New Industry Snapshot dated February 2018 and based on January starts stats

Article source: ConstructConnect

ConstructConnect announced today that January’s volume of construction starts, excluding residential activity, was $29.3 billion. The fact that some of the monthly starts numbers can display wild swings is confirmed by the following. January 2018’s volume of starts relative to December 2017’s level was +35.8%; but January 2018 compared with January 2017 was -22.6%.

The outsized percentage changes resulted from December 2017 being abnormally low ($21.6 billion) and January 2017 being inordinately high ($37.9 billion). Usually, it’s the presence or absence of a mega project or two that causes the monthly number to display extreme volatility.

Comparing January of this year with the annual average for January from the preceding five years, 2013 to 2017, − i.e., employing a ‘smoothing’ technique, − yields an increase of +9.7%.

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.

View this information as an infographic.

‘Nonresidential building’ plus ‘engineering/civil’ work accounts for a larger share of total construction than residential activity. The former’s combined proportion of total put-in-place construction in the Census Bureau’s December report was 59%; the latter’s was 41%.

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., January 2018) is one month ahead of the reporting period for the investment series (i.e., December 2017.)

During the past three months, the U.S. construction sector has set a blistering pace of jobs growth: November 2017, +42,000; December 2017, +33,000; and January 2018, +36,000. The cumulative climb in onsite employment during that time frame has been +111,000 jobs. The gain of +111,000 has been the second best performance over three months since the Great Recession. Only the October to December period of 2015 was better, at +134,000 jobs.

According to the latest Employment Situation report from the Bureau of Labor Statistics (BLS), the U.S. construction sector is generating jobs at a year-over-year pace that is more than twice as fast as what the whole economy is managing, +3.3% versus +1.5%. In a ranking of sectors, construction’s employment performance (+3.3%) is in first place, with ‘transportation and warehousing’ (+2.9%) in second. Construction’s NSA unemployment rate in January 2018 was 7.3%, which is low for winter. Twelve months earlier, in January 2017, it had been 9.4%.

The year-over-year staffing advance at architectural and engineering firms engaged in designing structures – i.e., their work is out-front of field assembly − was also strong in January, +3.0%. Additionally, the BLS provides jobs data for two other segments of the economy with close ties to construction: ‘real estate’ and ‘building material stores’. Both also achieved jobs growth (+1.8% and +2.6% respectively) in January that exceeded the all-positions average (+1.5%).

January 2018’s greater than one-third (+35.8%) rise in total nonresidential starts month to month (m/m) originated inthe heavy engineering/civil (+72.4%) and institutional (+57.7%) type-of-structure subcategories. Industrial (0.0%) stayed flat while commercial (-7.3%) fell to a relatively minor degree.

January’s more than one-fifth decline (-22.6%) in total nonresidential starts year over year (y/y) was due to weakness in all four of the major type-of-structure subcategories. Industrial (-89.2%) retreated the most, followed by commercial (-27.4%). The losses suffered by institutional (-9.8%) and heavy engineering/civil (-9.7%) were almost the same.

For every month of the year except January, the commentary in this report would normally go on to consider year-to-date results. January is unique, however, in that its statistics and year-to-date findings are one and the same. Therefore, the following will discuss both m/m and y/y performances among disaggregated market segments. Also keep in mind that January is too early in the year to leap to too many conclusions about such matters as shifting market shares.

‘Road and highwy’ initiations are usually the biggest component of overall engineering starts. In January 2018, such street starts were outstanding m/m (+75.9%), but lackluster y/y (-0.5%). ‘Water/sewage’ is also traditionally an important cog in engineering and in the latest month, its starts volume was an upbeat +39.6% m/m, but a dismal -62.2% y/y.

Also note that within engineering in the latest January there were exceptionally perky results for ‘airports’ (+389.9% m/m and +344.2% y/y) and ‘miscellaneous civil’ (+285.5% m/m and +176.5% y/y). The latter includes power generation and oil and natural gas pipeline work.

‘Schools/colleges’ is almost always the biggest market niche within institutional. In January, starts on academic facilities were +22.5% m/m, but -28.1% y/y. The ‘hospital/clinic’ designation also plays a prominent role in institutional construction. The latest results for groundbreakings on medical facilities were an impressive +204.7% m/m, but a more modest +11.6% y/y.

Within commercial, there is often considerable diversity as to which of several ensemble members will take its turn in the spotlight. At this present moment, ‘hotel/motel’ starts are +51.1% m/m and +11.9% y/y. ‘Retail/shopping’ is +60.4% m/m, but -1.3% y/y. And ‘private office building’ starts are way ahead m/m (+75.4%), but are lagging badly y/y (-59.9%).

The six graphs show 12-month moving average trend lines of starts for many of the major type-of-construction subcategories. There have been more slopes that have been falling recently rather than rising. Among the structure types taking descending paths have been ‘retail’, ‘private office buildings’, ‘schools’ and ‘water/sewage’. There have also been a couple, however, displaying sharp upwards turns – ‘miscellaneous civil (i.e., power and energy)’ and ‘bridges’.

Included in the BLS Employment Situation report are two tables on workplace compensation levels which analysts scour for evidence of quickly rising wages, since such a turn of events may forewarn of more aggressive interest rate hikes by the Federal Reserve to dampen inflationary tendencies. BLS Table B-3 includes ‘supervisory personnel’ while BLS Table B-8 does not.

Table B-3 is currently showing average earnings of all workers to be +2.9% y/y hourly and +2.6% y/y weekly. The comparable figures for construction workers are the same, +2.9% hourly and +2.6% weekly. Table B-8 has all workers (excluding bosses) at +2.4% y/y both hourly and weekly. Construction workers as a subset within Table B-8 are doing better at +2.9% hourly and +3.1% weekly. Note, however, that the +3.1% y/y weekly for construction is down significantly from the +5.3% y/y weekly that was reported by the BLS a month ago, in December 2017.

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.

Click here to download the Construction Industry Snapshot Package – January 2018 PDF.

Click here for the Top 10 Project Starts in the U.S. – January 2018.

Click here for the Nonresidential Construction Starts Trend Graphs – January 2018.

TABLE 1: VALUE OF UNITED STATES CONSTRUCTION STARTS
JANUARY 2018 – CONSTRUCTCONNECT

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

TABLE 2: VALUE OF UNITED STATES
CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION
– JANUARY 2018
Arranged to match the alphabetical category drop-down menus in INSIGHT

301.908

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 on-line product ‘Insight’.

Source: ConstructConnect.
Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES
NATIONAL CONSTRUCTION STARTS – JANUARY 2018 – CONSTRUCTCNNECT
Billions of current $s, not seasonally adjusted (NSA)

Data Source and Table: ConstructConnect.

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

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

Data Source and Table: ConstructConnect

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Tags: Alex Carrick, Economist, Economy

Category: ConstructConnect

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