Tag Archives: residential construction

Construction Spending

Construction Spending Reaches Highest Level Since December 2009

Construction spending in June rose to a 2-1/2 year high as double-digit percentage increases in private residential and nonresidential construction more than offset an ongoing downturn in public construction, according to an analysis of new federal data released today by the Associated General Contractors of America. Association officials said they expect the disparity between private and public construction is likely to persist and urged policy makers to put more funding into infrastructure projects.

“The June spending gains come on top of upward revisions to May and April totals, reinforcing the notion that private construction is now growing consistently,” said Ken Simonson, the association’s chief economist. “Even more encouraging, the improvement is showing up in a wide range of residential and nonresidential categories.”

Simonson noted that total construction spending gained 0.4% for the month and 7.0% year-over-year. Private nonresidential spending climbed for the fourth consecutive month and was 14% higher than in June 2011. Residential construction increased 1.3% for the month and 12% year-over-year, with new multifamily construction soaring 3.4% and 49%, respectively, and single-family homebuilding up 3.0% and 19%.

The construction economist said that five of the 11 private nonresidential categories in the Census Bureau’s monthly report registered double-digit percentage gains in spending from June 2011 to June 2012: power and energy construction (including oil and gas-related projects), 26%; hotels, 26%; manufacturing and educational, 19% apiece; and transportation (mainly trucking and rail facilities), 17%. There were also 7% year-over-year increases in health care, commercial (retail, warehouse and farm) and office construction.

Public construction spending appears to have stabilized in recent months but the June 2012 total was 3.7% less than a year earlier, Simonson noted. He said only two of the Census Bureau’s 13 public categories posted year-over-year increases.

“Private nonresidential and multifamily construction should continue to grow in the second half of 2012 and beyond,” Simonson predicted. “Single-family homebuilding also should top last year’s figures, although progress may not occur every month. As a result, total construction spending in 2012 will be positive for the year for the first time since 2007 even though public construction will remain in the doldrums.”

Association officials said construction growth will remain unbalanced, however, unless lawmakers enact more funding for essential water, wastewater and other infrastructure projects.

“Although Congress has kept highway spending from falling, other types of infrastructure, including our aging water systems, need attention,” said Stephen E. Sandherr, the association’s chief executive officer. “There is nothing to be gained from letting our infrastructure deteriorate further.”

construction industry

Construction Industry Loses 7,000 Jobs In March

The construction industry lost 7,000 jobs in March, inching the unemployment rate up to 17.2 percent from 17.1 percent in February, according to the April 6 Department of Labor employment report. Year over year, construction industry unemployment is down compared to the March 2011 rate of 20 percent. The construction industry added 55,000 jobs over the past 12 months.

The nonresidential construction sector lost 6,000 jobs for the month, but year over year has added 7,000 jobs, or 1.1 percent, bringing the total number of jobs to 659,400. Residential construction lost 5,000 jobs for the month and has added 3,000 jobs during the past 12 months, or 0.4 percent, to reach 569,000 jobs.

Nonresidential specialty trade contractors shed 5,000 jobs in March, while residential specialty trade contractors added 5,000 jobs and heavy and civil engineering construction employment saw a gain of 4,000 jobs. Year over year, nonresidential specialty trade contractors have lost 4,000 jobs, or 0.2 percent; residential specialty trade contractor employment grew by 29,000 jobs, or 2 percent; and heavy and civil engineering construction employment increased by 20,000 jobs, or 2.4 percent.

Across all industries, the nation added 120,000 jobs in March. The private sector expanded by 121,000 jobs and the public sector shrank by 1,000 jobs. On a yearly basis, the nation has added 1,899,000 jobs, or 1.5 percent. The national unemployment rate stood at 8.2 percent in March, down from 8.3 percent in February, with the labor force shrinking by 164,000 people.

“Today’s employment report was disappointing, particularly for the construction industry,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “The first quarter of 2012 will be judged as a step backward for the industry as construction spending levels stagnated and employment momentum disappeared.

“A certain level of weakness was anticipated due to the economic slowdown during the spring and summer of last year that caused many projects to be put on hold and resulted in diminished construction momentum,” Basu said. “In addition, ABC’s Construction Backlog Indicator, a predictor of construction activity, dipped during last year’s fourth quarter, setting the stage for the declines in construction employment now being observed.

“This employment report differed from the prior three months because employment growth was disappointing for the broader economy as well,” Basu said. “The consensus coming into today’s release was the nation would have added approximately 200,000 jobs in March, which did not happen.

“Some attribute the disappointing March report to abnormally warm weather across the nation, which caused February’s employment to be artificially high. However, one month does not make a trend and other data remain upbeat, including consumer activity and overall economic momentum. Economists and others will be looking for signs of improvement in labor market dynamics in April,” Basu said.

Nonresidential Construction Spending Dips In September

Nonresidential Construction Spending Dips In September 2010

While total construction spending edged up in September, private nonresidential construction slipped 1.6 percent, according to a report by the U.S. Census Bureau.

On a year-over-year basis, private nonresidential construction spending is down 24.6 percent. Meanwhile, total nonresidential construction spending – which includes both privately and publicly financed projects – was flat for the month and is down 12.4 percent from September 2009, and now stands at $559.6 billion on a seasonally adjusted annual rate.

Construction subsectors posting the largest monthly decreases were lodging, down 7.8 percent; manufacturing, 3.5 percent lower; and conservation and development-related construction, down 3.1 percent. Those subsectors suffering the biggest losses from the same time last year include lodging, down 53 percent; manufacturing, down 35.5 percent; and office construction, 24.5 percent lower.

In contrast, 9 of 16 nonresidential construction subsectors posted spending increases from the previous month led by transportation, up 4.1 percent; health care, 1.8 percent higher; office, up 1.6 percent; and amusement and recreation-related construction, up 1.6 percent. Five subsectors are up, compared to the same time last year, including conservation and development, up 25.5 percent; sewage and waste disposal, 13.9 percent higher; and water supply construction, up 7.7 percent.

Public nonresidential construction spending, which represents 55.3 percent of total nonresidential construction, was up 1.3 percent for the month and up 0.7 percent year-over-year. Residential construction spending was up 1.8 percent for the month, but is down 5.3 percent compared to September 2009. Total construction spending was up 0.5 percent in September compared to August, but down 10.4 percent compared to the same time last year.

“Though the media will likely focus upon the fact that total construction spending was up in September for the first time in three months, there is relatively little to celebrate in the most recent construction spending report,” said Associated Builders and Contractors Chief Economist Anirban Basu. “For example, total nonresidential construction spending last September totaled $639 billion on an annualized basis. In contrast, the total this September is $560 billion, a decline exceeding 12 percent. In addition, nonresidential construction volumes were virtually unchanged from August, and remained lower than they were during the early summer.

“Still, there was some positive movement. Construction spending on office space rose in September, perhaps because the lending environment is thawing a bit and new owners of buildings are seeking to re-tenant their purchases and to put their imprint on their properties,” said Basu.

“Construction related to education was also up, a good sign since the fear has been that education-related spending would continue to fall in the wake of still distressed state and local government budgets,” Basu said.

“However, there are also indications that publicly-financed spending related to the stimulus package passed in February 2009 is beginning to wane. For example, spending on construction related to water supply is no longer rising rapidly, and spending in the highway and street category declined in September. Looking at the bigger picture, today’s data suggests that overall nonresidential construction spending is poised to remain quite flat in the months ahead,” Basu said.

Construction at an All Time Low

National Construction Employment Near 14-Year Low

The number of people working in construction is approaching a 14-year low now that the industry lost 21,000 jobs in September, while construction unemployment is at a September high of 17.2 percent, according to an analysis of federal employment figures released today by the Associated General Contractors of America.

The construction industry continues to suffer from declining investments in construction and broad uncertainty about the future of many federal infrastructure programs and tax rates, association officials noted.

“It has taken less than four years to erase a decade’s worth of job gains as the industry suffers from declining private, state and local construction demand,” said Ken Simonson, the association’s chief economist. “No other sector of the economy has suffered as much for as long as construction.”

Simonson noted that the 5.6 million people working in construction today is barely higher than the 5.59 million people who were working in construction in August 1996. He added that construction employment continued to lag behind other sectors of the economy. For example, while total private employment rose by 593,000 during the past 12 months, the construction industry lost 210,000 jobs. Meanwhile, the industry’s unemployment rate is nearly double the unadjusted national rate of 9.2 percent.

Most of September’s construction job losses came from the nonresidential sector as demand for commercial facilities and infrastructure projects remains weak, Simonson noted. Residential construction lost 2,500 jobs last month while nonresidential construction lost 18,100 jobs. Nonresidential specialty trade contractors were the hardest hit, having lost 19,500 jobs in September, the economist added.

Association officials noted that construction spending figures released late last month show private, state and local construction spending continues to decline. And while federal spending has increased, most of those investments have come from temporary programs like the stimulus and military base realignment programs.

While these temporary federal programs have helped the industry, many contractors are reluctant to expand payrolls while long-term federal programs that fund highway, transit, water system and aviation related construction remain in limbo, association officials said. They added that most contractors don’t even know what their tax rates will be for next year.

“Construction firms aren’t going to start hiring again until they can predict how busy they’ll be,” said Stephen E. Sandherr, the association’s chief executive officer. “Frankly it is hard for contractors to make any business decisions when they don’t know how much they’ll make or how much they’ll owe.”


Promoting Smart Growth in Down Economy

Promoting Smart Growth In A Down Economy

Please welcome Diane Brossart, president of Valley Forward Association, and guest blogger to the AZ Green Scene. This is the first blog of our exclusive monthly blog partnership series, where Diane will share her experience and insight regarding the state’s sustainable industry.

Freezing impact fees to stimulate economic development runs counter to the principles of smart growth.

There is no evidence that placing a moratorium on impact fees results in any increase in residential or non-residential construction, according to a number of authoritative studies, including the Brookings Institution. Yet with the hope of establishing momentum in the development industry our legislature recently imposed a freeze on acquisitions and increases until June 2010.

Not only won’t this stimulate growth but it places a huge burden on Valley cities when they can least afford it. Most communities are struggling with severe budget cuts, reductions in personnel and impending tax hikes. Now they’re facing yet another economic hit in the form of lost revenue from impact fees.

New development should pay for itself, period end of story. Impact fees implemented by local governments on new or proposed developments assist or pay for costs caused by growth and expansion. These fees help fund the construction of offsite capital improvements including infrastructure and public services such as road expansion and maintenance, expanded police and fire services and increased demand on schools.

In short, impact fees effectively eliminate the financial encumbrance on local jurisdictions that are trying to deal with population growth within the area. The capital required to fund new growth is simply the cost of doing business.

The widely held perception that development results in economic growth is not always the case, however. Badly planned growth creates vast burdens that are often subsidized with tax dollars.

The financial crisis our state is now facing has little to do with impact fees. It’s the result of poor and unscrupulous lending and borrowing decisions that led to a nationwide credit freeze.

Legislation should work to promote livable and sustainable communities by creating viable incentives for developers to undertake projects within urban areas rather than in greenfields on city edges. Our policies should facilitate a balance between economic growth and environmental quality.
The moratorium on impact fees undermines smart growth while shifting the cost of development from one sector to another.

Diane BrossartPresidentValley Forward Associationwww.valleyforward.org