Total construction starts (in dollars) slumped 7% from May to June at a seasonally adjusted annual rate, but unadjusted starts soared 13% year-to-date, Dodge Data & Analytics reported on July 20. “All three major sectors (residential, nonresidential building, and nonbuilding) pulled back during the month….‘Unabated materials price inflation has driven a significant deceleration in single-family construction,’ stated [Chief Economist] Richard Branch….‘Lumber futures have eased in recent weeks, but builders are unlikely to see much relief over the short-term, meaning building costs will continue to negatively influence the housing industry. On the other hand, the nascent recovery in nonresidential buildings has continued on as projects pile up in the planning stages. These mixed signals coming from both residential and nonresidential construction starts suggest that recovery from the pandemic will remain uneven in coming months as rising materials prices and labor shortages weigh on the industry.’…Nonbuilding starts lost 13% in June [but] were up 4% within the first six months of 2021. Environmental public works surged 35%, while utility/gas plants gained 13%. Miscellaneous nonbuilding (-6%) and highway and bridge starts (-9%), however, dragged on the sector. Nonresidential building starts dropped 7% in June. [Year-to-date] starts were slightly ahead of the first six months of 2020. Commercial starts were up 7% and manufacturing starts were 36% higher, while institutional starts were 5% lower…Residential starts fell 5% in June. [Year-to-date] starts were 32% higher than the same period a year earlier. Single-family starts were up 37%, while multifamily starts were 19% higher.
Housing starts (units) rose 6.3% at a seasonally adjusted annual rate from May to June and 29% y/y from the June 2020 level, the Census Bureau reported on Wednesday. Year-to-date starts for January-June 2021 climbed 25% from the same months in 2020. Single-family starts rose 6.3% for the month and 31% year-to-date. Multifamily (five or more units) starts rose 6.8% for the month and 17% year-to-date. Residential permits slipped 5.1% from May but jumped 31% year-to-date, as single-family permits declined 6.3% for the month but increased 36% year-to-date, while multifamily permits decreased 1.6% from May but gained 21% year-to-date.
The Architecture Billings Index (ABI) slipped in June to 57.1 from 58.5 in May, which was its highest level since 2006, the American Institute of Architects reported on Wednesday. AIA says, “The ABI serves as 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 that firms with increased billings outnumbered firms with decreased billings. Scores by practice specialty (based on three-month moving averages) topped 50 for the fifth time in a row: commercial/industrial, 61.0 (the highest since the ABI began in 1995 and up from 60.9 in May); multifamily residential, 57.9 (up from 57.8); mixed practice, 57.3 (unchanged); and institutional, 56.4 (unchanged). “With the current pace of billings growth near the highest levels ever seen in the history of the index, we’re expecting a sharp upturn in nonresidential building activity later this year and into 2022,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, as is often the case when market conditions make a sudden reversal, concerns are growing about architecture firms not being able to find enough workers to meet the higher workloads. Nearly six in 10 firms report that they are having problems filling open architectural staff positions.”
AIA posted its semi-annual “Consensus Construction Forecast,” comprising the averages of eight forecasts of nonresidential building spending. The overall average is for spending to decline 3.9% in 2021 before increasing 4.6% in 2022 to a level slightly above 2020 spending. Commercial construction is predicted to decrease 5.4% in 2021, then climb 5.4% in 2022 (office, -5.6% and -0.1%, respectively; hotel, -20% and 19%; and retail and other commercial, -1.3% and 5.8%). Institutional construction is expected to slip 2.3% in 2021, then grow 3.6% in 2022 (health, 1.4% and 4.4%; education, -2.1% and 3.6%; amusement and recreation, -9.9% and 6.0%). Industrial construction is projected to decline 4.4%, then rebound 4.8%.
A report on wage mobility by Marcela Escobari, Ian Seyal and Carlos Daboin Contreras, of the Brookings Institution, posted in June, cites construction labor as “a prime example of a skyway occupation”—one that offers “decent wages and good prospects for upward mobility. [It is] the most common [upward transition path] for food and customer service, transportation and production, and assemblers and machine operators….Construction labor also offers a good median wage ($36,860) and myriad opportunities for career growth….The most common occupational transition for construction laborers is to carpentry, which on average offers an $11,000 salary increase. Another common transition is to construction management, which offers an average salary of $105,000 and has low barriers to entry (two-thirds of construction managers have less than a bachelor’s degree).” Low-wage transportation and production workers are especially likely to transition to construction laborer and construction operator occupations. Workers in the “construction and installation cluster” are more likely than most occupations to transition within the same cluster. These findings may help firms identify occupations to target for recruiting new workers and suggest the transitions that laborers may make within construction.
Reminder: Contractor readers are invited to take the 2021 AGC/Autodesk Workforce Survey.