AGC Survey Respondents Report Growing Delays, Layoffs; Employment Falls in March

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Submitted by the AGC

Once again last week, contractors reported more widespread impacts of the coronavirus pandemic on construction. AGC’s third weekly online survey, conducted March 30-April 2, drew 1296 respondents, of whom 55% (up from 39% in the March 23-26 survey) reported that an owner (including a public owner regarding its own projects) had directed them to delay or cancel construction on a current project or one expected to start in the next 30 days Also, 26% (up from 18%) reported that a government official or agency had ordered them to halt or cancel construction. In addition, 59% (up from 45%) reported various causes for project delays or disruptions: shortage of materials, equipment (including personal protective equipment for their workers) or parts, 35% (up from 23%); shortage of essential craftworkers (including subcontractors’ workers), 28% (up from 18%); shortage of government workers (whether to issue permits or certificates of occupancy, or to conduct inspections or lettings, or to make project awards), 16% (unchanged); potentially infected person had visited a jobsite, 18% (up from 13%). About 38% (up from 35%) of respondents said suppliers had notified them or their subcontractors that deliveries will be late or canceled. About 27% said they had furloughed or terminated jobsite workers and 16% reported doing so with office or other workers. Contractor readers (including previous respondents) are invited to take AGC’s new survey. View AGC’s coronavirus website for a wide range of resources. Here are some additional resources: Data provider ConstructConnect recorded a webinar on Wednesday with their chief economist, Alex Carrick, and AGC’s chief economist, Ken Simonson. The firm also has an interactive state map it updates daily with a nationwide count of delayed projects and links to each one. The National Association of Home Builders has a map with links to state and local orders affecting construction (not just homebuilding) and posted results of its latest weekly online survey on Friday. The law firm Dentons has a site listing extensive details for states and localities.

 

Nonfarm payroll employment in March plunged by 701,000, seasonally adjusted, from February, based on the payroll period of March 12, the Bureau of Labor Statistics (BLS) reported on Friday. The unemployment rate jumped to 4.4% from February’s level of 3.5%. Construction employment in March totaled 7,605,000, a decrease of 29,000 for the month, but an increase of 162,000 (2.2%) year-over-year (y/y). Average hourly earnings in construction rose 2.7% y/y to $31.31, 9.4% above the average for all private-sector employees ($28.62, a 3.1% y/y increase). The unemployment rate in construction, not seasonally adjusted, jumped from 5.2% in March 2019 to 6.9%, and the number of unemployed jobseekers with construction experience rose from 490,000 to 658,000. (Not-seasonally-adjusted levels vary with normal weather and holiday patterns and thus may not accurately show economic trends for different months within a year.) The fact that 27% of respondents in AGC’s latest survey reported layoffs suggests the April BLS employment report will show an even higher unemployment rate.

 

Construction spending totaled $1.367 trillion at a seasonally adjusted annual rate in February, a decrease of 1.3% from the upwardly revised January rate but a gain of 6.0% y/y from February 2019, the Census Bureau reported on Wednesday. Private residential spending declined 0.6% for the month but increased 11% y/y. New single-family construction climbed for the eighth consecutive month, by 3.9% from January to February and 16% y/y. New multifamily construction inched up 0.1% for the month but declined 5.7% y/y. Residential improvements slumped 7.2% for the month but climbed 10% y/y. Private nonresidential spending slid 2.0% from January and 0.7% y/y. Of the four largest components, power gained 4.0% y/y (comprising electric power, up 9.2%, and oil and gas pipelines and field structures, down 11%); commercial, 6.9% (comprising retail, -3.1%, and warehouse, 11%); manufacturing, -2.8%; and office, 0.6%. Public construction slipped 1.5% for the month but increased 7.4% y/y. The three largest public segments all had y/y increases: highway and street construction, 1.3%; education construction, 2.3%; and transportation (air, transit, rail and port) construction, 12%.

 

The change in value of real-estate investment trusts (REITs) provides an indicator of possible future demand for commercial construction. REITs hold specific classes of property and their value reflects investors’ collective judgment as to the properties’ expected stream of future income. “The worst-performing REIT sectors since their combined peak on February 21 include not just malls and hotels also health care—a category that includes senior housing,” the Wall Street Journal reported on Saturday. All three segments declined 35%. “Demand will suffer even for real estate…such as offices, warehousing facilities and even housing. There are exceptions, though. The best-performing REIT sector since February 21 has been data centers [down 3%. This reflects] a longer-term bet: that the novel coronavirus normalizes a higher level of remote working and learning. A more socially distanced vision of he future may be good for data centers and cell towers [down 7%] but it has worrying implications for offices and hotels. Retail landlords have struggled with the gradual drift of shopping online over the past decade, setting an ominous precedent for any similar shift in working patterns.”

 

Executive pay at construction firms surveyed by PAS, Inc. rose 4.2% in 2019, following increases of 4.1% in 2017 and 2018, the firm reported on March 25. In addition, the firm “just finished up the 2020 Construction / Construction Management Staff Salary Survey. The results indicated a 3.9% increase for middle managers and professionals in 2019.”

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