1. Construction & Materials Outlook
AGC of New York State
New York City, March 20, 2013
Ken Simonson
Chief Economist, AGC of America

2. Construction is growing, but unevenly
3 trends helping many sectors and regions:
‘Shale gale’
Panama Canal expansion
Residential revival
3 trends holding down construction growth:
Government spends less on schools, infrastructure
Consumers switch from stores to online buying
Employers shrink office space per employee
Source: Author 2

3. One (or many) bright spot(s): the shale ‘gale’
Haynesville
Fayetteville
New Albany
Floyd-Neal
Woodford
Barnett-
Eagle Ford
Barnett
Lewis
Cody
Niobrara
Mulky
Bakken
Antrim
Baxter-Mancos
Mowry
Gammon
Mancos
Pierre
Marcellus/
Devonian/Utica
Source: Energy Information Administration, Annual Energy Outlook, 2008 to 2011

4. Shale’s direct and indirect impacts on construction
Onsite: Each well requires access road, site prep, pad, storage pond, support structures, pipes
Nearby: Products, water require trucking, rail, pipeline, processing
Local spending by drilling firms, workers, royalty holders
Upstream: orders for fracking sand, rigs, compressors, pumps, pipe, tanks, trucks, railcars, processing facilities
Downstream: Petrochemical, power, steel plants; LNG export terminals, fueling stations; LNG-powered vehicles
Losers: coal; maybe wind, solar, nuclear & suppliers
Source: Author 4

5. U.S. Post-Panamax Ready Ports
Seattle & Tacoma
Mobile
Columbia River at Mouth, OR & WA
New York-New Jersey
Oakland
Baltimore
Norfolk
Los Angeles/ Long Beach
San Diego (with tide)
Charleston (with tide)
Savannah
Jacksonville
Miami
Source: U.S. Army Corps of Engineers 5

6. Panama Canal expansion’s impacts on construction
Ports: investing in dredging, piers, cranes, land access
Nearby: Storage, warehouse, trucking, rail facilities
Bridge, tunnel, highway improvements
Inland: possible changes in distribution, manufacturing
Source: Author 6

7. Residential spending still accelerating—for now
12-month percent change in single- and multifamily spending, 1/11-1/13
Source: Census Bureau construction spending reports

8. Housing outlook
SF: rising for now but tight credit, selective labor shortages may limit increases
MF: Upturn should last through 2013, maybe 2014
Vacancy rate is now at an 11-year low
Preference for urban living, fear of lock-in add to demand
But condo market remains weak
And government-subsidized market likely to worsen
Improvements: should benefit from rising SF sales
Source: Author 8

9. Construction spending (seasonally adjusted annual rate—SAAR )
Total construction, 1/08-1/13 (billion $)
Private nonres, residential & public, 1/08-1/13
Latest 1-month change: -2.1%
(-5.1%) (0.0%) (-1.0%)
12-month % change, 1/11-1/13
12-month % change, 1/11-1/13
Latest 12-month change: 7.1%
(4.0%) (22.0%) (-3.0%)
Source: Census Bureau construction spending reports

10. Nonres totals (billion $, SAAR), share & 12-month change
1/12-1/13
Nonresidential (priv.+federal+state/local)
$572
billion
100 % 1
    Power (incl. oil & gas struc., pipelines) 17 -1
    Educational 81 14 -6
    Highway and street 79 4
    Manufacturing 51 9 13
    Commercial (retail, warehouse, farm) 48 8 2
    Health care 40 7 -2
    Transportation 39
Office 38
    Sewage and waste disposal 21
-15
    Communication 3
    Amusement and recreation 15 -9
Other (water; lodging; public safety; conservation; religious): 8% of total -4 10
Source: Census Bureau construction spending report

11. Construction spending: public works (billion $, SAAR)
Latest 1-mo. change: 0.9%, 12-mo.: 4%
Latest 1-mo. change: -5.3%, 12-mo.: -13%
Amusement & recreation (59% public)
Latest 1-mo. change: -1.1%, 12-mo.: -9%
Latest 1-mo. change: -0.9%, 12-mo.: -8%
Source: Census Bureau construction spending reports

12. Construction spending: institutional (private + state/local)
Latest 1-mo. change: -2.1%, 12-mo.: 5%
Latest 1-mo. change: -2.4%, 12-mo.: -10%
Latest 1-mo. change: 1.0%, 12-mo.: -1%
Latest 1-mo. change: -3.5%, 12-mo.: -5%
Source: Census Bureau construction spending reports

13. Construction spending: industrial, heavy (billion $, SAAR)
Latest 1-mo. change: -12.4%, 12-mo.: -1%
Latest 1-mo. change: -3.0%, 12-mo.: 13%
Public transportation facilities
Latest 1-mo. change: 0.0%, 12-mo.: 24%
Latest 1-mo. change: 0.8%, 12-mo.: 16%
Source: Census Bureau construction spending reports

14. Construction spending: developer-financed (billion $, SAAR)
Latest 1-mo. change: -1.2%, 12-mo.: 8%
Latest 1-mo. change: 0.9%, 12-mo.: 26%
Latest 1-mo. change: 2.1%, 12-mo.: 6%
Latest 1-mo. change: -6.1%, 12-mo.: 13%
Source: Census Bureau construction spending reports

15. State construction employment change (U. S. : 1
State construction employment change (U.S.: 1.8%) 12/11 to 12/12: DC + 24 states up, 24 down, 2 unchanged
-10% or worse
-5.0% to -9.9%
-0.1% to -4.9%
0% to 4.9%
5.0% to 9.9%
10% or better 7% 1% 1%
-4%
-3% 4% 4%
NH -2%
-5% 4%
-2% VT 0%
-5%
-3% 4%
-4% 5%
-3%
MA 0.3%
-2%
10%
-4% 4% 1% 6% 0% 2%
-3%
CT -0.2%
RI -7% 1%
-3% 6%
-2% 3% 1% 4%
DE -6%
NJ -3% 7%
-6% 1%
-6%
-3%
-3% MD 3%
DC 7% 2%
-3%
-2%
HI 7%
Source: BLS state and regional employment report 15

16. Source: BLS 16

17. Construction Employment Change from Year Ago Seasonally adjusted
New York 2.4%
15 out of 51
U.S. 1.9%
Source: BLS 17

18. Change in construction employment, 1/12-1/13 not seasonally adjusted (NSA)
Metro area or division
12-mo. empl. change (NSA)
Rank
(out of 337)
Statewide (Construction only) 0%
Statewide* (Const/mining/logging)
Albany-Schenectady-Troy* 3%
109
Binghamton*
-8%
299
Buffalo-Niagara Falls*
-12%
324
Glens Falls*
14% 15
Kingston*
-10%
313
Nassau-Suffolk Div.*
New York City*
146
Poughkeepsie-Newburgh-Middletown*
Putnam-Rockland-Westchester*
-3%
222
Rochester
-2%
208
Syracuse*
Utica-Rome*
*The Bureau of Labor Statistics reports employment for construction, mining and logging combined for metro areas in which mining and logging have few employers. To allow comparisons between states and their metros, the table shows combined employment change for these metros. Not seasonally adjusted statewide data is shown for both construction-only and combined employment change.
Source: AGC rankings, calculated from BLS state and area employment reports 18

19. Construction vs. overall (un)employment, 1/11-2/13
Private sector added jobs since 2010, construction only since 1/11
Construction unemployment fell faster than industry added jobs
Thus, workers are leaving for other sectors, school, retiring
Unemployment rates
(February 2011-February 2013)
Change in unemployment & employment
(Not seasonally adjusted, Feb Feb. 2013)
Source: BLS employment, unemployment reports

20. Construction spending, labor & prices, 1/11-1/13
Spending +17% but jobs only +5%. How do they do it?
Contractors charging slightly more: PPI +5% (industrial buildings)
More hours per worker: aggregate hours +9%
Implication: further spending growth will trigger bigger pickup in hiring
17%
Source: Author, from Census Bureau (spending), BLS (employment, hours, PPI)

21. Material & labor costs vs. office & highway bid prices, 1/11-1/13
NHCCI
PPI for materials
PPI for offices
ECI
Source: Author, based on Bureau of Labor Statistics for Producer Price Indexes (PPIs) and Employment Cost Index (ECI); Federal Highway Administration for National Highway Construction Cost Index (NHCCI)

22. Producer price indexes for key inputs, 1/11-2/13 (January 2011=100)
Steel mill products
Copper & brass mill shapes
Gypsum products
Lumber & plywood
Source: Author, based on BLS producer price index reports

23. Producer price indexes for key inputs, 1/11-2/13 (January 2011=100)
No. 2 diesel fuel
Concrete products
Asphalt paving mixtures & blocks
Prepared asphalt & tar roofing & siding materials
Source: Author, based on BLS producer price index reports

24. Summary for 2013
Private nonres spending +10 to +15% (vs. 18% in ‘12): more power, pipelines, mfg., warehouse, higher ed, data centers, hotels, maybe hospitals; not office or retail
Res +10% to +15% (vs. 17% in ‘12): MF very strong, SF ??
Public: -2 to -5% (vs. -3% in ‘12): highways, educational 0%, other transp. -5%; declining federal funds
Total construction spending: +5 to +10% (vs. 10% in ‘12)
Materials costs: +2 to +4% Dec.-Dec. (vs. 1.3% in ‘12)
Labor costs: +2% to +3.5% (vs. 1.6% in ‘12)
Source: Author 24

25. Trends: 2014-2017 Total construction spending: +6% to +10% per year
- less SF housing, retail; declining public spending
- new drivers: shale-based gas & oil; Panama Canal widening; more elderly & kids, fewer young adults
Materials costs: +3% to +8% (vs. 2% to 3% for CPI)
Labor costs: +2% to + 4%
Bid prices: +2% to +5%
Source: Author 25

26. AGC economic resources (email simonsonk@agc.org)
The Data DIGest: weekly 1-page (subscribe at:
5 monthly press releases: national, state, metro employment; spending; PPI
State and metro data, fact sheets
Webinars: May 9 with AIA, Reed
Website: 26