%), March 2017 compared with March 2016, resulted from drops in institutional (-23.5%), commercial (-14.3%) and industrial (-7.1%). Only engineering (+33.4%) managed a gain this March versus last March.
As for year-to-date starts (ytd), – i.e., Q1 2017 versus Q1 2016 – heavy engineering (+17.4%) earned bouquets in the spotlight for a notable upside, while industrial (-28.9%), institutional (-17.1%) and commercial (-7.7%) were all relegated to the chorus for their downsides.
Within heavy engineering, the largest subcategory so far this year (i.e., with a 40% slice) has been ‘roads/highways’. Street work in March was uniformly positive: +28.3% m/m; +30.1% y/y; and +9.0% ytd. ‘Water/sewage’ work, next biggest component among civil starts (a 23% share), had a rough time m/m (-19.0%), but recorded improvement both y/y (+25.5%) and ytd (+19.7%).
Also important in the heavy engineering/civil type-of-structure category is bridge work, which chalked up outstanding numbers in March: +81.4% m/m; +40.5% y/y; and +30.5% ytd.
‘Private office buildings’ was the largest subcomponent of commercial work in March (with a 26% share so far this year) and it struggled m/m (-59.6%) and y/y (-47.9%), but managed to cling to an advance y/y (+10.0%). ‘Hotel/motel’ starts claimed the second largest slice (18%) and they were a notable success: +48.2% m/m; +97.0% y/y; and +43.9% ytd.
‘Warehouses’ (with a 12% share) was another subcategory of commercial that had outstanding numbers in March: +50.4% m/m; +101.5 y/y; and +51.4% ytd. ‘Retail/shopping’ starts (a 14% share), however, coincident with media reports of more ‘bricks and mortar’ locations being on the chopping block, were distressingly weak: -31.7% m/m; -70.7% y/y; and -51.6% ytd.
By far most important in institutional starts is the ‘school/college’ subcategory (a 58% share so far this year). In March, educational facility starts were +73.2% m/m; but -17.6% y/y; and -11.5% ytd. Second most significant (with a 12% slice) have been ‘hospital/clinic’ starts. They were also up m/m (+71.5%), but down y/y (-36.6%) and ytd (-46.3%).
Table 2 on page three of this report 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.
The 12-month moving average trend graphs on page five show nonresidential building starts coming off their not-so-long-ago peak, while heavy engineering starts are in a possibly early stage of heading up. Within nonresidential building work, both commercial (especially retail) and institutional have been departing negatively from previously upward paths. ‘Roads/highways’, ‘water/sewage’ and ‘bridges’ are all swinging higher in heavy engineering. Only ‘miscellaneous civil’, which encompasses oil and gas and electric power work, is diving.
To the surprise of many, given that March’s economy-wide jobless rate of 4.5% was the best it’s been since before the Great Recession, year-over-year earnings remained restrained. For workers across all industries, including supervisory personnel, March’s year-over-year increase in average hourly earnings was +2.7% and in average weekly earnings, +2.4%. The comparable figures for construction on its own were the reverse, +2.4% hourly and +2.7% weekly.
Leaving out bosses, average year-over-year earnings economy-wide were +2.3 hourly and +2.0% weekly. The standalone construction sector was a little higher at +2.7% both hourly and weekly.
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 nonresidential construction 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.
ConstructConnect has now moved to a better-targeted and research-assigned ‘start’ date. Prior to January 2017, the ‘start’ date was recorded as occurring within 30 to 60 days of the announced bid date. In concept, a ‘start’ is equivalent to ground being broken for a project to proceed. If work is abandoned or re-bid, the ‘start’ date is revised to reflect the new information.
TABLE 1: VALUE OF UNITED STATES
CONSTRUCTION STARTS – APRIL 2017
YEAR TO DATE
(CONSTRUCTCONNECT)
