Construction Spending, Labor & Materials Outlook AGC Fiscal Issues Forum June 8, 2015 Ken Simonson Chief Economist, AGC of America simonsonk@agc.org
Construction spending & employment, 2006 15 Total spending, March 2006 (peak) Mar. 2015 billion $, seasonally adjusted annual rate (SAAR) $1.2 trillion $1,250 $1,000 $750 $500 $250 2006 2008 2010 2012 2014 $967 bil. ( 20%) Total employment, April 06 (peak) April 15 thousands, seasonally adjusted 7.7 million 7,500 6,000 4,500 3,000 1,500 0 2006 2008 2010 2012 2014 6.4 mil. ( 17%) Spending change from March 2006 Employment change from April 2006 50% 25% 0% 25% 50% 75% 2006 2008 2010 2012 2014 Total as of 3/15: 20% Residential: 48% Private nonres: 24% Public: 5% 50% 25% 0% 25% 50% 75% 2006 2008 2010 2012 2014 Total: 17% Residential: 29% Nonresidential: 8% Source: BLS, Census Bureau construction spending reports
Construction is growing, but unevenly 3 trends helping many sectors and regions: Shale gale mainly downstream after oil price plunge Panama Canal expansion Residential revival, especially multifamily 3 trends holding down construction growth: Government spends less on schools, infrastructure Consumers switch from stores to online buying Employers shrink office space per employee Source: Author
Shale plays in lower 48 states Current play oldest stacked play F Current play intermediate depth/ age stacked play Current play shallowest/ youngest stacked play Prospective play Basin Source: U.S. Energy Information Administration, based on data from various published studies
Shale s direct and indirect impacts on construction Onsite: Each well requires access road, site prep, pad, storage pond, support structures, pipes Nearby: Products, water require trucking, rail, pipeline, processing Local spending by drilling firms, workers, royalty holders Upstream: orders for fracking sand, rigs, compressors, pumps, pipe, tanks, trucks, railcars, processing facilities Downstream: Petrochemical, power, steel plants; LNG export terminals, fueling stations; NG powered vehicles Losers: coal; maybe wind, solar, nuclear & their suppliers Source: Author
U.S. ports affected by Panama Canal expansion Seattle & Tacoma Columbia River at Mouth, OR & WA NY NJ Oakland Baltimore Los Angeles/ Long Beach San Diego Houston Mobile New Orleans Norfolk Charleston Savannah Jacksonville Miami Source: U.S. Army Corps of Engineers
Panama Canal expansion s impacts on construction Ports: investing in dredging, piers, cranes, land access Nearby: Storage, warehouse, trucking, rail facilities Bridge, tunnel, highway improvements Inland: possible changes in distribution, manufacturing Source: Author
Billion $ Private residential spending: MF still soaring, SF slowing $450 $375 $300 $225 $150 $75 2011 2012 2013 2014 2015 Private residential spending, Jan. 2011 March 2015 (billion $, SAAR) Multifamily (MF) Single family (SF) Improvements 60% 12 month % change, Jan. 2011 March 2015 12 month % change 40% 20% 0% 20% 2011 2012 2013 2014 2015 Multifamily: 23% Single family: 8% Total: 3% Improvements: 25% Source: Census Bureau construction spending reports
Housing outlook SF: rising for now but tight credit, fear of lock in, demographic shifts may limit increases MF: Upturn should last through 2015 Vacancy rates near multi year lows in most cities Preference for urban living adds to demand Condos have been slower to revive than rentals Government subsidized market remains weak Improvements: reported 2014 15 decline is not credible; should track SF sales Source: Author
Population change by state, July 2013 July 2014 (U.S.: 0.75%) decrease 0 0.49% 0.5 0.99% 1.0 1.49% 1.5%+ 1.3% 1.1% 1.7% 1.0% 1.3% 1.5% 1.4% 0.9% 0.2% 1.6% 0.1% 2.2% 0.9% 0.7% 0.3% 0.6% 0.6% 0.3% 0.3% 0.1% 0.5% 0.05% 0.2% 0.1% 0.4% 0.2% 0.3% 0.7% 0.3% 1.0% 0.8% 0.3% 1.3% 1.0% 0.1% 0.3% 0.1% CT 0.1% DE 1.1% MD 0.6% NH 0.3% VT 0.05% MA 0.5% RI 0.2% NJ 0.3% DC 1.5% 0.1% HI 0.8% 1.7% 0.4% 1.5% Source: U.S. Census Bureau News
Nonresidential segments: 2014 total & 2015 forecast 2014 total 2014 vs. 2013 2015 forecast Nonresidential $606 billion 7 % 4 8% Power (incl. oil & gas structures, pipelines) 101 11 10+ Highway and street 84 3 0 to 5 Educational 78 1 0 to 5 Commercial (retail, warehouse, farm) 57 12 0 to 5 Manufacturing 56 16 10+ Office 45 19 5+ Transportation 42 5 2 to 5 Health care 39 6 0 to 5 Sewage and waste disposal 23 5 Amusement & recreation 17 8 Lodging 16 19 10+ Other (communication; water; public safety; conservation; religious): 8% of total 1 Source: Census Bureau construction spending report; Author s forecast
Construction spending: industrial, heavy (billion $, SAAR) Power (88% private) Total $100 $80 Electric $60 $40 Oil & Gas 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 16% (oil & gas 45%; electric 40%) Manufacturing (98% private) $100 $80 $60 $40 2008 2009 2010 2011 2012 2013 2014 2015 Total Other Chemical Latest 12 mo. change: 50% (other 27%; chemical 90%) Transportation facilities (70% public) $50 $40 $30 $10 2008 2009 2010 2011 2012 2013 2014 2015 Public & private transportation facilities $50 $40 $30 Public $10 Private 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 9% Latest 12 mo. change: private 5%; public 19% Source: Census Bureau construction spending reports
Construction spending: public works (billion $, SAAR) $90 Highways (99.7% public) $30 Sewage/waste (99% public) $60 $30 $10 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 5% Latest 12 mo. change: 20% $30 $10 Amusement & recreation (52% public) $30 $10 Water supply (95% public) 2008 2009 2010 2011 2012 2013 2014 2015 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 24% Latest 12 mo. change: 2% Source: Census Bureau construction spending reports
Construction spending: institutional (private + state/local) Total education (79% public) $100 $80 $60 $40 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 3% Education (state & local K 12, higher; private) $100 $80 S/L prek 12 $60 $40 S/L higher ed Private 2008 2009 2010 2011 2012 2013 2014 2015 Latest: state/local prek 12 8%, higher 6%; private 3% Total healthcare (77% private) $50 $40 $30 $10 2008 2009 2010 2011 2012 2013 2014 2015 Hospitals (private, state & local) $50 $40 $30 Private $10 S/L 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 0.2% Latest 12 mo. change: private 1%; state & local 5% Source: Census Bureau construction spending reports
Construction spending: developer financed (billion $, SAAR) Retail (private) $80 $60 $40 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 6% Office (85% private) $80 Total $60 Private $40 Public 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 20% (private 26%; public 6%) Warehouse (private) $40 $30 $10 2008 2009 2010 2011 2012 2013 2014 2015 Lodging (private) $40 $30 $10 2008 2009 2010 2011 2012 2013 2014 2015 Latest 12 mo. change: 37% Latest 12 mo. change: 22% Source: Census Bureau construction spending reports
Major locations for data centers Seattle Portland Minneapolis Boston Silicon Valley Southern California Salt Lake Las City Vegas Phoenix Denver Colorado Springs Des Moines Omaha Kansas City Chicago St. Louis Atlanta Philadelphia Northern Virginia Northern New Jersey Dallas Houston Northern Florida Source: www.datacenterknowledge.com, from CBRE, ASHRAE
State construction employment change (U.S.: 4.7%) 3/14 to 3/15: 41 states up, DC unchanged, 9 down Over 10% 5.1% to 10% 0.1% to 5% 0% 0.1% to 5% 5.1% to 10% Over 10% 12% 2% 6% 7% 15% 2% 6% 2% 4% 1% 10% 12% 7% 1% 3% 1% 0.2% 9% 0.1% 3% 8% 8% 10% 2% 4% 5% 2% 1% 0.1% 1% 7% 7% 7% 4% 2% 3% 1% CT 1% DE 2% MD 1% NH 3% VT 3% MA 1% RI 1% NJ 8% DC 0% 1% HI 3% 6% 1% 10% Shading based on unrounded numbers Source: BLS state and regional employment report
Metro construction employment change 3/14 to 3/15: 249 metros up, 53 unchanged, 56 down Over 10% 5.1% to 10% 0.1% to 5% 0% 0.1% to 5% 5.1% to 10% Over 10%
Unemployed construction workers, April 2000 April 2015 (not seasonally adjusted) 2,000,000 1,750,000 1,500,000 1,250,000 1,000,000 750,000 500,000 250,000 0 2000 2002 2004 2006 2008 2010 2012 2014 Source: BLS
Hardest positions to fill (% of respondents who are having trouble filling) Craft 83% Carpenters 66 Roofers 64 Equipment operators 59 Plumbers 54 Electricians 52 Professional 61% Project managers/supervisors 48 Estimators 32 Source: AGC Member Survey, Sept. 2014 21
Producer price indexes for key inputs, 12/10 4/15 (Dec. 2010=100) 150 Steel mill products 150 Copper & brass mill shapes 125 125 100 100 75 12/10 2011 2012 2013 2014 2015 Latest 1 mo. change: 3.4%, 12 mo.: 9% 75 12/10 2011 2012 2013 2014 2015 Latest 1 mo. change: 1.6%, 12 mo.: 3% 150 Steel pipe and tube 150 Aluminum mill shapes 125 125 100 100 75 75 12/10 12/10 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Latest 1 mo. change: 4.3%, 12 mo.: 7% Latest 1 mo. change: 1.4%, 12 mo.: 3% Source: Author, based on BLS producer price index reports
Producer price indexes for key inputs, 12/10 4/15 (Dec. 2010=100) 150 Diesel fuel 150 Concrete products 125 125 100 100 75 12/10 2011 2012 2013 2014 2015 Latest 1 mo. change: 5.6%, 12 mo.: 42% 75 12/10 2011 2012 2013 2014 2015 Latest 1 mo. change: 1.4%, 12 mo.: 5% 150 Plastic construction products 150 Architectural coatings 125 125 100 100 75 75 12/10 12/10 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Latest 1 mo. change: 0.05%, 12 mo.: 1% Latest 1 mo. change: 0.1%, 12 mo.: 2% Source: Author, based on BLS producer price index reports
AGC members expectations for 2015 Net % who expect dollar volume of projects to be higher 33% Retail/warehouse/lodging 15% Higher education 26% Manufacturing 13% Other transportation 25% Private office 8% K 12 school 24% Water/sewer 5% Public building 24% Energy 6% Marine construction 20% Hospital 16% Direct federal construction 17% Power 16% Highway Source: AGC Construction Outlook Survey, Jan. 2015 (912 total responses)
Trends: 2015 2017 Total construction spending: +6% to +10% per year less SF housing, retail; flat public spending new drivers: shale based gas & oil; Panama Canal widening; more elderly & kids, fewer young adults Materials costs: 1 to +3% (similar to CPI); rare spikes Labor costs: +2.5% to + 5% Labor supply: widespread shortages possible due to retirements, competition from other sectors, fewer vets Source: Author
Summary for 2013, 2014, 2015 17 forecast 2013 actual 2014 actual Total spending 5.6% 5.5% 6 10% Private residential 20% 4% 1 10% nonresidential 1% 11% 1 10% 2015 17 annual average forecast Public 3% 2% near 0 Materials PPI 1.3% 0.9% 0 3%; rare spikes Employment cost index 2.0% 1.8% 3 5% Source: 2013 14: Census, BLS; 2014 17: Author s ests.
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 state and metro data, fact sheets: www.agc.org/learn/construction data Webinars, custom presentations