AGC

Warehouse Builds Nearly Offset Retail, But Construction Spending Still Down, AGC Says

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

For the first time in seven months, total construction spending decreased during September.

According to the Associated General Contractors of America, both nonresidential and residential construction slipped. AGC officials are urging the U.S. House of Representatives to complete work on the bipartisan infrastructure bill that the Senate passed months ago.

“Spending on projects has been slowed by shortages of workers and materials, as well as extended or uncertain delivery times,” said Ken Simonson, AGC of America chief economist. “And the extreme rise in materials costs is likely to mean some infrastructure projects will no longer be affordable without additional funding.”

Construction spending in September totaled $1.57 trillion (seasonally adjusted) nationwide, Simonson said, down 0.5 percent from August. Year-to-date spending in the first nine months of 2021 combined for an increase of 7.1 percent in total, compared to January through September 2020.

While both nonresidential and residential construction has experienced a decline in August and September of this year, the two categories have diverged as compared to 2020 levels. Nonresidential construction in both public and private sectors combined fell 0.6 percent in September and 5.8 percent year-to-date. Residential construction spending slipped 0.4 percent for September but was 24.5 percent higher year-to-date.

“Most infrastructure categories posted significant year-to-date declines,” said Simonton. “The largest public infrastructure segment – highway and street construction – was 1.3 percent lower than in January through September 2020. Spending on public transportation slumped 6.8 percent year-to-date.” The sole exception, he added, was investment in sewage and waste disposal structures; spending in this category rose 4.3 percent in the first nine months of 2021. That said, public water supply projects dipped 0.9 percent while conservation and development construction plummeted 19.5 percent.

Combined private and public spending on nonresidential electric power and oil and gas projects declined 2.5 percent over the same period in 2021. Education-related construction decreased 10.1 percent. Commercial construction – including warehouse, retail and farm structures – declined 1.7 percent. “A 13.2 percent plunge in retail construction from January through September of this year outweighed a 12 percent increase in construction of warehouse structures,” he said.

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PPI Jumps 24% in 12 Months, Preventing Contractors from Passing Along Cost Increases

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

Increases in prices for wood, metals, plastics and gypsum continue to narrow the margin between what contractors pay to acquire raw materials and what they’re able to charge the project owner.

Ken Simonson, chief economist for the Associated General Contractors of America, said the construction industry Producer Price Index – which measures the average change over time in the selling prices received by domestic producers for their output – has climbed 24.3 percent over the past 12 months, increasing 4.3 percent in May 2021 alone. The 12-month climb, he says, is nearly double that of any previous year in history.

“This increase far outstrips contractors’ ability to charge more for projects,” said Simonson. “This gap means contractors are being hit with huge costs that they did not anticipate and cannot pass on.”

Meanwhile, the PPI for new nonresidential construction – a measure of what contractors say they’d charge to build five types of commercial structures – increased only 2.8 percent over the past 12 months. AGC’s recent analysis included narrative from contractors across the nation who said they’d held their profit expectations down to compete for a limited number of new projects.

According to the AGC, the PPI for lumber and plywood more than doubled, increasing 111 percent from May 2020 to May 2021. The index for steel mill products increased 75.6 percent over the same period. The copper and brass mill shapes PPI rose 60.4 percent since May 2020, and the aluminum PPI rose 28.6 percent. The PPI for plastic construction products increased 17.5 percent, while the index for gypsum products such as wallboard climbed 14.1 percent.

Fuel costs, Simonson says, along with surcharges on freight deliveries, have also jumped.

AGC officials including CEO Stephen Sandherr, are urging the Biden administration to end tariffs and quotas on steel, aluminum and lumber as the first step toward easing pressure on construction costs and supply chain bottlenecks.

“Ending tariffs on Canadian lumber, along with tariffs and quotas on steel and aluminum from numerous allied countries, is good policy,” Sandherr said.

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Construction employment falls in May; hourly earnings premium, hires decline in April; openings soar

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Construction employment, seasonally adjusted, totaled 7,423,000 in May, a drop of 20,000 from April and the third decline in the past four months, according to AGC’s analysis [ https://AGCA.informz.net/AGCA/data/images/Employment table_May_PDF.pdf ] of Bureau of Labor Statistics (BLS) data posted [ https://www.bls.gov/news.release/empsit.nr0.htm ] on Friday The May total was 225,000 (-2.9%) below the pre-pandemic peak in February 2020. The gap widened between residential and nonresidential employment gains. Residential construction employment, comprising residential building and residential specialty trade contractors, edged up by 1,900 in May, putting the total 35,000 (1.2%) higher than in February 2020. Nonresidential construction employment—building, specialty trades, and heavy and civil engineering construction—shrank by 21,800 in May and was 260,000 (-5.6%) below the February 2020 level. A total of 642,000 former construction workers were unemployed in May, a sharp decline from May 2020 but the second-highest May level since 2014. The industry’s unemployment rate in May was 6.7%, compared to 12.7% in May 2020.
 
The BLS report also covers average hourly earnings by industry, with a one-month lag for subsectors. For total construction, hourly earnings in April averaged $32.59, 8.0% more than the average for the nonfarm private sector. However, over the past two years this premium shrank by 2.2 percentage points from 10.2% in April 2019, implying that the financial attractiveness of construction may be diminishing as other sectors that are expanding faster raise pay to attract more workers. The premium diminished the most for employees of heavy and civil engineering construction firms (-4.5 points, from 16.0% above the private-sector average in April 2019 to 11.5% in April 2021), followed by residential building firms (-2.7 points, from an 8.8% premium to 6.0%), specialty trade contractors (-1.0 points, from a 6.1% premium to 5.0%), and nonresidential building firms (-0.9 points, from a 25.4% premium to 24.5%).
 
There were 357,000 job openings in construction, seasonally adjusted, at the end of April, BLS reported [ https://www.bls.gov/jlt/ ] on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. Hires in April totaled 335,000 or 4.5% of the employment total for the month. Apart from the pandemic-depressed 3.1% rate in 2020, the rate was the lowest rate of hires for April in the 21-year history of the series, while the job openings rate (4.6% of filled and unfilled jobs) was the second-highest total for any month since the series began in December 2000. That is consistent with reports from many contractors that they are having a very hard time hiring workers. (JOLTS data combines nonresidential construction with residential, and it is not possible to tell if the demand and openings are coming from both segments of the industry.)
 
The Dodge Momentum Index jumped 9.1% in May from the revised April reading, Dodge Data & Analytics reported [ https://www.construction.com/news/Dodge-Momentum-Index-Increases-In-April-2021 ] on Monday. The index “is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year….May’s jump was the result of a large increase in commercial planning activity, which posted its strongest month-over-month increase since October 2017. Institutional planning, meanwhile, fell by less than one percentage point. Commercial planning had been in a holding pattern over the last four months, but broke out in May due to several sizable data center, office, and warehouse projects that peaked in a 13-year high for the commercial component of the Momentum Index. While essentially flat in May, institutional planning remains at levels not seen since 2009. On a year-over-year basis, both commercial and institutional planning were up from May 2020 (38% and 47% respectively). The Momentum Index overall was also 41% higher than in May 2020….The rising trend in planning activity is a good sign that the economic recovery is starting to spread into the construction sector. However, these projects are unlikely to have an impact on construction starts this year. Rising material prices and a continued shortage of skilled labor have led to project delays. On the upside, construction starts are shaping up for a healthy increase in 2022.”
 
Readers continue to report materials price increases, some immediate or retroactive, and supply-chain disruptions. A reader received a notice on June 5 from a structural steel supplier that “Effective with orders received after 8:00 pm EST, Friday June 4, [m]erchant products will be increased by…$70 ton.” A commercial furniture supplier notified customers on June 8, “Foam shortages persist, and foam pricing continues to rise[, making] it necessary to adjust pricing on select pieces[, ]effective June 7.” A Texas concrete supplier wrote to customers on June 4, “Effective August 1,…we will be increasing the price of all concrete products by $3.00 per cubic yard[, ] due to labor shortages.” Readers are invited to send information to ken.simonson@agc.org [ http://ken.simonson@agc.org ] .
Steel-industry newsletter Steel Market Update [ https://www.steelmarketupdate.com/ ] reported today, “Hot-rolled coil prices charged higher yet again even as lead times stretched into August, a typically slower time of the year….Hot-rolled coil prices have hit a new all-time high of $1,675 per ton, up $55 per ton compared to a week ago and up $1,235 per ton from August of last year. Cold-rolled coil prices were up $65 per ton week-over-week, galvanized base prices gained $20 per ton, and Galvalume prices were up $70 per ton. The increases came after June prime scrap prices settled up $60 per gross ton. Plate prices, meanwhile, were unchanged….SMU’s Price Momentum Indicators, in the meantime, continue to point toward higher prices for the next 30 days.”
 
Lumber-product prices have shown mixed trends recently. Futures contracts for lumber have declined sharply for four weeks in a row, while trade publication Random Lengths [ https://randomlengths.com ] reported further record weekly highs for oriented strand board and lumber prices.

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Construction Safety Week 2021 Emphasizes Focusing on Everyday Jobsite Safety Choices

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

More than 40 national and global construction firms comprising the Construction Industry Safety Initiative and the Incident and Injury-Free CEO Forum invite the industry to recognize Construction Safety Week 2021 from May 3-7.

With the AGC of America as a signature event sponsor, the eighth-annual safety week bears the theme, “Be Present. Be Focused. Be Safe.”

Construction Safety Week 2021 Chairman Mike McKelvy, President and CEO of Gilbane Building Company, says the board chose this year’s theme based upon what the industry and society at large experienced during 2020.

“From last March onward, construction workers across the country have had to go to jobsites every day and continue building projects – roads, bridges, hospitals and schools,” said McKelvy. “They’ve been front line when the rest of society has taken a step back. Our them for this year’s safety week is holistic. It’s about each of us getting our mind straight about what our role is and focusing intently during an uncertain time when there are more distractions than ever, and focusing on the task so we can make the best, safest choices. The choices we make are better and safer when our focus is there,” he added.

Construction industry partners are invited to visit https://www.constructionsafetyweek.com/ and download myriad resources such as jobsite banners, a safety week planning playbook, communications toolkits with social media templates and media relations tips and at-home family activities.

From now until 4pm CST on May 6, individuals working in construction are invited to upload their photo and short story about what safety means to them. A total of 10 safety week winners will be chosen for awards of $1,000 each.

“This is the one week of the year that we can all use to remind ourselves about staying safe, and to recharge our batteries to focus on safety in the year ahead,” McKelvy said.

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Building Materials Supplier, AGC Economist Attest to COVID Lumber Price Spikes

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By KERRY SMITH, Editor, St. Louis Construction News and Review Magazine

A Metro East building materials supplier with 72 locations across four states says the latest analysis by the Associated General Contractors of America is accurate: Builders and consumers are hurting from un precedented increases in the cost of lumber.

Robert Plummer, chairman and CEO of R.P. Lumber Company, Inc., says record price increases of more than 200 percent in lumber and panel products are not only choking the supply chain but also affecting commercial and residential contractors as well as consumers.

The life-long industry veteran’s observations track with AGC Chief Economist Ken Simonson’s latest analysis – released Feb. 17 – that prices for materials and services used in construction and contractors’ bid prices have diverged sharply since April 2020. A government index measuring the selling price for materials and services used in nonresidential construction increased 2.5 percent from December to January and a whopping 10.7 percent since the extreme price increases.

“Current conditions are harming contractors on existing projects and making it difficult to bid new work at a profitable level,” Simonson said, noting that the PPI for new nonresidential construction is a measure of what contractors say they would charge to erect five types of nonresidential buildings. The PPI increased only .2 percent since April. “While contractors have kept bids nearly flat until now, project owners and budget officials should anticipate the prospect that contractors will have to pass along their higher costs in upcoming bids,” he added. “Since this government data was collected more than a month ago, numerous sources indicate price increases have continued or even accelerated since then.”

Plummer attests that this is indeed the scenario. In addition to its 44-year history of serving as a building materials supplier, R.P. Lumber operates a truss plant and has retail home centers across Illinois, Missouri, Iowa and Wyoming.

“In all these years, I’ve never seen anything like this,” said Plummer. “We buy and sell a tremendous amount of lumber, drywall and roofing product – thousands of semitrailers’ worth – every year. It’s shocking where the price of lumber has gone since the (COVID) pandemic began, particularly on lumber and panels products such as OSBs (oriented strand board), ZipWalls and plywood. One year ago, we were paying somewhere in the $300 range per thousand board feet for 7/16ths (7/16-inch by 4 feet by 8 feet). Today we’re paying slightly more than $900 for the identical material.”

Even precut lumber is not immune from mills’ drastic price increases since COVID hit. Plummer says a 2×4-foot precut that cost in the $3 range in February 2020 now costs in the $6.50 to $7 range.

No doubt supply chains were impacted by the West Coast wildfires of 2020 that consumed huge forests of cedar, spruce and fir, and tariffs for product entering the U.S. from Canada has also played a role, Plummer says. But beyond these conditions, the severity of material increases continue to stymie lumberyards and contractors while hitting owners and homeowners’ bottom lines.

“This week we’ve heard of another 20 percent price increase in drywall, the second such increase this year, and it will take effect in March/April,” said Plummer. “In addition to lumber price increases, we’ve experienced three increases in the cost of metals, from steel studs to soffits, metal panels and I-beams. And we’re anticipating a second increase this year on wiring and on roofing materials. Builders will forward these increases through the pipeline. They may be protected on one job if they have locked-in pricing, but they may feel it on the next job.”

The entire industry is buying more building materials from Europe, according to Plummer. “Euro-Premium, a spruce product, is shipped into the U.S. more cheaply than we can many times buy a comparable product domestically right now,” he said. “That’s a reflection of how volatile the domestic supply chain is right now.”

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AGC Urges Industry to Garner Support From Users for Federal Highway Funding

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By KERRY SMITH, EDITOR, ST. LOUIS CONSTRUCTION NEWS AND REVIEW MAGAZINE

The Associated General Contractors of America says Tuesday’s agreement between President Donald Trump and House and Senate Democrats to work together on a $2 trillion highways, roads, bridges and rail investment program builds the beginning of momentum that will need to accelerate to make a big, bold federal transportation initiative a reality.

“We’ve got a long road – pun intended – ahead of us before we reach agreement on an infrastructure spending bill,” said AGC Spokesman Brian Turmail, “but the fact that this bipartisan agreement has been forged amidst other pressing (non-transportation-related) issues on Capitol Hill is encouraging. Now we need to keep the momentum going toward creation and passage of a broad-based infrastructure package long before the current program expires in September 2020, because by then we’ll be in the middle of an election year.”

The AGC of America and its affiliates across the U.S. – including the AGC of Missouri – are advocating for a bill that does more than fund road, rail and bridge projects. The organization wants to see a solid workforce development component as well, according to Turmail.

“Yes, we’ve got to fix the Highway Trust Fund, which is based upon a user-pay system that is fundamentally American,” Turmail said, noting that the revenue that funds the fund – 18.4 cents per gallon of gasoline purchased – hasn’t been updated since 1993. “But we think the infrastructure package also needs to include workforce development since creating jobs through these construction projects is paramount. What better opportunity to marry these investments in infrastructure than with the ability to create well-paying jobs?”

Construction industry members can help further development and passage of a new, multi-year federal transportation infrastructure funding bill, he said, by engaging support from individuals and organizations beyond the construction sphere.

“One of the things our AGC members and lobbyists hear all the time (from Congress) is, “’We hear from construction industry people all the time, but we also need to hear from others outside your industry such as those who use our highway system,’” Turmail said. “We’re asking AGC members to ask shippers, manufacturers, drivers and consumers – neighbors, church friends and others – to contact their federal elected officials and communicate the importance of maintaining our transportation system for all.”

The nation’s current multi-year transportation funding program, Fixing America’s Surface Transportation Act (FAST) was signed into law by former President Barack Obama in December 2015, authorizing $305 billion over fiscal years 2016-2020.

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Many Craft Jobs Remain Hard To Fill, AGC Survey Finds; PPI Rises For Construction, Some Inputs

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Filling craft positions and some salaried positions remains as great a challenge for contractors as it was a year ago, according to participants in AGC’s 2017 Workforce Survey, released on Tuesday. (The site includes results by region and some states. Breakouts by firm size, union/nonunion, and project type will be added soon.) Of the 1,608 respondents, 70% stated they were having a hard time filling some hourly craft positions. In addition, 38% said they were having a hard time filling some salaried field positions; 35%, salaried office positions; and 16%, hourly office positions, while 9% reported no trouble filling any positions and 8% had no openings to fill. (These shares were all within two percentage points of the 2016 results.)

The hardest craft positions to fill were carpenters, reported by 58% of firms that currently employ them (vs. 60% in 2016); electricians, reported by 53% (also 53% in 2016); bricklayers, 53% (up from 45% in 2016); concrete workers, 51% (49% in 2016) and plumbers, 50% (also 50% in 2016). Respondents reported less difficulty in finding two types of craft workers: roofers (reported as difficult by 41% in 2017 vs. 50% in 2016) and installers–sheet metal (31% vs. 45%). As in 2016, the hardest salaried positions to fill were project managers/supervisors, 48% (50% in 2016); estimating personnel, 32% (31% in 2016); and engineers, 28% (also 28% in 2016). Half of respondents said their firms increased base pay rates for hourly craft workers (vs. 48% in 2016) and 43% did so for salaried workers (also 43% in 2016) because of difficulty filling positions.

More firms than in 2016 paid incentives/bonuses: 24% of respondents (vs. 20% in 2016) did so for hourly workers and 30% (vs. 27%) for salaried workers. Similar to 2016, about one-fifth of firms increased their portion of benefit contributions and/or improved employee benefits (hourly 20%; salaried, 21%). To add to their labor supply, firms turned to: overtime hours, 47% of respondents; in-house training, 46%; subcontractors, 41%; interns, 35%; engage with career-building programs, 27% (down from 37% in 2016, the only method with a substantial change in share); executive search firms, 23%; labor suppliers (craft), 22%; staffing firms and professional employer organizations (non-craft), 19%; and unions, 17%.

Some firms used these substitutes for labor: labor-saving equipment, tools or machinery, 22% of firms; lean construction, 15%; offsite prefabrication, 13%; virtual construction methods such as building information modeling, 7%. These shares also were close to 2016 levels.

The producer price index (PPI) for final demand in July, not seasonally adjusted, dipped 0.1% from June but increased 1.9% year-over-year (y/y) from July 2016, the Bureau of Labor Statistics (BLS) reported on August 10. AGC posted tables and an explanation focusing on construction prices and costs. Final demand includes goods, services and five types of nonresidential buildings that BLS says make up 34% of total construction. The PPI for final demand construction, not seasonally adjusted, rose 1.1% for the month and 3.2% y/y. The PPI for new nonresidential building construction–a measure of the price that contractors say they would charge to build a fixed set of five categories of buildings–climbed 3.1% y/y. Increases ranged from 2.4% y/y for office buildings to 2.4% for health care buildings, 3.8% for schools, 4.1% for warehouses and 4.5% for industrial buildings. PPI changes for new,
repair and maintenance work on nonresidential buildings ranged from 2.8% y/y for roofing contractors to 3.4% for electrical contractors, 3.5% for plumbing contractors and 3.7% for concrete contractors.

The PPI for inputs to construction–excluding capital investment, labor and imports–comprises a mix of goods (59%) and services (41%). This index increased 2.5% y/y. The PPI for all goods used in construction rose 3.0% y/y, as the sub-index for energy climbed 6.5%, while the PPI for goods less food and energy rose 2.6%. The index for services increased 2.1%. PPIs for inputs to seven types of new nonresidential structures had increases ranging from 2.3% for educational and vocational structures to 3.5% for power and communications structures. PPIs for inputs to new residential structures rose 2.7% y/y for single-family housing and 2.6% for multifamily. Materials important to construction that had notable one- or 12-month price changes include diesel fuel, 8.7% in July and 20% y/y; copper and brass mill shapes, 1.1% and 15%, respectively; steel mill products, 0.3% and 10%; gypsum products, 0.7% and 9.9%; aluminum mill shapes, -1.7% and 7.4%; and lumber and plywood, 0 and 5.2%.

Construction employment, not seasonally adjusted, rose from July 2016 to July 2017 in 259 (72%) of the 358 metro areas (including divisions of larger metros) for which BLS provides construction employment data, fell in 58 (16%) and was stagnant in 41, according to an AGC release on Wednesday. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers.) The largest gains again occurred in Riverside-San Bernardino-Ontario, Calif. (15,800 construction jobs, 17%) and the Los Angeles-Long Beach-Glendale division (11,200 construction jobs, 8%), followed by Portland-Vancouver-Hillsboro, Ore.-Wash. (9,300 construction jobs, 15%) and Las Vegas-Henderson-Paradise (9,200 construction jobs, 17%). The largest percentage gains occurred in Lake Charles, La. (21%, 4,300 construction jobs), followed by Lewiston, Idaho-Wash. (20%, 300 construction jobs); Riverside-San Bernardino-Ontario, Las Vegas-Henderson-Paradise and Madera, Calif. (17%, 300 combined jobs). The largest job losses again were in Houston-The Woodlands-Sugar Land (-8,300 construction jobs, -4%) and the Middlesex-Monmouth-Ocean, N.J. division (-3,100 combined jobs, -8%), followed by San Jose-Sunnyvale-Santa Clara, Calif. (-2,000 construction jobs, -4%). The largest percentage losses again occurred in Grand Forks, N.D.-Minn. (-22%, -1,100 combined jobs) and Danville, Ill. (-17%, -100 combined jobs). July employment was a record high for the month in 44 metros (dating back in most areas to July 1990); none set a new July low.

 

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Three IBEW/NECA Projects are Finalists in the 2017 AGC Keystone Awards

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The Associated General Contractors (AGC) of Missouri is saluting three IBEW/NECA projects as finalists in its AGC Keystone Awards. This is the 20th anniversary for prestigious construction awards program.  Since 1997, nearly 100 IBEW/NECA projects have been honored as finalists.  The annual awards salute building excellence in a number of categories and represent the highest level of professionalism, craftsmanship and quality in construction by Missouri’s general and specialty contractors.  This year, the IBEW/NECA finalist include two projects from Guarantee Electrical Co. and one from PayneCrest Electric, Inc.

Guarantee is being honored for its work on St. Joseph Hospital West Campus Expansion for SSM Health in Spanish Lake, Mo. and the McKendree Metro Rec Plex for McKendree University in O’Fallon, Ill.

PayneCrest is saluted for its work on the Washington University School of Medicine (WUSM) Mid-Campus Center, a mammoth 12-story, 517,000-square-foot medical building completed on an extremely tight site in the midst of the BJC/Washington University campus renewal project.

The finalists will now compete in several categories to earn AGC Keystone Awards.  Winners will be announced at the AGC’s annual construction gala on Thursday, Nov. 9, 2017 at the Ameristar Spa & Casino in St. Charles.  For more information on the Keystone Awards, visit www.agcmo.org.

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