1. Construction Spending, Labor & Materials Outlook
Economic Club of Las Vegas
December 15, 2016
Ken Simonson
Chief Economist, AGC of America

2. Construction spending & employment, 2006-16
Total spending, Feb. ‘06 (peak)-Oct. ‘16
billion $, seasonally adjusted annual rate (SAAR)
Total employment, Apr. ’06 (peak)-Oct. ‘16
thousands, seasonally adjusted
$1.17 trillion
(3% below peak)
7.7 million
$1.21 trillion
6.7 million
Total
Total
(13% below peak)
Private Residential
Nonresidential (9% below peak)
Private nonresidential
Residential (24% below peak)
Public
October 2015-October 2016: total 3.4%
private res. 5%, private nonres. 5%, public -1%
October 2015-October 2016: total 3.1%
residential 5.9%, nonresidential 1.4%

3. Nonresidential segments: 2014-15 change, 2016-17 forecast
2015 vs. 2014
Jan.-Oct. ‘16 vs. ‘15
2016 forecast
2017 forecast
Nonresidential total (public+private) 7 % 4
3-5%
2-6%
Power (incl. oil & gas field structures, pipelines)
-16
3-5
5-10
Highway and street 6
-1 to 1
2-5
Educational 5
3-7
Manufacturing 33 -3
-5 to -2
<0
Commercial (retail, warehouse, farm) 10
8-10
0-5
Office 18 23
22-24
5-15
Transportation 8 -6
-7 to -5
Health care 1
0-3
Sewage and waste disposal -8
-9 to -7
Lodging 30 25
22-25 ~0
Other--amusement; communication; religious; public safety; conservation; water: 10% of total 9
-5 to -1
Source: U.S. Census Bureau construction spending report; Author’s forecast

4. Construction spending: industrial, heavy annual total, 2008-13; monthly, SAAR, 1/14-10/16; billion $
Power (92% private)
Manufacturing (99% private)
Electric
Other
Oil &
Gas
Chemical
Oct. '15-Oct. '16 change: 1% (oil & gas -20%; electric 10%)
Oct. '15-Oct. '16 change: -9% (chemical -5%; other -12%)
Amusement & recreation (56% private)
Communication (99% private)
Public
Private
Oct. '15-Oct. '16 change: 6% (private 17%; public -5%)
Oct. '15-Oct. '16 change: -12%
Source: U.S. Census Bureau construction spending report

5. Key points: power, mfg., recreation
Solar, wind power are growing again; expect more gas-fired plants, natural gas pipelines into ‘18
Mfg decline led by completion/delay of chemical plants (ethane crackers, petrochemicals, LNG) and transportation equipment (cars, trucks, jets, railcars); revival possible by ‘18
Amusement & recreation spending is very “lumpy”—a few big stadiums at irregular intervals; but funding for local, state, federal parks keeps eroding
Source: Author

6. Construction spending: public works annual total, 2008-13; monthly, SAAR, 1/14-10/16; billion $
Highways (99.8% public)
Sewage/waste (98% public)
Oct. '15-Oct. '16 change: 0.4%
Oct. '15-Oct. '16 change: -12%
Transportation facilities (69% public)
Water supply (99% public)
public
private
Oct. '15-Oct. '16 change: -9% (private -9%; public -9%)
Oct. '15-Oct. '16 change: -11%
Source: U.S. Census Bureau construction spending report

7. Key points: roads, transportation, sewer/water
Infrastructure categories could benefit from policy changes but impact on spending put in place likely to be minimal before ‘18
Highway funds benefit from more travel, hence fuel purchases; gradual pick-up in state funding & P3s
Railroads slashing investment; pickup in airport projects but no increase likely before ‘18 in port, transit construction funding
Eastern & Midwestern cities under orders to make long-term upgrades to sewer systems that should boost spending; water utilities hurt by drought, conservation but may get money for lead abatement
Source: Author

8. Construction spending: institutional (private + state/local) annual total, ; monthly, SAAR, 1/14-10/16; billion $
Education (state & local K-12, higher; private)
Health care (private hosp, S/L hosp, other)
Total (78% public)
Total (79% private)
Private hospital
S/L
preK-12
S/L
higher ed
Private
S/L hospital
Oct. '15-Oct. '16 change: 13% (state/local preK-12 18%, state/local higher ed 4%; private 18%)
Oct. '15-Oct. '16 change: 2% (private hospital 2%; state & local hospital -9%; other: special care, med bldg, federal 4%)
Source: U.S. Census Bureau construction spending report

9. Key points: education & health care
Recent bond issues should boost funding in some districts; recovery in home prices is adding to property tax revenues that support school construction and renovation
Private school and college capital campaigns and endowments can fund more construction as stock market sets records
Higher-ed enrollment is shrinking, so colleges need fewer dorms & classrooms; apts. (multifamily) replacing dorms (educational construction)
Hospitals face more competition from standalone urgent care, outpatient surgery, clinics in stores; more investment in small facilities, short stays
Source: Author

10. Oct. '15-Oct. '16 change: 25% (private 28%; public 2%)
Construction spending: developer-financed annual total, ; monthly, SAAR, 1/14-10/16; billion $
Retail (private)
Office (89% private)
Total
Private
Public
Oct. '15-Oct. '16 change: 7%
Oct. '15-Oct. '16 change: 25% (private 28%; public 2%)
Warehouse (private)
Lodging (private)
Oct. '15-Oct. '16 change: 7%
Oct. '15-Oct. '16 change: 23%
Source: U.S. Census Bureau construction spending report

11. Key points: retail, warehouse, office, hotel, data centers
Retail now tied to mixed-use buildings & renovations, not standalone stores or shopping centers
Warehouse market still benefiting from e-commerce; more local than huge regional distribution centers likely in future
Employment sets records each month but office space per employee keeps shrinking; growth mainly in cities & renovations, not suburban office parks
Hotel construction likely to drop as revenue per available room slows
Data centers remain a strong niche but no data available on how strong
Source: Author

12. Private residential spending: MF continues to outpace SF
seasonally adjusted annual rate (SAAR): Jan ($238 B)-Oct ($466 B)
Multifamily (MF)
(Oct. ‘16: $64 B)
Single-family (SF)
(Oct. ‘16: $243 B)
Improvements
(Oct. ‘16: $159 B)
12-month % change: Jan (-5.3%)-Oct (2.4%)
Improvements: 13%
Multifamily: 11%
Total: 5%
Single-family: -2%
Source: U.S. Census Bureau construction spending reports

13. Residential spending forecast: 2016: 5-7%; 2017: 5-10%
SF: ‘16: 5-7%, ‘17: 6-11%, ‘18: >0; ongoing job gains add to demand; student debt, fears of lock-in, limited supply will cap growth
MF: ‘16: 15-18%, ‘17: 2-7%; ‘18: <0
occupancy, rent growth are slowing in more metros
but millennials show continued preference for cities, will continue to rent
nearly all rental construction is MF (and vice-versa; very few condos)
Improvements: ’16: 0-5%, ‘17: 0-10%, ‘18: ?? Census data is not reliable and shows only a loose relationship to SF spending
Source: Author

14. Population change by state, July 2014-July 2015 (U.S.: 0.79%)
0.2%
1.5%
0.9%
1.2%
0.3%
1.9%
-0.02%
2.3%
0.6%
0.7%
0.8%
1.8%
0.5%
-0.2%
0.1%
-0.04%
1.0%
-0.1%
-0.3%
0.4%
1.7%
HI 0.8%
1.4% VT
CT -0.1%
RI 0.1%
DE 1.1%
NJ 0.2% MD DC
NH 0.2%
decrease
0-0.49% % %
MA 0.6%
1.5%+
Source: U.S. Census Bureau

15. State construction employment change (U. S. : 2
State construction employment change (U.S.: 2.4%) 10/15 to 10/16: 35 states up, 1 unchanged, 15 + DC down
Over -10%
-5.1% to -10%
-0.1% to -5% 0%
0.1% to 5%
5.1% to 10%
Over 10%
10% 6%
-4%
-8% 4%
NH 1% 8%
-5% 7% 4% 1% VT 3% 6%
-7% 5%
MA 7%
13%
CT 0.4%
RI 1%
13%
-1% 2%
-3%
-3% 2%
NJ 4% 4%
11% 0% MD
0.1%
DE -6% 2% 2%
-8%
-5% 9% 4%
-0.2% 4% 4%
0.3%
-1% 3%
0.4%
-3% 6% DC
-1% 3%
-3% 7%
Shading based on unrounded numbers
HI 7%
Source: BLS state and regional employment report

16. Construction Employment in United States, 1/90-10/16
(seasonally adjusted; shading = recessions)
Peak: Apr. ‘06
-13% vs. peak
Construction Employment in Nevada, 1/90-10/16
(seasonally adjusted; shading = recessions)
Peak: Jun. ‘06
-45% vs. peak
Source: BLS

17. Construction Employment Change from Year Ago 1/08-10/16 (not seasonally adjusted)
Las Vegas-Henderson- Paradise 16.1% (4 out of 358)
Nevada 13.4%
(2 out of 51)
Reno 7.8% (40 out of 358)
U.S. 2.7%
Source: BLS

18. Change in construction employment, 10/15-10/16 (NSA)
Metro area or division
12-mo. empl. change (NSA)
Rank (out of 339)
Statewide
13%
Las Vegas-Henderson-Paradise
16% 3
Reno 8% 40
Source: AGC rankings, calculated from BLS state and area employment reports

19. Metro construction employment change 10/15 to 10/16: 223 metros up, 62 unchanged, 73 down

20. Hardest positions to fill
Source: AGC Member Survey, August 2016

21. How contractors are coping with worker shortages

22. Construction workforce indicators (not seasonally adjusted)
Construction hires, Sep Sep. 2016
Job openings, Sep Sep. 2016
Unemployment, Sep Sep. 2016
ECI, 12-month change, Q Q3 2016
Source: Bureau of Labor Statistics

23. Producer price indexes for key inputs, 1/11-10/16 (Jan. 2011=100)
Diesel fuel
Steel mill products
Latest 1-mo. change: -8%, 12-mo.: -3%
Latest 1-mo. change: -0.1%, 12-mo.: 3%
Copper & brass mill shapes
Aluminum mill shapes
Latest 1-mo. change: 0.7%, 12-mo.: -4%
Latest 1-mo. change: 0.2%, 12-mo.: 0.1%

24. Producer price indexes for key inputs, 1/11-10/16 (Jan. 2011=100)
Gypsum products
Paving mixtures
Latest 1-mo. change: -0.5%, 12-mo.: 1%
Latest 1-mo. change: -0.7%, 12-mo.: -6%
Flat glass
Concrete products
Latest 1-mo. change: 0.1%, 12-mo.: 4%
Latest 1-mo. change: -0.1%, 12-mo.: 3%

25. 2015 summary, 2016-17 forecast 2015 actual 2016 yr-to-date forecast
Total spending
11% 4%
4-6
% 2-7%
Private – residential
17% 6%
5-7
% 5-10%
– nonresidential 8%
6-8
Public 5%
-2%
-2 to 0
% 0-3%
Goods & serv. inputs PPI 1%
1-2
% 2-4%
Employment cost index
2.2%
1.9%
% 3-4%
Source: actuals: Census, BLS; forecasts: Author’s estimates

26. AGC economic resources (email simonsonk@agc.org)
The Data DIGest: weekly 1-page (subscribe at
monthly press releases: spending; PPI; national, state, metro employment
state and metro data, fact sheets: