The Building Tradesman Newspaper

Friday, July 04, 2014

U.S. Construction sags in May; overall trends seems positive

By The Building Tradesman

The U.S. construction industry seems headed in the right direction – but there are enough occasional bumps in the road that keep the industry from having the confidence to go full throttle.

First, the relatively good news: Michigan was in the middle of the pack, at No. 23 among the states, when it came to construction employment gains from May 2013 to May 2014. Michigan’s construction employment rose 3.4 percent during that year’s time, according to a report released June 20 by the Associated General Contractors. Our state’s construction workforce rose by 4,500 during that time, one of 40 states that added jobs during that one-year period.

“With demand for construction growing in most states, many firms are slowly rebuilding their depleted payrolls,” said Stephen E. Sandherr, the AGC’s chief executive officer. “But if overall economic growth slows, construction employment could backslide in many states.”

Michigan was one of 40 states where construction employment was higher than it was a year ago.

The architects were also happier. After consecutive months of decreasing demand for design services, the Architecture Billings Index has returned to positive territory. The American Institute of Architects reported on June 18 that the billings index was 52.6 percent, up sharply from 49.6 in April. (Any score above 50 represents an increase in billings). The architects provide the first level of warning for where the construction industry is headed.

“Volatility continues to be the watchword in the design and construction markets, with firms in some regions of the country, and serving some sectors of the industry, reporting strong growth, while others are indicating continued weakness,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, overall, it appears that activity has recovered from the winter slump, and design professions should see more positive than negative numbers in the coming months.”

Overall in the U.S., however, construction starts fell 5 percent in May from the previous month, according to a June 20 report from McGraw Hill Construction.

“After the slow beginning to 2014, construction activity during March and April regained upward momentum, and May’s retreat does not necessarily mean that renewed expansion is stalling,” said Robert A. Murray, chief economist for McGraw Hill Construction. “The downturn for nonresidential building in May was the result of a sharp pullback by the often-volatile manufacturing plant category after its huge gain in April.

“Residential building has often reflected the monthly up-and-down pattern for multifamily housing, which despite a setback in May can still be viewed as trending upward. Of more concern for residential building is single family housing, which has yet to move beyond its recent plateau and resume growth. Nonbuilding construction in May was pulled down by further weakness for electric utilities; at the same time, public works construction made a partial rebound in May after retreating during the previous two months.”

West Virginia (-6.8 percent), New Jersey (-6.2 percent) and Montana (-5.7 percent) lost the highest percentage of jobs over the past year. Nevada led the way in job gains (+12.5 percent) from May 2013 to May 2014, followed by Florida (+9.8 percent) and Minnesota (+9.7 percent).