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Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for … More »

ConstructConnect’s June Starts Stumbled, but YTD Stayed Positive at +2%

 
July 17th, 2017 by Alex Carrick, Chief Economist at ConstructConnect

Article source: ConstructConnect

ConstructConnect announced today that June construction starts, excluding residential activity, fell -13.7% versus May. The usual May-to-June change, due to seasonality, is +4.5%.

2017-07-13-US-Nonresidential-Construction-Starts-June-2017

June of this year versus a strong June of last year was -16.3%. Standalone June of this year versus June’s average level over the previous five years (2012-2016 inclusive), however, was a more upbeat +2.8%.

Year-to-date starts through the first half of this year, compared with January-to-June of last year,  stayed positive at +2.4%.

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 May report was 57%; the latter’s was 43%.

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., June 2017) is one month ahead of the reporting period for the investment series (i.e., May 2017.)

According to the latest Employment Situation Report from the Bureau of Labor Statistics (BLS), the total number of jobs in construction climbed by +16,000 in June. The monthly average rise in on-site work so far this year has been +19,000, almost double the pace of +10,000 set in last year’s first half. Among industrial sectors, construction is tied with ‘professional and business services’ for best year-over-year percentage change in jobs, +3.1%. The +1.6% performance for all jobs in the economy is only about half as quick. Construction’s NSA unemployment rate in June was an exceedingly low 4.5%. In May, it had been 5.3% and in June 2016, 4.6%.

Employment in ‘architectural and engineering services’ rose by +5,000 jobs in June, yielding a year-over-year pickup of +3.8%. Healthy hiring by the design professions is a positive ‘leading indicator’ for construction. Turning owners’ capital spending wishes into visualizations and then creating ‘assembly instructions’ are crucial first steps prior to work proceeding at job sites.

There were nothing but declines month to month (m/m) in all four major type-of-structure subcategories. Industrial dipped the most (-36.7%), followed by heavy engineering/civil (-19.8%). Commercial also exhibited weakness (-14.8%), while institutional (-5.5%) retreated the least.

In a comparison of June 2017 with June 2016 (y/y), there was one subcategory that managed a confident forward stride, engineering at +16.3%. The others, though, took backwards steps progressing from -11.8% for institutional, to -27.2% for industrial, and -40.8% for commercial.

First-half 2017 versus first-half 2016 starts (i.e., year-to-date or ytd starts) have swung from a high of +25.2% for heavy engineering/civil to a low of -29.1% for industrial, with commercial (-5.6%) and especially institutional (i.e., a nearly ‘flat’ -0.9%) in the middle.

‘Road/highway’ starts have accounted for the largest slice (42%) of engineering work so far this year. In June, the ‘streets’ component was disappointing m/m (-25.5%), but encouraging both y/y (+16.4%) and ytd (+17.1%). A closely related category is ‘bridges’ and in the latest month it too was down m/m (-31.8%), but it was even more bullish y/y (+34.7%) and ytd (+64.9%).

‘Bridges’, with a 16% share, is the third largest portion of engineering. Second place belongs to ‘water/sewage’ (21%). ‘Water/sewage’ starts in June were up across the board, although in two instances, only barely: +0.4% m/m; +13.7% y/y; and +1.0% ytd. And before leaving engineering, ‘miscellaneous civil’ starts (e.g., power-related and oil and gas) should also be mentioned. They’ve recently cast quite a bright light: +27.4% m/m; +33.5% y/y; and +33.9% ytd.

Among subcomponents, ‘schools/colleges’ contribute the most (i.e., 57%) to institutional starts, by far. The time-comparisons of groundbreakings on education facilities in June were mixed, with an upward lift m/m (+9.6%) tempered by downdrafts y/y (-4.9%) and ytd (-5.0%). ‘Hospital/clinic’ work is second most important in institutional (with a 15% share) and in the sixth month of this year, medical facilities did nothing but drag their feet: -67.6% m/m; -67.9% y/y; and -17.9% ytd. Moving in the other direction, the ‘fire/police/courthouse/prison’ catch-all category in June was +71.4% ytd, led by courthouses (+232.0% ytd) and prisons (+42.2% ytd).

Within commercial starts, ‘hotel/motel’ work (a 23% slice) has stayed buoyant through this year’s mid-point: +24.1% m/m; +40.1% y/y; and +80.2% ytd. ‘Private office buildings’ (a 20% share of commercial) haven’t fared as well. While they leapt +93.2% m/m, they were -40.2% y/y and -2.9% ytd. ‘Retail/shopping’ starts in June pulled ahead moderately m/m (+11.0%), but they were down steeply both y/y (-74.8%) and ytd (-57.2%). ‘Warehouse’ starts faltered m/m (-31.4%) and y/y (-20.6%), but they remained on the plus side of the ledger ytd (+30.3%).

An impressive +43.4% change for ‘miscellaneous commercial’ ytd is a combination of -26.9% ytd for ‘transportation terminals’ being more than offset by +92.8% for ‘sports stadiums’.

Table 2 reorders 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 show nonresidential building giving up ground on the heights while heavy engineering is gradually scaling the foothills. The slopes for ‘private office buildings’, ‘schools/colleges’ and especially ‘retail’ are clearly descending. Acting as counter-weights, the curves for ‘roads/highways’ and ‘bridges’ are on the ascendant.

As for year-over-year compensation levels in June, as reported by the BLS in the latest Employment Situation Report (Tables B-3 and B-8), there wasn’t much difference between all workers and those engaged in construction. Including supervisory personnel, year-over-year average hourly and average weekly earnings economy-wide were +2.5% and +2.8% respectively. The comparable figures in the construction sector were +2.5% and +2.7%.

Excluding bosses, the ‘all jobs’ earnings increases, on average, were +2.3% hourly and +2.6% weekly. For ‘hard hat’ workers, the gains were +2.3% 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 – JUNE 2017
(CONSTRUCTCONNECT)

% Change % Change % Change
Jan-JUN 17 Jan-JUN 17 vs JUN 17 vs JUN 17 vs
($ billions) Jan-JUN 16 JUN 15 MAY 17
Hotel/Motel 16.698 80.2% 40.1% 24.1%
Retail 9.523 -57.2% -74.8% 11.0%
Parking Garage 1.368 -47.2% -84.7% -79.9%
Amusement 3.474 13.8% 26.5% -4.9%
Private Office 14.603 -2.9% -40.2% 93.2%
Government Office 5.413 -15.3% -13.1% 18.4%
Laboratory 1.031 -67.7% 23.0% -39.3%
Warehouse 8.559 30.3% -20.6% -31.4%
Miscellaneous Commercial 11.172 43.4% -20.5% -73.7%
COMMERCIAL 71.840 -5.6% -40.8% -14.8%
 
INDUSTRIAL (Manufacturing) 9.890 -29.1% -27.2% -36.7%
Religious 1.142 28.8% 51.2% 42.4%
Hospital/Clinic 9.706 -17.9% -67.9% -67.6%
Nursing/Assisted Living 4.245 -12.7% 94.1% 60.0%
Library/Museum 1.439 -22.1% -38.6% 136.8%
Police/Courthouse/Prison 5.020 71.4% 1.9% -1.4%
Military 2.214 43.1% 80.6% -2.5%
School/College 37.153 -5.0% -4.9% 9.6%
Miscellaneous Government 4.776 46.7% -3.7% -23.9%
INSTITUTIONAL 65.695 -0.9% -11.8% -5.5%
Miscellaneous Nonresidential 3.243 -21.9% -20.3% 2.0%
NONRESIDENTIAL BUILDING 150.667 -6.1% -26.6% -10.4%
Airport 4.798 167.3% 1.1% -43.4%
Road/Highway 31.451 17.1% 16.4% -25.5%
Bridge 11.681 64.9% 34.7% -31.8%
Dam/Marine 2.185 21.5% -29.4% -40.1%
Water/Sewage 15.485 1.0% 13.7% 0.4%
Miscellaneous Civil 9.293 33.9% 33.5% 27.4%
HEAVY ENGINEERING 74.893 25.2% 16.3% -19.8%
TOTAL NONRESIDENTIAL 225.560 2.4% -16.3% -13.7%

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

TABLE 2: VALUE OF UNITED STATES
CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION
– JUNE 2017
Arranged to match the alphabetical category drop-down menus in INSIGHT

Table 2 Content – Go to ConstructConnect

Source: ConstructConnect.Table 1 conforms to the type-of-structure ordering adopted by many firms and organizations in the industry. Specifically, it breaks nonresidential 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 online product ‘Insight’.

Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES
NATIONAL
CONSTRUCTION STARTS – JUNE 2017 – CONSTRUCTCONNECT
Billions of current $s, not seasonally adjusted (NSA)

Table 3 Content – Go to ConstructConnect

Data Source and Table: ConstructConnect.

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

Jan-JUN 2016 Jan-JUN 2017 % Change
Connecticut $1,604,622,959 $2,789,009,948 73.8%
Maine $624,333,175 $542,194,298 -13.2%
Massachusetts $5,475,236,317 $5,117,782,189 -6.5%
New Hampshire $721,965,395 $454,810,305 -37.0%
Rhode Island $410,365,343 $583,154,874 42.1%
Vermont $485,278,805 $385,900,271 -20.5%
Total New England $9,321,801,994 $9,872,851,885 5.9%
New Jersey $4,990,739,205 $5,975,472,067 19.7%
New York $12,860,339,894 $19,131,826,478 48.8%
Pennsylvania $7,371,986,335 $7,622,079,763 3.4%
Total Middle Atlantic $25,223,065,434 $32,729,378,308 29.8%
TOTAL NORTHEAST $34,544,867,428 $42,602,230,193 23.3%
Illinois $6,383,016,984 $7,603,979,783 19.1%
Indiana $3,321,259,327 $3,503,960,928 5.5%
Michigan $5,598,295,493 $6,067,069,655 8.4%
Ohio $6,140,423,211 $6,533,907,350 6.4%
Wisconsin $4,530,436,990 $4,912,028,228 8.4%
Total East North Central $25,973,432,005 $28,620,945,944 10.2%
Iowa $2,957,328,299 $2,275,976,360 -23.0%
Kansas $2,010,254,478 $1,575,176,480 -21.6%
Minnesota $4,571,614,000 $4,363,208,583 -4.6%
Missouri $4,264,171,940 $3,826,141,410 -10.3%
Nebraska $1,745,531,403 $2,135,417,291 22.3%
North Dakota $1,325,153,235 $1,001,200,534 -24.4%
South Dakota $829,452,264 $828,779,272 -0.1%
Total West North Central $17,703,505,619 $16,005,899,930 -9.6%
TOTAL MIDWEST $43,676,937,624 $44,626,845,874 2.2%
Delaware $579,865,759 $830,079,408 43.2%
District of Columbia $1,183,405,393 $1,446,893,547 22.3%
Florida $11,497,408,978 $15,493,143,323 34.8%
Georgia $7,153,154,045 $6,117,127,899 -14.5%
Maryland $6,555,688,245 $3,390,384,630 -48.3%
North Carolina $7,932,791,551 $6,131,987,132 -22.7%
South Carolina $3,521,173,814 $4,042,572,232 14.8%
Virginia $5,054,791,350 $5,563,732,283 10.1%
West Virginia $421,810,816 $566,826,157 34.4%
Total South Atlantic $43,900,089,951 $43,582,746,611 -0.7%
Alabama $2,495,625,642 $2,456,769,584 -1.6%
Kentucky $3,903,496,732 $1,823,367,583 -53.3%
Mississippi $1,590,761,966 $1,318,124,277 -17.1%
Tennessee $4,607,217,381 $2,701,691,228 -41.4%
Total East South Central $12,597,101,721 $8,299,952,672 -34.1%
Arkansas $1,327,067,714 $1,368,796,999 3.1%
Louisiana $5,096,544,258 $3,456,430,941 -32.2%
Oklahoma $2,665,354,844 $3,556,424,231 33.4%
Texas $28,713,757,002 $24,331,374,440 -15.3%
Total West South Central $37,802,723,818 $32,713,026,611 -13.5%
TOTAL SOUTH $94,299,915,490 $84,595,725,894 -10.3%
Arizona $3,552,329,740 $3,725,119,719 4.9%
Colorado $3,310,610,258 $3,346,382,601 1.1%
Idaho $727,154,505 $747,031,015 2.7%
Montana $616,228,717 $494,835,128 -19.7%
Nevada $2,657,583,697 $1,240,314,932 -53.3%
New Mexico $727,514,274 $1,031,788,832 41.8%
Utah $3,402,075,778 $3,397,727,622 -0.1%
Wyoming $991,436,393 $640,613,908 -35.4%
Total Mountain $15,984,933,362 $14,623,813,757 -8.5%
Alaska $897,020,867 $1,121,807,368 25.1%
California $20,950,814,423 $28,687,703,571 36.9%
Hawaii $1,604,995,408 $701,968,903 -56.3%
Oregon $2,728,129,500 $3,254,540,488 19.3%
Washington $5,651,911,321 $5,345,482,813 -5.4%
Total Pacific $31,832,871,519 $39,111,503,143 22.9%
TOTAL WEST $47,817,804,881 $53,735,316,900 12.4%
TOTAL U.S. $220,339,525,423 $225,560,118,861 2.4%

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

Data Source and Table: ConstructConnect.

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Category: ConstructConnect

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