By Richard Branch, Chief Economist, Dodge Data & Analytics

HAMILTON, NJ - JUNE 4, 2021 -- The U.S. economy added 589,000 new jobs in May, a solid improvement over the 278,000 jobs added in April, and the U.S. unemployment rate fell to 5.8%. Easing of state and local Covid-19 restrictions is helping the economy make steady improvement. Most new jobs came from leisure and hospitality (which added 292,000 jobs), education, and healthcare.

The construction sector, however, shed 20,000 jobs — the second consecutive monthly decline. Employment in building construction grew by 4,900 positions due to gains in single family housing, but specialty trade jobs fell by 19,300 and heavy and civil engineering jobs dropped by 5,500.

The disappointing construction jobs figure stands in stark contrast to the dollar value of projects that Dodge Data & Analytics tracks in the early stages of planning, which are at levels not seen in nearly 13 years. Today’s jobs figure is a reminder that the hope that construction starts will post aggressive growth in the second half of the year must be tempered as scarce and higher prices for construction materials lead to further delays in getting projects underway and completed.

The recovery in the construction sector will be jagged through the remainder of 2021, but confidence is growing that 2022 will bring a healthy pickup in construction activity.

By Kim Kennedy Director of Forecasting, Dodge Data & Analytics

While last year was unique for so many reasons, one way it was not unique is that the number of babies born in the U.S. fell 4% in 2020 to 3,605,201. The birth rate also fell 4% to its lowest level since 1979 (42 years).  Just 55.8 babies were born for every 1,000 women aged 15-44 in the U.S. The negative economic impact of the pandemic has caused many Americans to be concerned about their jobs and income, student loan debt, and many other aspects of their finances, leading them to postpone or forego decisions to have children.

Furthermore, the number of births and birth rate are unlikely to pull a sudden reversal in 2021 as the economy begins to re-open. Since gestation is nine months, decisions about having children made in 2020 will continue to impact births through most of 2021. Even as the economy begins to improve, births and birth rates are unlikely to show major changes. A declining birth rate, in fact, has become a long-standing fact for the United States. In the 1950s, for example, the typical woman had an average of four children. Today, that figure is less than two (1.6 in 2020) — a level that is below the “replacement rate” and therefore portends a decline in the population.

Why is this significant to the construction industry? Population growth is the underlying driver of nearly all construction — with the possible exception of renovation that simply improves existing facilities and does not add new space. An argument could be made that a declining population even lowers demand for renovation, however, as a smaller population requires less space. Therefore, a decline in the U.S. population will mean weaker demand for construction in coming years, shrinking the pie available to members of the construction industry.

The wild card, of course, lies with immigration. The U.S. population is a combination of the internal, domestic population as well as the in-migration of people from other parts of the world. As U.S. immigration policies are loosened under a presumably more expansive Biden administration, immigrants may be able to take up some of the slack that a declining domestic population creates. How much of that slack will be tightened remains to be seen, however, since the U.S. has struggled to find consensus on immigration policy for some time.

By Kim Kennedy, Director of Forecasting Dodge Data & Analytics

HAMILTON, NJ -- APRIL 30, 2021 -- As more states began to re-open during first-quarter 2021, anticipated pent-up demand showed up in force and the economy grew at an annualized 6.4%. Significantly more people began to be vaccinated in the first quarter encouraging state and local governments to begin to ease restrictions on activities, and life slowly began to return to a new normal. In addition, COVID-19 stimulus checks and enhanced unemployment compensation were distributed in the first quarter and, combined with growing employment and a robust stock market, gave consumers the confidence to spend. Consumer spending, in fact, grew at an annualized 10.7% in the first quarter. Excluding last year’s third quarter (which saw an astounding bounceback following the second quarter’s drop), this was the strongest quarterly growth rate for consumer spending since 1965.

Fixed business investment in equipment (up at an annualized 16.7%) and business investment in intellectual property products (up 10.1%) were also strong components of last quarter’s growth. Business investment in nonresidential structures, however, saw its sixth consecutive quarterly decline with the first quarter’s 4.8% drop. This weak spot has been a significant blow to the construction industry’s recovery.

By contrast, investment in housing saw only one quarter of decline (a sharp 35.6% drop in the second quarter of 2020) and has energetically rebounded since then. Growth slowed to a still hot 10.8% in the first quarter. These vigorous gains in housing have somewhat eased the construction industry’s nonresidential malaise, although players do not always overlap.

Looking ahead nonresidential construction (particularly nonbuilding construction) could receive an enthusiastic boost from the Biden Administration’s proposed $2.3 billion American Jobs Act. If enacted, an estimated billion dollars of funding would be distributed for various infrastructure projects including roads, bridges, transit, water and sewer, water resources, as well as education and healthcare buildings. While not distributed in a single year, this effort would nonetheless provide a significant lift to the construction industry’s recovery. Follow this link to review our early analysis of how even a limited infrastructure program could have a positive impact on construction starts. https://www.construction.com/dodge-newsletters/infrastructure-proposal-could-have-profound-impact-on-construction-starts

By Richard Branch, Chief Economist, Dodge Data & Analytics

On Wednesday, March 31, President Biden unveiled his nearly $2 trillion infrastructure and job growth initiative called the American Jobs Act. It is a program that, if enacted in whole, would have a profound impact on the economy, and the construction sector in particular. The plan is expansive and its direct construction-related portion accounts for roughly half of the total.

The proposal sets aside $621 billion for transportation initiatives including funding for roads, electric vehicle incentives and charging stations, public transit, airports, and ports. For buildings and utilities, another $689 billion is dedicated to water infrastructure, broadband internet, electric grid improvements, public schools, and veterans’ hospitals. Additional funds are also made available for workforce training, increased wages/benefits for home-care workers, and new spending on research and development.

While comprehensive, the plan’s future course remains precarious. The main difficulty lies with its passage through Congress where it may prove difficult to pass another large spending bill on the heels of the $1.9 trillion COVID-19 relief bill (the American Rescue Act) signed into law in March. To pay for the elements of the American Jobs Act, the plan calls for raising corporate taxes — a large hurdle that could raise the ire of Republicans and moderate Democrats. Pushing through the legislation with Democrats alone brings its own complications (either using the budget reconciliation process that requires the bill is fully paid for, or eliminating the filibuster), and would still require unanimity among Senate Democrats.

At the same time, a great deal of bipartisan and bicameral support does exist for added spending on infrastructure projects. In 2015, for example, President Obama and the Republican-controlled Congress agreed on the $305 billion FAST Act, and just before the 2020 presidential election, bipartisan committees in the House and Senate had agreed on its replacement.

To build this large effort into the forecast, and yet account for the looming uncertainty of what will eventually be passed, Dodge has included a much more limited and targeted infrastructure package into the forecast set to be released at the end of April — roughly $550 billion for core infrastructure construction, or half the size of the current core infrastructure proposal. This infrastructure spending is assumed to be in addition to a $300 billion replacement for the FAST Act, which has already been built into the Dodge construction starts forecast.

Even this lower dollar figure would have an immediate and positive impact on the forecast for construction starts. Under this assumption, our proprietary econometric model suggests that public works starts would increase by nearly 50% from 2021 through the end of our forecast window in 2025, up from a 17% growth rate in the previous version of the forecast released in January. This growth is equally shared across the public works sectors. Nonresidential buildings would also see some support through additional funds for education, healthcare, and federal buildings, but the impact is more muted.

We will be hosting a webinar on Tuesday April 27^th at 2pm EST to discuss in more detail the impact of a infrastructure package on the construction starts forecast. Registration information will be forthcoming.

By Kim Kennedy, Director of Forecasting Dodge Data & Analytics

BEDFORD, MA -- MARCH 5, 2021 -- New cases of COVID-19 began to decline in February after the winter surge and the economy responded positively by adding a healthy 379,000 jobs during the month and allowing the unemployment rate to slip to 6.2%. The easing of COVID-19 restrictions encouraged job growth in sectors hit hardest by the pandemic. Leisure and hospitality, for example, added 355,000 jobs in February with most of those jobs (286,000) coming from restaurants and bars. Retail jobs climbed by a smaller 41,000 and healthcare service employment, in high demand with the pandemic, increased by almost 46,000. Temporary jobs, which are typically a leading indicator for overall job growth, also rose by 57,000 over the month.

Construction employment, by contrast, fell by 61,000 in February. Specialty trade contractors lost 42,000 jobs and heavy/civil engineering jobs were down by 21,000, but the stalwart residential sector still added 5,000 jobs over the month.

Private sector jobs increased by 465,000 in February, but government jobs continued to feel the squeeze from the loss of tax revenue and high cost of responding to the pandemic. Government jobs declined by 86,000 in February with most of those losses coming from state (39,000) and local (44,000) governments.

Looking ahead, Dodge believes that employment will continue to grow, particularly as the economy picks up steam in the second half of the year. The president is promising plentiful COVID-19 vaccines for Americans by the end of May, which should usher in the beginnings of a true recovery.

By Richard Branch, Chief Economist, Dodge Data & Analytics

BEDFORD, MA – FEBRUARY 24, 2021 – In 2020, the COVID-19 pandemic raged on, pushing the U.S. economy into recession and constraining opportunity. Construction starts fell 9% to $778 billion but would have been down a total of 17% if single family construction had not provided a significant boost.

The COVID-19 vaccine rollout will help the overall economic recovery, but the construction sector’s recovery will be limited by reduced demand for nonresidential buildings, budgetary issues at the state and local level, and limited public works projects.

Hope for a better recovery, however, lies with the potential for an influx of federal stimulus funds directed to infrastructure. President Biden’s Build Back Better plan is said to include “a $2 trillion accelerated investment, with a plan to deploy those resources over his first term.” The last major spending program was in the wake of the Great Recession in 2009. Though the American Recovery Reinvestment Act of 2009 (ARRA) helped direct $100-$150 billion towards infrastructure, it did not provide consistent and significant upward momentum in public works starts.

If, however, President Biden’s (or similar Congressional) infrastructure package is aimed at investment across a broad range of construction types, it could significantly alter Dodge’s forecast trajectory. Below is a brief look at its potential impact by project type.

Potential High Impact

Public Works: Public works consist largely of roads, bridges, water supply, other water resources, and sewers/waste removal. In constant dollar terms (i.e., adjusted for inflation), public works construction peaked in 2002 at $68 billion. In the years since, starts have averaged just $59 billion after adjusting for inflation. This is arguably the “low hanging fruit” in any potential infrastructure plan. There is broad consensus across party lines for action beyond a renewal of the five-year surface transportation plan (FAST Act), which is set to expire on September 30, 2021.

Transit/High-Speed Rail: Throughout the COVID-19 pandemic, single family construction has been growing sharply in less dense (and more affordable) suburban and rural areas further away from downtown cores. While this pace is expected to cool somewhat as the pandemic eases, it will exacerbate congestion on roads and transit systems. Legislation for roads and transit would, therefore, likely include additional funds for high-speed rail projects such as the Dallas-Houston line, Los Angeles-Las Vegas line, and potential upgrades to Amtrak’s Acela line between Boston and New York. Land acquisition will be a significant challenge to overcome for these kinds of projects.

Renovations: Addressing climate change was a hallmark of Build Back Better, so improving energy efficiency for existing structures could be a significant element of the final plan. In 2020, nonresidential building renovations totaled $61 billion, accounting for 25% of all nonresidential building starts. The likely vehicle for funding these projects is tax credits, which could reduce the overall cost.

Potential Medium Impact

Renewables: Over the last decade, utility-scale renewable projects (mainly wind and solar) have accounted for almost 60% of all electric generation starts. In December 2020, the Investment Tax Credit and Production Tax Credit were extended through 2025 as part of the omnibus appropriations package, providing further tailwinds for this sector. Additional funds will likely be allocated in the infrastructure plan to build renewable resources. The current limiting factor to stronger growth in this sector is the lack of transmission capacity to carry the power to large markets.

Potential Small Impact

Data Centers: Access to broadband internet has been a key restraint to growth in many areas of the country and could be a boon in any potential infrastructure package. In turn, this could have a two-tailed effect on construction. First, from the actual buildout of the wiring and other assets, but also increased data center construction. It seems unlikely that data center developers would receive direct funds to build, but tax credits could potentially be made available. Even without support, data center construction starts have totaled nearly $30 billion since 2017 and are likely to remain robust.

Healthcare: The pandemic laid bare the lack of surge capacity within the nation’s hospitals. Over the last decade, healthcare construction starts have been heavily skewed towards outpatient clinics, while investment in hospitals has trended lower. Although the issue was not directly addressed during the campaign as part of an infrastructure package, it seems logical that insufficient in-patient bed counts could be addressed.

Summary

A program of this size is not without challenges. The current political environment presents the most significant impediment. Slim majorities in the House and Senate will require finesse in passing any large dollar spending program, especially since it comes on the heels of a big-ticket COVID-19 relief package.

The ultimate impact on the construction sector will also be determined by how spending programs are designed:

• Will funds be allocated over multiple years? Longer duration spending programs will mute the impact on annual construction starts.
• What will be the ultimate funding formula at the project level? Will the federal government spend the bulk of the funds, or will funds be allocated to state and local entities for disbursement?
• Will state and local governments need to provide matching funds? The pandemic and economic fallout have had a significant impact on budgets, so matching requirements may lead to lower overall investment.

Much remains to be determined, but the possibilities for an infrastructure package on construction are significant. Once a plan has been submitted to Congress, Dodge Data & Analytics will be able to provide more guidance on the potential impact on our proprietary construction starts forecast.

This topic, and much more, will be discussed in our upcoming webinar The Rocky Road to Recovery: Dodge Construction 2021 Outlook – First Quarter Update on March 4^th at 2 PM EST.

For more information and to register: https://register.gotowebinar.com/register/8230860895708523280?source=Reps

By Richard Branch, Chief Economist, Dodge Data & Analytics

The Bureau of Labor Statistics reported today that the U.S. economy added just 49,000 jobs in the month of January following the December decline of 227,000. In January, the construction sector lost 3,000 jobs — the first time since April that the sector has shed positions. Residential building and heavy and civil engineering jobs rose in January, while nonresidential and specialty trade positions fell.

By Richard Branch, Chief Economist Dodge Data & Analytics

NEW JERSEY — JANUARY 11, 2021 —  U.S. economy lost 140,000 jobs in December as the economy downshifted in the face of rising COVID-19 cases across the country. The construction sector was one of the few bright spots during the month as it gained 51,000 jobs. Still, construction has added back less than 80% of the jobs lost in March and April.

Other data from the construction sector suggests construction has not escaped the distress from COVID-19. The Dodge Momentum Index, a leading indicator on nonresidential building activity, finished 2020 4.8% below where it was at the end of 2019 – a gap that would have been much wider if not for robust activity in the warehouse market. Outside of building related to e-commerce, planning for both commercial and institutional building has struggled to gain traction in the midst of weak economic growth.

Construction starts (ground breakings) also suffered greatly during the year. Building starts posted significant declines in 2020 with only single family housing and warehouse activity showing strength. Nonbuilding (infrastructure) starts also languished as state and local revenues declined.

The December jobs report is a poignant reminder that the U.S. economy was in precarious shape as 2020 ended due to the new wave of COVID-19 cases spreading rapidly across the country. For the first time in nearly a year, however, we can say that the immediate future looks brighter. The $900 billion stimulus plan approved by Congress at the end of 2020 will provide meaningful support for individuals and businesses. Further deployment of vaccines will also lead to a more rapid recovery as the year progresses. While it will be a long road back to full recovery, the construction sector is poised for a return to growth in 2021.

Richard Branch, Chief Economist, Dodge Data & Analytics

NEW JERSEY – DECEMBER 4, 2020 – According to the Bureau of Labor Statistics, the U.S. economy added 245,000 jobs in November – a considerable step back from the revised 610,000 jobs added in October. Still, the unemployment rate dipped to 6.7%. Private sector employment improved by 344,000, while the public sector shed 99,000 positions. Within the public sector, state and local governments cut 13,000 positions, while federal employment was down 86,000 reflecting the loss of temporary workers that had been hired for the 2020 Census.

Within the private sector, transportation and warehousing added 145,000 jobs, while retail jobs fell 34,700 reflecting less seasonal hiring in brick and mortar retail and increased online shopping. Manufacturing jobs improved by 27,000, while professional and business services employment improved by 60,000.

Employment growth in the construction sector also lost steam in November, adding 27,000 positions, down from the 72,000 added in the previous month. Gains were seen in residential and nonresidential building, heavy and civil engineering as well as in residential specialty trade contractors. Nonresidential specialty trade contractors cut 1,200 positions. The construction sector has now added back nearly 80% of the jobs lost during March and April, while total nonfarm employment has added back just under 60% of the jobs lost.

Economic growth has slowed noticeably over the past several months and the labor market is beginning to stagnate as a result. There should nevertheless be some solace that employment growth was as strong as it was in November, given the considerable headwinds facing the economy. The next wave of the virus is accelerating and the prospects for additional federal stimulus are still very uncertain, so employment growth is expected to slow further in the months to come. Construction employment should remain somewhat resilient, however, due to the booming housing market. Looking into 2021, the hope for rapid deployment of a vaccine sets the table for a stronger economic recovery taking hold by the midpoint of the year.

Richard Branch, Chief Economist, Dodge Data & Analytics

NEW JERSEY – DECEMBER 4, 2020 – According to the Bureau of Labor Statistics, the U.S. economy added 245,000 jobs in November – a considerable step back from the revised 610,000 jobs added in October. Still, the unemployment rate dipped to 6.7%. Private sector employment improved by 344,000, while the public sector shed 99,000 positions. Within the public sector, state and local governments cut 13,000 positions, while federal employment was down 86,000 reflecting the loss of temporary workers that had been hired for the 2020 Census.

Within the private sector, transportation and warehousing added 145,000 jobs, while retail jobs fell 34,700 reflecting less seasonal hiring in brick and mortar retail and increased online shopping. Manufacturing jobs improved by 27,000, while professional and business services employment improved by 60,000.

Employment growth in the construction sector also lost steam in November, adding 27,000 positions, down from the 72,000 added in the previous month. Gains were seen in residential and nonresidential building, heavy and civil engineering as well as in residential specialty trade contractors. Nonresidential specialty trade contractors cut 1,200 positions. The construction sector has now added back nearly 80% of the jobs lost during March and April, while total nonfarm employment has added back just under 60% of the jobs lost.

Economic growth has slowed noticeably over the past several months and the labor market is beginning to stagnate as a result. There should nevertheless be some solace that employment growth was as strong as it was in November, given the considerable headwinds facing the economy. The next wave of the virus is accelerating and the prospects for additional federal stimulus are still very uncertain, so employment growth is expected to slow further in the months to come. Construction employment should remain somewhat resilient, however, due to the booming housing market. Looking into 2021, the hope for rapid deployment of a vaccine sets the table for a stronger economic recovery taking hold by the midpoint of the year.