The Building Tradesman Newspaper

Friday, October 07, 2016

Michigan is No. 1, but that's not really saying too much

By The Building Tradesman

Michigan, for one month anyway, got its construction mojo back. Long-term, though, construction employment in our state, and elsewhere, remains middling, although a positive change could be around the corner.

Between July and August of this year, employment in Michigan's construction industry grew by 1.8 percent, or 2,600 jobs. If that doesn't seem like much, the official number-crunchers wouldn't argue. Still, Michigan was No. 1 among the states in terms of job growth during that time, and No. 2 percentage-wise. But nearly leading the nation with 1.8 percent growth is nothing to brag about.

"The construction market has cooled off in recent months but continues to outperform the overall economy in most states, with solid year-over-year job gains," said Ken Simonson, chief economist for the Associated General Contractors, who released the new monthly report on Sept. 20. "Despite some slowing in public construction, apartments and manufacturing projects, contractors in many states say they would be hiring more employees if they could find enough qualified workers."

Michigan's year to year construction employment numbers are more restrained. Our state employed 151,000 workers in the industry in August 2016, a gain of 4,300 jobs from 12 months prior. That represents a 2.9 percent increase, ranking Michigan No. 26 among the states in employment gains. During the course of 2016 construction employment has shown an up and down pattern, without a significant trend.

It's been a weird year for U.S. construction, with the Dodge Index showing that construction activity increased 11 percent in this year’s first quarter, followed by a 10 percent decline in the second quarter.

Long-term, indicators point to improving prospects in the U.S. construction industry.  Dodge Data and Analytics reported on Sept. 22 that new U.S. construction starts in August soared 21 percent to a seasonally adjusted annual rate of $711.2 billion, following lackluster activity in July. 

"The August rise for total construction starts featured an especially elevated amount for nonresidential building," Dodge said.

And, the American Institute of Architects' Architecture Billings Index - a leading indicator for what's being planned for the construction industry - reported Sept. 21 that six out of the last seven months have seen increasing levels of demand for design services. Although, that single month's drop was the most recent, in August. “This is only the second month this year where demand for architectural services has declined and it is only by a fraction of a point,” said AIA Chief Economist, Kermit Baker.  “Given the solid numbers for new design contracts and project inquiries, it doesn’t appear that this is the beginning of a broader downturn in the design and construction industry.”

According to Robert A. Murray, chief economist for Dodge Data & Analytics, “the sharp rise in August makes it likely when September data becomes available that construction starts for the third quarter will be able to register moderate growth, supporting the belief that the construction industry still has room for further expansion despite some recent deceleration.”