With the exception of residential construction, four recent economic reports show a steady, but agonizingly slow increase in activity throughout the construction industry. The housing market, as has been well reported, is taking off with specific markets, such as Phoenix and Las Vegas, rebounding from near-death experiences. The construction industry has been in a deep hole, and many segments are still not robust and may not reach their trend lines for a couple of more years.
Value of Construction Put in Place-Seasonally Adjusted Annual Rate
(Millions of dollars, Details may not add to totals due to rounding)
pPreliminary rRevised
p+Although released for the first time this month, data for September 2013 include late reports and corrections normally associated with the first revision.
1Includes the following categories of private construction not shown separately: public safety, highway and street, sewage and waste disposal, water supply, and conservation and development.
2Includes the following categories of public construction not shown separately: lodging, religious, communication, and manufacturing.
The year-over-year increases for September and October of the Value of Construction Put in Place show the steady, but uninspiring growth of the construction market. With the exception of the minor downturn in the private construction numbers for September, all of the topline results are positive.
One layer below the Total Construction, Total Private Construction and Total Public Construction numbers, you see the reason why all of them are positive. Residential. The housing market pickup is offsetting declines in other areas.
ABI Holds Steady
In the darkest days of the downturn, cynics would tender economic forecasts with the phrase, “flat is the new up.” If the American Institute of Architects’ Architecture Billing Index is any indicator, we have successfully achieved “the new up.” The ABI is a leading indicator that reflects the work on the books within architectural firms and can be predictive of future construction work. An index number below 50 is a negative assessment, but above 50 shows promise for growth.
For the last year, the ABI has hung within a hailing distance of 50 without showing any strong increase. In fact, in April it dipped into a negative zone, but made a quick recovery.
Compared to 2012, though, this is improvement. Last year, the ABI dipped south in four months, and barely nosed above the median line in two others. While not robust, these numbers do, in comparison, show improvement.
(Source: American Institute of Architects)
Growth and a Positive Outlook
The National Association of Home Builders reports on housing starts, and predicts that the accelerated growth in residential construction will increase even more in 2014 and 2015. As is usual with residential work, much of that will come in the single-family market, but the long neglected multifamily market is beginning to demonstrate strength. The decline in multifamily began well before the rapid downturn in 2007, predating the residential recession by a couple of years.
(Source: National Association of Home Builders)
Construction Employment Increases
At the peak of the downturn unemployment in the construction industry hit about 25 percent. That number is dropping considerably and hovers around 10 percent now, which is still above the national average. With those kinds of numbers, you would expect to see a much more rapid increase in total construction employment.
The truth is that the year-over-year growth in construction employment is barely hitting three percent. In 2011 and 2012, it was less than two percent. The main reason for the significant decline in unemployment in this industry is people have left the industry. This is setting us up for a potential labor shortage, depending on how fast production ramps up.
