Construction Spending, Labor

and Materials Outlook

2018 Realtors® Legislative Meetings & Trade Expo
Washington, DC, May 18, 2018
Ken Simonson
Chief Economist, AGC of America
simonsonk@agc.org
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Construction spending & employment, 2006–2018

Total spending, Feb. ‘06 (peak)–Mar. ‘18 Total employment, Apr. ’06 (peak)–Mar. ‘18
trillion $, seasonally adjusted annual rate millions, seasonally adjusted
$1.50 8.0 3/18 Total: 7.2 million
3/18 Total: $1.28 trillion 7.7 million (7% below peak)
(7% above ‘06 peak)
$1.20
6.0
Nonresidential
$0.90 (2% below ‘08 peak)

Private residential 4.0

(21% below ‘06 peak)
$0.60
Private nonresidential
(9% above ‘08 peak)
2.0
$0.30 Residential (19%
Public below ‘06 peak)
(9% below ‘09 peak)
$0.00 0.0
2006 2008 2010 2012 2014 2016 2018 2006 2008 2010 2012 2014 2016 2018

Mar. 2017–Mar. 2018: total 3.6% Mar. 2017–Mar. 2018: total 3.3%
private res. 5%, private nonres. 2%, public 3% residential 4.3%, nonresidential 2.7%

Source: spending--U.S. Census Bureau; employment--Bureau of Labor Statistics

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Construction spending & employment, 2016–2018

Construction spending 12-month % change: Jan. 2016 – Mar. 2018
15% 3/17–3/18

12-month % change
10%
Private res: 5%
5% Total: 4%
Total public: 3%
0% Private nonres: 2%

-5%
-10%
2016 2017 2018

Construction employment 12-month % change: Jan. 2016 – Mar. 2018

7%
3/17–3/18
6%
12-month % change

5%
Residential: 4%
4%
Total: 3%
3% Nonres: 3%
2%
1%
0%
2016 2017 2018

Source: spending--U.S. Census Bureau; employment--Bureau of Labor Statistics

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Private residential spending: steady single-family growth, slower multifamily

annual total, 2006–15; monthly (seasonally adjusted annual rate), 1/16–3/18; billion $
Dollars (in billions) 12-month % change
$600 30%

25%
$500
Private total
(21% below Feb ‘06 peak) 20%
$400 3/17–3/18:

12 month % change
15%
Single-family
$300 (40% below Feb ‘06 peak) 10% Single-family: 10%

5% Private total: 5%
$200 Improvements: 4%
Improvements 0%
(8% below Feb ‘18 peak)
$100
-5%
Multifamily
(9% below Apr ‘17 peak) Multifamily: -8%
$0 -10%
'06 '15 '16 '17 '18 2016 2017 2018

Source: U.S. Census Bureau construction spending report

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Residential spending forecast--2018: 6-9% growth (11% in 2017)

• SF: 8-10% growth in 2018 (9% in 2017); rising interest rates, tax law changes,
student debt will limit number of potential buyers
• MF: near 0 change in 2018 (4% in 2017)
– occupancy rates, rents have leveled off; but permits are rising, implying rebound in 2019
– millennials are staying longer in cities and denser suburbs where MF construction is bigger
share of market than in outer suburbs
– nearly all MF construction is rental, not condo; more high-rises
• Improvements: 10-15% growth in 2018 (16% in 2017); unpredictable because
Census lacks reliable data source; post-storm reconstruction may boost totals

Source: Author
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Population change by state, July 2016–July 2017 (U.S.: 0.72%)

decrease 0-0.49% 0.5-0.99% 1.0-1.49% 1.5%+

Top 5 1.7%
NH
ID 2.2% 1.1% -0.02% 0.4% 0.6%
NV 2.0% 1.4% 0.9% VT
2.2% 0.4% 0.0%
UT 1.9% 0.9% 0.1%
-1.0% 0.3%
WA 1.7% 0.1%
MA
0.7% 0.5% 0.5%
FL 1.6% 0.3%
2.0% 1.9%
0.6% -0.3% 0.5% CT RI
1.4% -0.7% 0.0% 0.2%
Bottom 5 0.2% 0.4% 0.4%
0.7%

1.1% DE NJ
HI -0.1% 1.0% 1.0% 0.3%
1.6% 0.2%
AK -0.2% 0.1% 0.5% 1.3% MD DC
1.1% 0.5% 1.4%
IL -0.3% -0.04% 0.3%
1.4%
WV -0.7% AK -0.04%
-0.2%
WY -1.0% 1.6%
HI
-0.1%

Source: U.S. Census Bureau

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State construction employment change (U.S.: 3.3%)

3/17 to 3/18: 38 states and DC up, 12 down
Top 5 Over -10% -5.1% to -10% -0.1% to -5% 0% 0.1% to 5% 5.1% to 10% Over 10%

WV 11% 5%
NH
NV 9% -2% -15% -2% 3%
6% -0.2%
ID 9% VT
9% 5% 2% 1%
MA 8% 0.4%
1% 7% MA
NM 8% -4% -5% 6% 8%
3%
9% 6% 5% CT RI
2%
Bottom 5 7% 7%
-4% -1%
11%
4% 2% 2%
-2%
5 states -2% 3% DE NJ
1% 4% -1%
NE -4% 9% 3%
8% -2% 1% MD DC
KS -4% 2% 5% 2% 3%
1%

IA -5% 5%
-1% Shading based on
-1%
ND -15% 6% unrounded numbers
HI
-2%

Source: BLS state and regional employment report

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Metro construction employment change (U.S.: 3.3%)

3/17 to 3/18: 245 metros up, 46 unchanged, 67 down
Over -10% -5.1% to -10% -0.1% to -5% 0% 0.1% to 5% 5.1% to 10% Over 10%

Top 5 Bottom 5
Weirton- 5 metro areas -9%
Steubenville, WV-OH 29%
Columbia, SC -11%
Merced, CA 26% Portland-South
Wenatchee, WA 26% Portland, ME NECTA -11%
Midland, TX 23% Monroe, MI -17%
Lawrence-Methuen Auburn-Opelika, AL -34%
Town-Salem, MA-NH
NECTA Division 22%

Source: BLS state and regional employment report

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Construction workforce indicators (not seasonally adjusted)

Construction hires, Mar. 2001–Mar. 2018 Job openings, Mar. 2001–Mar. 2018
600,000 600,000
500,000 500,000
400,000 400,000
300,000 300,000
200,000 200,000
100,000 100,000
0 0
'01'02 '04 '06 '08 '10 '12 '14 '16 '18 '01'02 '04 '06 '08 '10 '12 '14 '16 '18

Production and nonsupervisory employees:

Unemployment, Mar. 2001–Mar. 2018 avg. hourly earnings, 12-mo. % change, 3/01–3/18
2,500,000 5%

2,000,000 4%

1,500,000 3%

1,000,000 2%
500,000 1%
0 0%
'01'02 '04 '06 '08 '10 '12 '14 '16 '18 '01 '02 '04 '06 '08 '10 '12 '14 '16 '18

Source: Bureau of Labor Statistics

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Producer price indexes for key inputs, 4/17–4/18

Diesel fuel 42%

Lumber &
plywood 11%

Copper & brass

mill shapes 10%

Gypsum 8%

Steel mill
products 7%

Ready-mix
concrete 7%

Prepared asphalt
and tar roofing 6%

Flat Glass 3%

0% 10% 20% 30% 40% 50%

Source: Bureau of Labor Statistics

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Labor & materials costs are rising faster than bid prices
12-month % change, not seasonally adjusted: Jan. 2016 – March 2018 3/17–3/18
6% 6.2%
Average hourly earnings for all
residential building employees
5%
PPI for residential 4.7%
construction
4%
3.6%
3%
12 month % change

2%

1%
PPI for final construction
demand
0%

-1%

-2%

-3%
2016 2017 2018

Source: Bureau of Labor Statistics

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2016–2017 summary, 2018 forecast

2016 2017 2018
actual actual forecast
Total spending 6% 4% 2-7%
Private – residential 11% 11% 6-9%
– nonresidential 8% 1% 1-5%
Public -1% -2% -3 to 3%

Goods & services inputs PPI 1% 4% 4-5%

Employment cost index 2.2% 2.7% 3-4%

Source: actuals: Census, BLS; forecasts: Author’s estimates

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AGC economic resources

(email: simonsonk@agc.org)

• The Data DIGest: weekly 1-page email (subscribe at

http://store.agc.org)
• monthly press releases: spending; PPI; national, state,
metro employment
• yearly employment & outlook surveys, state and metro
data, fact sheets: www.agc.org/learn/construction-data