2018 AC: How Do Your Numbers Stack Up? (Ken Simonson)

Construction Spending, Labor
and Materials Outlook
SC&RA Convention
Boca Raton, FL, April 19, 2018
Ken Simonson
Chief Economist, AGC of America
simonsonk@agc.org

2017
vs. 2016
Jan-Feb ’18 vs.
Jan-Feb ’17
2018
forecast
Nonresidential total (public+private) 0% 3% 1-5%
Power (incl. oil & gas field structures, pipelines) -6 -7 positive
Educational 2 4 positive
Highway and street -4 0 small pos.
Commercial (retail, warehouse, farm) 14 8 less pos.
Office 2 1 less pos.
Manufacturing -12 -6 small pos.
Transportation 4 20 positive
Health care 4 8 small pos.
Lodging 6 12 negative
Sewage & waste disposal -13 7 near 0
Other--amusement; communication; religious;
public safety; conservation; water: 11% of ‘17 total 0 7
Nonresidential segments: 2017 change, 2018 forecast
Source: U.S. Census Bureau construction spending report; Author’s forecast
2

'15 '16 '17 '18
$0
$5
$10
$15
$20
$25
'08'10'12'14'15 '16 '17 '18
Construction spending: industrial, heavy
annual total, 2008-14; monthly (seasonally adjusted annual rate), 1/15-2/18; billion $
3
$0
$25
$50
$75
$100
'08'10'12'14'15 '16 '17 '18
Manufacturing (99% private in 2017)
Feb ‘17-Feb '18 change: -6% (chemical -16%; other 5%)
Other
Chemical
Communication (99.5% private in 2017)
Feb ‘17-Feb '18 change: 3%
Source: U.S. Census Bureau construction spending report
'15 '16 '17 '18
$0
$5
$10
$15
$20
$25
'08'10'12'14
Amusement & recreation (55% private in 2017)
Feb ‘17-Feb '18 change: -1% (private 7%; public -10%)
Public
Private
Power (94% private in 2017)
$0
$30
$60
$90
$120
'08'10'12'14
Feb ‘17-Feb '18 change: -8% (oil & gas -1%; electric -10%)
electric
oil & gas

Key points: power & energy, mfg, amusement & recreation
• Solar, wind power are growing again; expect more gas-fired plants,
natural gas pipelines in ‘18
• Manufacturing construction should recover in ‘18 based on energy
projects, tax-induced reshoring, U.S. & global economic growth,
weaker dollar; but tariffs, foreign retaliation are a concern
• Amusement & recreation spending is very “lumpy”—a few big
stadiums at irregular intervals; but funding for local, state, federal
parks keeps eroding
4
Source: Author

'15 '16 '17 '18
$0
$30
$60
$90
$120
'08'10'12'14
$0
$10
$20
$30
'08'10'12'14'15 '16 '17 '18
Construction spending: public works
5
$0
$10
$20
$30
'08'10'12'14'15 '16 '17 '18
Highways (99.7% public in 2017)
Feb ‘17-Feb '18 change: -5%
Sewage/waste (99.1% public in 2017)
Water supply (98% public in 2017)
$0
$10
$20
$30
$40
$50
'08'10'12'14 '15 '16 '17 '18
Transportation facilities (67% public in 2017)
Feb ‘17-Feb '18 change: 16% (private 31%; public 9%)
public
private

Key points: roads, transportation, sewer/water
• State highway funding and P3s gradually increasing but federal
funding likely to be flat through 2018; pickup likely by 2019
• Many new and ongoing public & private airport projects; revival of
freight rail construction; but no net increase likely in public funding
for port, passenger rail or transit construction
• Huge declines in water & sewer spending in 2017: hard to explain
and unlikely to be repeated
6
Source: Author

$0
$25
$50
$75
$100
'08 '10 '12 '14
$0
$10
$20
$30
$40
$50
'08 '10 '12 '14 '15 '16 '17 '18
Construction spending: education, health care
7
'15 '16 '17 '18
Education: state/local K-12, S/L higher; private
Feb ‘17-Feb '18 change: 3% (private 2%;
state/local preK-12 4%; state/local higher ed -1%)
State/local preK-12
Private
State/local higher ed
Health care: (private hospital, S/L hospital, other)
Feb ‘17-Feb '18 change: 4% (private hospital 5%; S/L hospital
37%; other: special care, med. office, federal 5%)
State/local hospital
Private hospital
Total (78% public)
Total (76% private)
Other

Key points: education & health care
• Rising house & commercial property values are supporting school
district tax receipts & bond issues for preK-12 projects
• Higher-ed enrollment declined 21% from 2011 to 2016, so colleges
need fewer dorms & classrooms; apts. (multifamily) replacing dorms
(educational construction)
• Rising stock prices help private school & college capital campaigns
• Health care spending is shifting from hospitals to special care
facilities (standalone urgent care, surgery, rehab, hospices)
8
Source: Author

'15 '16 '17 '18
$0
$20
$40
$60
$80
'08'10'12'14
Construction spending: developer-financed
9
$0
$20
$40
$60
$80
'08'10'12'14 '15 '16 '17 '18
$0
$10
$20
$30
$40
'08'10'12'14'15 '16 '17 '18
Retail (private)
Feb ‘17-Feb '18 change: -2%
Office (88% private in 2017)
Feb ‘17-Feb '18 change: 2% (private 4%; public 20%)
Public
Private
Total
Warehouse (private)
Lodging (private)
$0
$10
$20
$30
$40
'08'10'12'14 '15 '16 '17 '18

Key points: retail, warehouse, office, hotel, data centers
• Retail now tied to mixed-use buildings & renovations, not standalone
stores or shopping centers; massive store closings imply downturn in ‘18
• Warehouse growth is still benefiting from e-commerce; more local than
huge regional distribution centers likely in future; self-storage is booming
• Office growth is slowing; employment still rising but space per worker is
shrinking; more urban & renovation work than suburban office parks
• Hotel: more markets reaching saturation; more competition from Airbnb
• Data centers remain a strong niche but no data available on how strong
10
Source: Author

$0
$100
$200
$300
$400
$500
$600
$700
'06 '08 '10 '12 '14
Private residential spending: steady single-family growth, slower multifamily
11
'15 '16 '17 '18
Levels
Multifamily
-5%
0%
5%
10%
15%
20%
25%
30%
35%
2015 2016 2017 2018
12month%change
Improvements: 1%
Single-
family: 9%
Multifamily: 1%
Private total: 5%
12-month % change: Feb. 2015-Feb. 2018
Private total
Single-family
Improvements
2/17-2/18:

Residential spending forecast--2018: 6-9% growth (11% in 2017)
• SF: 8-10% growth in 2018 (9% in 2017); rising interest rates, tax law changes,
student debt will limit number of potential buyers
• MF: near 0 change in 2018 (4% in 2017)
– occupancy rates, rents have leveled off; starts, permits are down from 2016
– millennials are staying longer in cities and denser suburbs where MF
construction is bigger share of market than in outer suburbs
– nearly all MF construction is rental, not condo; more high-rises
• Improvements: 10-15% growth in 2018 (16% in 2017); unpredictable because
Census lacks reliable data source; post-storm reconstruction may boost totals
Source: Author
12

CT
-0.2%
-1%
6%
8%
10%
9%
-1%
-1%
11%
9%
7%
9%
-16%
2%
-5%
-4%
4%
5%
3%
-9%
-3%
-1%
2%
1%
7%
5%
-3%
3% 0.1%
3%
3%
4%
4%
6%
6%
-1%
14%
-0.4%
8%
HI
1%
2%
VT
0%
MD
0.2%
DC
4%
NH
4%
Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5%
MA
7%
State construction employment change (U.S.: 3.7%)
2/17 to 2/18: 35 states and DC up, 14 down, 1 unchanged
13
5.1% to 10% Over 10%
Shading based on
unrounded numbers
0%
Source: BLS state and regional employment report
2%
NJ
-1%
DE
5%
RI
2%
2%

FIRMS WILL CONTINUE TO COPE WITH WORKER SHORTAGES
How would you describe your firm’s current conditions for filling key
salaried positions (project manager/supervisor, estimator, etc.) and hourly
craft positions (carpenter, laborer, equipment operator, etc.)? My firm is:
10%
9%
71%
57%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
not doing any hiring
having no trouble filling any positions
having a hard time filling craft worker positions
having a hard time filling salaried positions
Source: AGC Construction Outlook Survey, January 2018. Survey conducted Dec.-mid-Jan. 2018.
Total responses: 1,046.; response totals varied by question.

MOST FIRMS ARE INCREASING PAY OR BENEFITS…
Did your firm increase pay or benefits in 2017 to retain or recruit
salaried/hourly craft professionals?
7%
3%
7%
9%
18%
24%
36%
60%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Unsure
We did not seek to hire any salaried/hourly craft
professionals in 2017
No, and we are not considering increases in pay and/or
benefits
No, but we are considering increases in pay and/or
benefits in the near future
Paid more overtime
Increased contributions and/or improve employee
benefits
Provided incentives/bonuses
Increased base pay
Source: AGC Construction Outlook Survey, January 2018. Survey conducted Dec.-mid-Jan. 2018.
Total responses: 1,046.; response totals varied by question.

0%
1%
2%
3%
4%
5%
6%
7%
2001 2003 2005 2007 2009 2011 2013 2015 2017
Production and nonsupervisory employees:
avg. hourly earnings, 12-mo. % change, 3/01-3/18
Construction workforce indicators (not seasonally adjusted)
16
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2001 2003 2005 2007 2009 2011 2013 2015 2017
Unemployment, March 2001-March 2018
0
100,000
200,000
300,000
400,000
500,000
600,000
2001 2003 2005 2007 2009 2011 2013 2015 2017
Job openings, Jan. 2001-Jan. 2018
Source: Bureau of Labor Statistics
Construction hires, Jan. 2001-Jan. 2018
0
100,000
200,000
300,000
400,000
500,000
600,000
2001 2003 2005 2007 2009 2011 2013 2015 2017

70
85
100
115
130
2015 2016 2017 2018
70
85
100
115
130
2015 2016 2017 2018
Latest 1-mo. change: -2%, 12-mo.: 38%
70
85
100
115
130
2015 2016 2017 2018
Producer price indexes for key inputs, 1/15-2/18 (Jan. 2015=100)
17
Copper & brass mill shapes Aluminum mill shapes
Latest 1-mo. change: -0.9%, 12-mo.: 10% Latest 1-mo. change: 2.9%, 12-mo.: 12%
Diesel fuel
70
85
100
115
130
2015 2016 2017 2018
Steel mill products
Latest 1-mo. change: 2.3%, 12-mo.: 5%

70
85
100
115
130
2015 2016 2017 2018
70
85
100
115
130
2015 2016 2017 2018
Paving mixtures
Producer price indexes for key inputs, 1/15-2/18 (Jan. 2015=100)
18
Concrete products
70
85
100
115
130
2015 2016 2017 2018
Flat glass
70
85
100
115
130
2015 2016 2017 2018
Gypsum products

-4%
-2%
0%
2%
4%
6%
2016 2017 2018
12month%change
Latest 12-mo. change: PPI for nonresidential building: 3.6%; PPI for inputs to construction: 5.6%;
average hourly earnings for all construction employees: 2.9%
Change in costs for buildings, material inputs and wages
19
PPI for inputs to
constructionAverage hourly earnings for all
construction employees
PPI for nonresidential building
12-month % change, not seasonally adjusted: Jan. 2016 – March 2018

2016-2017 summary, 2018 forecast
Source: actuals: Census, BLS; forecasts: Author’s estimates
2016
actual
2017
actual
2018
forecast
Total spending 6% 4% 2-7%
Private – residential 11% 11% 6-9%
– nonresidential 8% 1% 1-5%
Public -1% -2% -3 to 3%
Goods & services inputs PPI 1% 4% 4-5%
Employment cost index 2.2% 2.5% 3-4%
20

AGC economic resources
(email simonsonk@agc.org)
• The Data DIGest: weekly 1-page email (subscribe at
http://store.agc.org)
• monthly press releases: spending; PPI; national, state,
metro employment
• yearly employment & outlook surveys, state and metro
data, fact sheets: www.agc.org/learn/construction-data
• outlook webinar May 10 with Kermit Baker, AIA; Alex
Carrick, ConstructConnect: https://goo.gl/uf6oC2
21

www.agc.org/learn/construction-data
Vol. 18, No. 15 · April 9-13, 2018
Construction-input PPIs jump in March, outpace contractors’ prices; job openings climb
The producer price index (PPI) for final demand in March, not seasonally adjusted, rose 0.5% from February and 3.0%
year-over-year (y/y) from March 2017, the Bureau of Labor Statistics (BLS) reported on Tuesday. 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 31% of total construction. The PPI for final demand construction, not seasonally adjusted,
climbed 0.2% for the month and 3.6% y/y, the largest y/y increase since July 2012. 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—
rose 3.6% y/y. Increases ranged from 3.2% y/y for office buildings to 3.6% for warehouses, 3.8% for schools and health care
buildings and 4.3% for industrial buildings. PPI increases for subcontractors’ new, repair and maintenance work on
nonresidential buildings ranged from 1.1% y/y for roofing contractors to 3.7% for concrete contractors, 4.0% for plumbing
contractors and 4.5% for electrical contractors. The PPI for inputs to construction—excluding capital investment, labor and
imports—comprises a mix of goods (56%) and services (44%). This index jumped 5.6% y/y, which exceeded the 3.6% PPI
increase for new nonresidential building construction, implying a cost squeeze for contractors. The PPI for inputs to construction,
goods (including items consumed by contractors, such as diesel fuel) rose 5.8% y/y—the biggest jump since 2011, as the sub-
index for energy soared 18%, while the PPI for goods less food and energy rose 4.5%. The index for inputs to construction,
services increased 5.3% y/y. PPIs for inputs to seven types of new nonresidential structures had increases ranging from 4.3%
for industrial structures to 6.2% for power and communications structures. PPIs for inputs to new residential structures rose
5.8% y/y for both single-family and multifamily. Goods important to construction that had major one- or 12-month price changes
include diesel fuel, down 0.4% in March but up 40% y/y; lumber and plywood, up 1.8% for the month and 14% y/y; aluminum
mill shapes, 1.4% and 11%, respectively; copper and brass mill shapes, -1.8% and 11%; gypsum products, 0 and 8.4%; steel
mill products, 5.5% and 7.1%; ready-mixed concrete, 3.0% and 6.7%; and plastic construction products, 0.8% and 5.8%. Among
services important to construction, the PPI for truck transportation of freight rose 0.2% for the month and 5.9% y/y.
There were 196,000 job openings in construction, not seasonally adjusted, at the end of February, up from 169,000 in
February 2017 and the highest February total since 2007, BLS reported today in its latest Job Openings and Labor Turnover
Survey (JOLTS) release. The industry hired 306,000 employees in February, little changed from the 309
,000 hired in February 2017. BLS reported on April 6 that there were 732,000 unemployed jobseekers in February whose last
job was in construction, the lowest February total in the 19-year history of that series. Together, these figures suggest contractors
are still eager to hire more workers but are having difficulty finding ones who have construction experience.
“The construction industry, which may not spring readily to mind as an industry that could have its supply chain affected
by tariffs, is also vulnerable to higher costs of many of its major inputs,” Wells Fargo Economics reported on Thursday. A table
in the report shows that 27% of construction industry inputs are subject to potential American tariffs on Chinese goods. “Not
only would tariffs directly raise the prices of Chinese-produced goods, but non-Chinese producers of those goods could use the
opportunity to raise their prices.”
On Wednesday, construction data provider ConstructConnect reported, “March’s volume of construction starts,
excluding residential activity,…versus an extraordinarily strong March of last year, was -18.9%.” Nonresidential starts in
January-March 2018 were down 22% from January-March of 2017. Heavy engineering (civil) starts gained 2%, while
nonresidential building starts plunged 34% (comprising institutional starts, -16%; commercial, -41%, and industrial, -66%).
The Census Bureau on Tuesday posted a blog on women’s earnings by occupation that included a link to a table listing
the number of men and women in 30 construction occupations and their median earnings in 2016. Women earned 80% as
much as men in all full-time, year-round occupations. In construction and extraction occupations combined, women earned 88%
as much as men but constituted only 2.6% of all such workers. Median annual earnings for all workers were $40,860, nearly
identical to the $40,852 median for construction and extraction occupations. The 148,000 women in these occupations earned a
median of $35,859, 88% of the median $40,675 earned by the 45.9 million women in all occupations. The 5.5 million men in
construction and extraction occupations earned a median of $40,926, 81% of the $50,741 median for the 60.7 million men in all
occupations. Of the 30 construction occupations, the most numerous were construction laborers: 1,150,000 men and 30,000
women (2.5%). Women laborers earned 94% of men. There were only eight construction occupations with enough women for
Census to post ratios of women's to men's median earnings. Women's median earnings exceeded men's in one of those eight
occupations: operating engineers and other construction equipment operators, including pile-driver operators, with 263,000 men
and 6,600 women (2.4%). The women earned a median of $50,129, 108% of the $46,485 median earnings of men. The above
figures exclude construction managers, who are included among management occupations. There were 44,900 women
construction managers, 7.8% of the total. The women had median earnings of $62,218, 87% of the $71,907 median earned by
the 528,000 men.
Data DIGest is a weekly summary of economic news. All rights reserved. Sign up at http://store.agc.org. Editor: Ken Simonson, Chief Economist, AGC, simonsonk@agc.org

2018 AC: How Do Your Numbers Stack Up? (Ken Simonson)

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