Article source: ConstructConnect

Highlights

•  US construction starts fell 28.2% year-on-year and 19.9% year-to-date in Q3 2020. Non-residential building experienced the steepest decline, as the pandemic has weighed on the prospects of sectors such as hospitality, retail, and office working. The decline in civil engineering construction was exacerbated by some mega projects in 2019 falling out of the calculation. The decline in residential homebuilding has been driven by construction of apartments, with the single-family segment holding steady.
• The pace of the recovery has slowed markedly, driven by the expiry of fiscal stimulus, rising infection rates, and election uncertainty. Our baseline forecast assumes that Congress will eventually pass a new fiscal aid package, but even if Biden wins the election and delivers fiscal aid in 2021, the economy would stall in Q4 2020. We see the economy contracting 3.5% in 2020 and expect a relatively soft rebound of 3.7% in 2021.
•  US construction activity is forecast to decline more deeply in 2020 than during the global financial crisis of 2008-09. Non-residential construction will see the sharpest falls amid weak business investment. Residential activity will hold up relatively well, particularly within single-family construction. Looking ahead, we forecast a rebound in growth from 2021 but it will be slow and unevenly distributed.
• Total construction starts in Canada in Q3 declined 43.9% year-on-year and 28.6% year-to-date, with declines in all three headline segments. Restricted construction earlier in the year has largely resumed, but strong activity in Q3 2019 has fallen out of the annual calculation.
• Headline construction starts are forecast to decline by nearly 30% in 2020, following a contraction last year as well. In the recovery phase, new construction activity is expected to grow at a double-digit pace through 2023, but it is not expected to regain its pre-pandemic high (in 2018) until 2023.

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Article source: ConstructConnect

Two key numbers on the U.S. economy were released this morning at 8:30 a.m.: (1) the standard weekly initial jobless claims number; and (2) the ‘Advance Estimate’ of Q3 gross domestic product (GDP) change.

Both results are highlighted in the graphs below. The bigger story is sure to be the outsized increase in GDP and I’ll come to that in a moment.

But first, initial jobless claims remained ‘sticky’. For the week ending October 24, they were 751,000.

They have been higher than 2008-2009’s recessionary peak of 665,000 for 32 weeks in a row.

They need to fall to around 400,000 before there can be sighs of relief that the economy is truly on the mend.

In the last recovery phase, it was when they moved below 300,000 that optimism reigned once again.

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Article source: ConstructConnect

U.S. Housing Starts Surprisingly Buoyant Year to Date

One of the true economic surprises of the pandemic is how little sway it has been holding over housing starts.

In the U.S. (Graph 1), the Census Bureau is saying that year-to-date monthly average residential groundbreakings (in units) are +6.5% compared with January-to-September 2019.

In Canada (Graph 9), as reported by CMHC, monthly average starts are basically level with last year, +0.7%, but that’s commendable considering how much havoc has been created elsewhere in the economy by the coronavirus health crisis.

There have been only two months of extreme weakness in U.S. housing starts to date in 2020 that can be attributed to pandemic lockdown measures ‒ April (934,000 units seasonally adjusted and annualized/SAAR) and May (1.038 million units).

In September, American housing starts were back above 1.4 million units. Regionally (Graph 7), on a percentage-change basis, the Midwest has been leading (+12.7%), followed by the West (+6.8%) and the South (+6.1%), with the Northeast (0.0%) in a holding pattern.

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Canada’s Jobs Claw-Back Ratio Above Three-Quarters

In September, the U.S. economy experienced a fourth month of slowing jobs increase. In other words, new jobs creation decelerated. North of the border, according to Statistics Canada, there was an improvement in hiring (or re-hiring) in the latest month, versus the period before (+378,000 compared with +246,000), bringing a little more excitement to the recovery party (Graph 1).

Canada’s total jobs ‘claw-back’ ratio has improved to a quite respectable 76.1% (Table 1). More than three-quarters of the positions that disappeared from February to April, due to the coronavirus-related lockdowns, have been re-acquired.

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Article source: ConstructConnect

Below are six graphs recording 12-month moving averages of ConstructConnect’s nonresidential construction starts.

When the value of the current month is higher than for the same month a year ago, the line will turn up; when lower, it will dip.

String a couple of similar positive or negative directional changes together over several months and one has a trend.

And that’s what the graphs are designed to do, show improving or deteriorating trends in a dozen major and more granular categories of construction work.

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Article source: ConstructConnect

U.S. GDP Bounce Back
After a change of -5.0% annualized in ‘real’ (inflation-adjusted) gross domestic product (GDP) in Q1 of this year, the U.S. economy plummeted -32.9% in Q2. Annualizing the number essentially means compounding the quarter-to-quarter change to obtain a yearly rate. (The result is usually close to multiplying by four.) The quarter-to-quarter change in Q2 was about -9.0%.
In Q3, there will be a big bounce back. A Q/Q increase of +7.0% to +8.0% will yield an outsized number for GDP growth approaching +30.0% annualized. This will inspire a lot of celebratory backslapping, but it will be deceptive and way too early to uncork the champagne.
September’s jobs numbers tell a truer story. The month-to-month increase in U.S. employment may have been an eye-popping +661,000, but it showed a third straight month of deceleration. The improvement in the labor market has been losing steam.
Graph 1

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Article source: ConstructConnect

A Deceleration in Jobs Increases

The total number of U.S. jobs in September, according to the latest Employment Situation report from the Bureau of Labor Statistics (BLS), rose by +661,000. An increase of nearly two-thirds of a million, on first blush, sounds wonderful. But it needs to be placed in perspective.

The +661,000 gain continues the deceleration in jobs generation that has been underway since June. The net jobs increases over the latest four months have been +4.8 million, +1.8 million, +1.5 million, and most recently, +661,000.

The month-to-month percentage change in U.S. total employment in September was +0.5% after being +3.6% in June, +1.3% in July and +1.1% in August.

September’s seasonally adjusted (SA) unemployment rate improved to 7.9% from 8.4% in August. In September 2019, the SA jobless figure was only 3.5%.

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