Up 9.7% over previous year
Submitted by the AGC.
Construction spending (not adjusted for inflation) totaled $1.78 trillion in May at a seasonally adjusted annual rate, down 0.1% from the upwardly revised April total but up 9.7% year-over-year (y/y), the Census Bureau reported today. Given the fast-rising prices for construction, the monthly decline would be greater if adjusted for inflation. Private nonresidential construction spending slipped 0.4% for the month but climbed 3.7% y/y. The largest private nonresidential segment—power—fell 1.1% for the month and 8.4% y/y (including electric power, -1.6% for the month and -11% y/y, and oil and gas field structures and pipelines, up 0.6% in May but -0.5% y/y), followed by commercial, down 0.9% for the month but up 11% y/y (including warehouse, -0.9% and 15%, respectively, and retail, -1.8% and 5.6%); manufacturing, up 1.2% in May and 26% y/y (including chemical and pharmaceutical, 1.5% and 0, and computer/electronic/electrical, 2.2% and 256%); and office (including data centers, which are not broken out), 0 and 3.3%. Public construction spending fell 0.8% for the month and 2.7% y/y. The largest public segment, highway and street construction, sank 2.3% for the month and 6.2% y/y. Public education construction declined 0.9% in May but rose 11% y/y. Public transportation construction rose 1.4% in May but fell 3.6% y/y. Private residential construction spending rose 0.2% for the month and 19% y/y. Single-family spending was unchanged for the month but up 15% y/y; multifamily, 0 and -0.6%, respectively; and improvements, 0.6% and 34%.
Construction employment, not seasonally adjusted, rose y/y from May 2021 to May 2022 in 248 (69%) of the 358 metro areas (including divisions of larger metros) for which the Bureau of Labor Statistics (BLS) posts construction employment data, fell in 62 (17%) and was unchanged in 48, according to an analysis AGC released on Wednesday. (BLS reports combined totals for mining, logging, and construction in most metro areas, to avoid disclosing data about industries with few employers.) Houston-The Woodlands-Sugar Land again added the most jobs (23,800 construction jobs, 11%), followed again by the Dallas-Plano-Irving division (11,800 combined jobs, 8%) and St. Louis, Mo.-Ill. (5,500 combined jobs, 8%). The highest percentage gains again occurred in Cheyenne, Wyo. (35%, 1,200 combined jobs) and Decatur, Ill. (21%, 700 combined jobs), followed by Lawton, Okla. (20%, 300 combined jobs). There was a new May high in 69 areas and no new lows, in series dating in most cases to 1990.
“Aggregate and cement pricing commentary was unanimously bullish, with contacts seeing pricing generally accepted in the market,” investment analyst Thompson Research Group reported today, based on a quarterly survey it conducted. January-to-April “aggregate price increases were successful, and July’s price increase is showing signs of full acceptance. There is a third price increase for the fall that is looking more likely by the day. On balance, aggregate pricing has accelerated as the year has progressed, with high single-digit to teens pricing a realistic bogie for 2022. For cement, pricing actions from January and mid-year ($8-$12/ton range, depending upon the market) we believe will largely be successful, driven by increased demand and allocation measures….Although supply chain challenges have been around for two years now since COVID, the situation remains volatile. Contacts noted mainly parts and raw materials being the major pain point. Lead times for equipment are at least 12 months (and as high as 24).” Contractors and concrete products suppliers in numerous regions have reported being on allocation. In addition, some highway contractors and state transportation departments report shortages of highway striping material. Readers are invited to send information on materials prices and availability to email@example.com.
“Based on our survey data, contractors are projecting 2022 construction staff wages to increase an average of 4.17% (excludes 0% projections), reported by over 340 companies in this 40th edition of the Construction/Construction Management Staff Salary Survey,” construction compensation consultant PAS reported on Wednesday. “2022 staff pay predictions are increasing each month and may hit 5% by fall. For pay increase comparison—according to WorldatWork, across all industries exempt professionals saw 2021 increases of 3.0% with initial projected 2022 increases of 3.3%. For construction, WorldatWork reported a 3.4% increase in 2021 and a very early projection of 3.4% for 2022.”
A recent joint research effort by the National Association of Home Builders (NAHB) and the National Multifamily Housing Council found that “an average of 40.6% of total development costs [for new multifamily housing] can now be attributed to complying with regulations imposed by all levels of government,” NAHB reported in its “Eye on Housing” blog on Monday. “Among the categories of regulation captured by the survey, the highest average cost is the result of changes to building codes over the past 10 years (11.1% of total development costs). The second highest are the costs imposed when site work begins (8.5%). The average cost of affordability mandates like inclusionary zoning (which typically requires developers to rent some of the apartments they build at below the market rate) is 2.7%. However, affordability mandates are less common than some other types of regulation. Only 38.8% of the multifamily developers surveyed indicated that the typical project they build experienced added costs due to affordability mandates, so the 2.7% average includes a large number of developers with zero costs due to affordability mandates. Among the 38.8% who do experience this type of cost, that cost was 6.9% of their total development costs, forcing them to raise rents on their market-rate apartments by 7.6%. Moreover, some types of regulatory mandates can discourage developers from building in the very marketplaces that have the greatest need for more housing. For example, 47.9% of multifamily developers said they avoid building in jurisdictions with policies such as inclusionary zoning, and a full 87.5% avoid building in a jurisdiction with rent control in place.”