ConstructConnect announced today that August’s volume of construction starts, excluding residential activity, was $33.1 billion − a month-to-month change of -18.9%. The long-term history of the starts data records a ‘normal’ change of -3.5% from July to August, due to seasonality. (Starts are traditionally strongest in Spring and early Summer.)

Compared with August of last year, this year’s latest-month nonresidential starts volume was -9.5%.  Relative to the nonresidential five-year average for August, from 2013 through 2017, this year’s latest-month starts volume was +2.7%. Year-to-date nonresidential starts in 2018 compared with the same January-August time frame of 2017 have been -1.9%.

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 larger share of total construction than residential activity. The former’s combined proportion of total put-in-place construction in the Census Bureau’s July report was 55%; the latter’s share was 45%.

View this information as an infographic.

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., August 2018) is one month ahead of the reporting period for the investment series (i.e., July 2018.)

The all-jobs increase for the U.S. economy in August was +1.6% year over year, according to the latest Employment Situation report from the Bureau of Labor Statistics (BLS). Hiring by the construction sector has been more robust, +4.3% year over year. The month-to-month nominal jobs increase in construction in August was +23,000, the same as the average monthly gain since the beginning of this year. Construction hiring on average for January-August 2018 is up by one-third versus 2017’s +18,000 monthly average for the first two-thirds of 2017. Construction’s current unemployment rate is 3.4%, the same as in July, but down from 4.7% in August 2017. Construction’s jobless rate is lower than the ‘headline’ figure for the whole economy, 3.9%.

Year-over-year staffing changes in other industrial sectors with close ties to construction have been: ‘cement and concrete product manufacturing’, -0.1%; ‘real estate firms’, +2.2%; ‘building material and supplies dealers’, +2.5%; ‘architectural and engineering services’, +3.2%; ‘oil and gas extraction’, +4.8%; and most impressive, ‘machinery and equipment rental’, +12.2%.

The month-to-month (m/m) decline of -18.9% in total nonresidential starts in August resulted from relatively minor pullbacks in institutional (-6.0%) and heavy engineering/civil (-13.9%) that were exacerbated by a major downshift in commercial (-52.1%). Industrial, thanks to a couple of large energy-related projects, surged ahead (+268.2%).

The -9.5% year-over-year (y/y) drop in total nonresidential starts in August 2018 compared with August 2017 was due to retreats in heavy engineering (-10.1%) and commercial (-33.2%) that were not matched or compensated by uplifts in institutional (+3.2%) and industrial (+53.0%).

The slight easing back year to date (ytd) in total nonresidential starts (-1.9%) in August was a mix of steps forward by engineering (+10.2%) and industrial (+39.8%) that were more than counter-balanced by backtracking steps from institutional (-7.4%) and commercial (-15.4%).

As the year has progressed, the ‘roads/highways’ segment of engineering work has grown larger. It has moved from 34% of total civil in January to 41% in the latest month. In August, ‘street starts’ were -12.0% m/m; but +43.8% y/y; and +14.5% ytd. ‘Miscellaneous civil’ and ‘water/sewage’ are now about tied – with nearly 20% shares each – for second place within the engineering total. The former, in August, was mainly upbeat, +13.4% m/m; and +52.5% ytd; but -75.6% y/y. The latter was in the doldrums: -21.3% m/m; -19.5% y/y; and -12.6% ytd.

Starring in the institutional starts story so far this has been the ‘schools/colleges’ subcategory. Its share of the institutional total has risen from 43% in January to 59% at present. Educational facility starts in August were -12.3% m/m; and -2.2% ytd; but +20.4% y/y. ‘Hospital/clinic’ starts in the latest month were +51.6% m/m; and +23.6% y/y; but -16.8% ytd. The share of institutional starts taken by the three health care categories – ‘hospitals’, ‘nursing/assisted living’ and ‘miscellaneous medical’ is now 28%, down from its more typical one-third slice.

Although the ‘private office’ subcategory currently has a first-place share (22%) among commercial starts to date in 2017, it failed to shine in August. Its percentage changes were -35.2% m/m; -42.2% y/y; and -15.0% ytd. The ‘hotel/motel’ subcategory is runner-up for share (20%), but it likewise is delivering negative news: -78.9% m/m; -41.7% y/y; and -10.7% ytd.

During the past several months, the slopes of many of the 12-month moving average trend graphs have leveled off rather than sustained upwards or downwards patterns. There have been three exceptions. 12-month moving average ‘retail’ and ‘hospital/clinic’ starts are still showing weakness, while ‘road/highway’ starts have returned to considerable strength.

Tables B-3 and B-8 of the monthly Employment Situation report record average hourly and average weekly wages for industry sectors. B-3 is for all employees (i.e., including bosses) on nonfarm payrolls; B-8 is for ‘production and nonsupervisory personnel’ only (i.e., it excludes bosses). For ‘all jobs’ and construction, there are eight relevant percentage changes to consider.

From Table B-3, the average annual compensation hikes in August 2018 for ‘all jobs’ nationally were +2.9% hourly and +3.2% weekly. The pay raises for construction workers, as a subset, were more lucrative, +3.3% hourly and +4.4% weekly. In Table B-8 (excluding bosses), there were similar gaps. While the ‘all jobs’ earnings gains were +2.8% hourly and +3.4% weekly, the financial rewards going to construction workers were better at +3.3% hourly and +4.4% weekly.

Further on the costing front, August’s results for three key Producer Price Index (PPI) series from the BLS were: ‘construction materials special index’, +8.0%; ‘inputs to new construction index (excluding capital investment, labor and imports)’, +6.2%; and ‘final demand construction’, +3.2%.

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’s single-family plus multi-family residential starts in August were -3.8% m/m; -15.3% y/y; and -9.7% ytd. ‘Grand total’ starts were -13.2% m/m; -12.0% y/y; and -5.0% ytd.

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 – August 2018 PDF.

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

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

TABLE 1: VALUE OF UNITED STATES
CONSTRUCTION STARTS – AUGUST 2018
(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.

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

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

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’.

Source: ConstructConnect.
Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES
NATIONAL
CONSTRUCTION STARTS – AUGUST 2018 – CONSTRUCTCONNECT
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