Submitted by the AGC.
Total construction starts in current dollars (that is, not adjusted for inflation) slumped 9% in July at a seasonally adjusted annual rate, Dodge Construction Network reported on Wednesday. “This decline follows a July that saw the start of two multi-billion-dollar LNG export plants. If these projects were excluded from July, August’s nonbuilding starts [, which tumbled 36%,] would have increased 27%. In August, highway and bridge starts moved 21% higher, environmental public works increased 39%, while miscellaneous nonbuilding starts lost 9%….August’s gain [of 7% in nonresidential building starts] comes on the heels of a massive increase in July that saw the start of several large manufacturing projects….Commercial starts were 22% higher in August, with all categories posting an increase. Institutional starts were up 62%, despite education and healthcare starts declining, and manufacturing starts lost 42% during the month.” Residential building starts rose 1%, with single-family down 10% and multifamily up 19%.
The Architecture Billings Index (ABI) registered a score of 53.3 in August, up from 51.0 in July and the 19th consecutive reading above 50, the American Institute of Architects (AIA) reported on Wednesday. AIA calls the index “a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months.” The ABI is derived from the share of responding architecture firms that report a gain in billings over the previous month less the share reporting a decline in billings, presented on a 0-to-100 scale. Any score above 50 means more firms reported increased billings than decreased billings. “During August, the score for new project inquiries rose to 57.9 from 56.1 the previous month, while the design contracts score softened slightly with a score of 52.3, down from 52.9 in July. ‘While a strengthening billings score is encouraging, the flat scoring across regions and sectors is indicative of a nationwide deceleration over the next several months,’ said AIA Chief Economist, Kermit Baker.”
Housing starts (units) in August jumped 12% at a seasonally adjusted annual rate from the July rate but dipped 0.1% year-over-year (y/y), the Census Bureau reported on Tuesday. Single-family starts rose 3.4% for the month but slumped 15% y/y. Multifamily (five or more units) starts soared 29% for the month and 31% y/y. Residential permits fell 10% for the month and 14% y/y. Single-family permits fell for the sixth-straight month, by 3.5% from July and 15% y/y. Multifamily permits plummeted 19% from July and 15% y/y. The number of authorized multifamily units that have not started slipped 2.7% from July but climbed 31% y/y. Although a growing backlog of unused permits frequently indicates a likely increase in near-term starts, the rapid rise in both financing costs and construction costs could cause some developers to defer or cancel projects that have yet to break ground.
Negative signs appeared in the past month regarding demand for retail, amusement, and office construction. Bed Bath and Beyond announced it would close 150 stores and FedEx announced plans to shutter 90 locations. Cineworld declared Chapter 11 bankruptcy and closed some Regal Cinemas; other theater chains experienced lower-than-expected sales during the summer “blockbuster” season. “U.S. office vacancy stands at 12.4%, the highest it has been in the pandemic, up from 9.6% in the first quarter of 2020, according to data firm CoStar Group Inc.,” the Wall Street Journal reported on Monday. “In a sign that more companies are trying to reduce office space, 230 million square feet of sublease space currently is available, up from 120 million in the first quarter of 2020 and the highest amount since CoStar began tracking the metric in 2005.” Without a concentration of office workers, more retailers are like to shut their doors. The implication for office construction depends on whether firms move to newer but smaller offices, stay put but add amenities to try to lure more employees back, or subdivide and sublease space.
Total compensation for construction industry employees (salaried and hourly) averaged $43.56 per hour in the second quarter of 2022, the Bureau of Labor Statistics (BLS) reported on Wednesday in the latest Employer Costs for Employee Compensation release. That was 12% more than the average of $38.91 for all private sector employees. Construction industry wages and salaries averaged $30.39 per hour, 11% higher than the all-industry average of $27.44. Construction spending on benefits differed markedly from other industries, averaging $13.16 per hour, 15% more than the all-industry average of $11.47. For construction, the largest benefits cost was for legally required benefits, averaging $4.03 per hour (9.3% of total compensation), which was 38% more than the all-industry average of $2.93 (7.5% of compensation). The second-costliest category of benefits for construction (and costliest for the overall private sector) was insurance, averaging $3.09 per hour (9.5% of compensation), 4% more than the all-industry average of $2.96 (7.6% of compensation). Construction averaged $2.34 per hour (5.4% of compensation) for retirement and savings, 76% more than the all-industry average of $1.33 (3.4% of compensation). Paid leave in construction averaged $1.97 per hour (4.5% of compensation), 31% less than the all-industry average of $2.87 (7.4% of compensation).
“The COVID-19 pandemic’s disruption of labor markets was massive, but it had only a modest impact on peoples’ retirement timing, according to recently released data from the U.S. Census Bureau’s 2021 Survey of Income and Program Participation,” the agency reported on Monday. The sample size was too small to break out construction, but among people employed in January 2020 in agriculture, forestry, mining, construction, transportation, warehousing, or utilities, 2.1% reported in 2021 that they had retired early or planned to do so (compared to 2.9% of all workers), while 1.4% retired later or planned to (compared to 2.3% of all workers).