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Contractors Optimistic About 2020, AGC-Sage Survey Finds

Dec. 22, 2019
Despite staffing challenges, contractors are optimistic regarding their hiring plans and the volume of work available in 2020 for nonresidential and multifamily construction, based on a survey the Associated General Contractors released last week.

Despite staffing challenges, contractors are optimistic, on balance, regarding their hiring plans and the volume of work available in 2020 for nonresidential and multifamily construction, based on a survey that the Associated General Contractors released last week. Respondents were asked whether the available dollar volume of projects they compete for would be higher or lower than in 2019. For all 13 categories of projects, between 27 percent and 36 percent of respondents expect a higher volume, while 10 percent to 21 percent expect a lower volume. (The remainder expects the volume to remain about the same.)

The difference—the net reading—ranged from 25 percent positive for water and sewer construction down to 8 percent for private office construction. On balance, respondents were more optimistic than in the 2019 outlook survey for multifamily, infrastructure and institutional categories but less upbeat than before for other nonresidential building segments.

Only 5 percent of respondents expect their firms to reduce headcount in 2020, compared with 75 percent who expect an increase (compared with 77 percent a year ago and 75 percent two years ago). In addition, 81 percent say they are having a hard time filling salaried or hourly craft positions (up from 78 percent a year ago) and 65 percent say it will be as hard or harder to do so in 2020 (down from 68 percent). Nearly half (44 percent) of respondents (up from 33 percent) said project costs had been higher than anticipated and 41 percent (up from 37 percent) said they have put higher prices into bids or contractors. Similarly, 40 percent (up from 34 percent) said projects had taken longer than anticipated and 23 percent (up from 18 percent) said they had put longer completion times into bids or contracts. The survey was conducted from November 6 to December 9 and garnered 956 responses. The survey was sponsored by software firm Sage and included several questions about use of information technology, as well as recruitment, training, top concerns, safety and other topics. Results are available for 13 states and four regions, three revenue size classes and union/open-shop.

The value of new construction starts “surged” 37 percent higher from October to November at a seasonally adjusted annual rate, Dodge Data & Analytics reported on Tuesday. “The large percentage gain was not only a response to a particularly weak October, but also numerous massive projects that broke ground during the month. By major sector, nonresidential building starts gained 61 percent over the month, while nonbuilding starts moved 82 percent higher. Residential building starts were flat from October to November.” Total starts for January-November were 1 percent lower than in the first 11 months of 2018, with nonbuilding starts up 6 percent, nonresidential building down 3 percent, and residential building down 4 percent.

The Architecture Billings Index (ABI) dipped from 52.0 in October to 51.9 in November, the American Institute of Architects reported on Wednesday. The ABI measures the percentage of surveyed architecture firms that reported higher billings than a month earlier, less the percentage reporting lower billings. Any score below 50 (on a 0-100 scale) indicates a decrease in billings. Scores (based on three-month moving averages) topped the breakeven 50 mark for all practice specialties: commercial/industrial, 52.9, up from 51.0 in October; mixed practice, 52.2, down from 53.8; residential (mainly multifamily), 51.5, down from 53.8; and institutional, 50.1, up from 49.4.

The USG Corporation/U.S. Chamber of Commerce Commercial Construction Index, conducted online from October 17 to 22, declined from a series high of 77 (on a 0-100 scale) in the third quarter (Q3) to a new low of 71 in Q4, the Chamber reported on December 12. “Rather than suggesting a precipitous decline, the instability between Q3 and Q4 appears to indicate greater uncertainty among contractors about what to expect from the construction market. While the overall index number is relatively low, that is in comparison to what has been a boom market in construction since the index was launched in 2017.”   

Seasonally adjusted construction employment increased from November 2018 to November 2019 in 38 states and the District of Columbia and declined in 12 states, an AGC analysis of Bureau of Labor Statistics data released on Tuesday shows. The largest additions of construction jobs occurred again in Texas (56,000 jobs, 7.5%), California (29,400, 3.4%) and Florida (26,700, 4.9%), followed by Nevada (12,500, 13%) and Arizona (11,600, 7.0%). The largest percentage increases again occurred in Nevada and New Mexico (11%, 5,300), followed by New Hampshire (9.3%, 2,500), Utah (8.6%, 8,900), Texas and Arizona. Construction employment reached new highs (in records dating back to 1990) in Oregon, Texas, Utah and Washington. The largest 12-month losses of construction jobs occurred again in Louisiana (-9,200, -6.2%) and Ohio (-7,800, -3.5%), followed by Illinois (-4,000, -1.8%) and Tennessee (-4,000, -3.1%). Construction employment rose from October to November in 18 states, decreased in 30 and was flat in Kansas, New Hampshire and D.C. (AGC’s rankings are based on seasonally adjusted data, which in D.C., Hawaii and Delaware is available only for construction, mining and logging combined.)

Housing starts (units) in November increased 3.2% at a seasonally adjusted annual rate from October and 14% year-over-year (y/y) from November 2018, the Census Bureau reported on Tuesday. Multifamily (five or more units) starts rose 2.3% from October and 4.4% y/y, although the data are typically volatile and often substantially revised in later months. Single-family starts increased 2.4% for the month and 17% y/y. For the first 11 months of 2019 combined, total starts rose 0.6% compared to January-November 2018, with single-family starts down 0.4% and multifamily starts up 3.0%. Residential permits climbed 1.4% for the month and 11% y/y. Multifamily permits jumped 4.4% and 26%, respectively. Single-family permits rose 0.8% and 8.9%. Multifamily permits in the first 11 months of 2019 combined totaled 430,000, 23% higher than year-to-date starts, implying there is a backlog of projects that may break ground in the next several months.