The Building Tradesman Newspaper

Friday, September 04, 2015

'Uneven growth' a drag on construction momentum

By The Building Tradesman

Michigan's construction employment momentum took a breather in July, but the long-term job numbers continue to be strong compared to other states.

First the good news: Michigan's construction workforce stood at 154,000 in July, an increase of 12,400 compared to July 2014. That 8.7 percent increase ranked Michigan No. 5 among the states, and it has been holding down a top-10 spot for much of the past year.

Short-term, however, Michigan's construction industry lost 1,500 jobs between June and July 2015, or 1 percent of its workforce. The numbers come from an Aug. 21 release from the Associated General Contractors.

"Construction continues to grow overall but fewer states are participating in the expansion than was true a year ago," said Ken Simonson, the AGC's chief economist. "The uneven growth reflects the cross-cutting trends in the overall economy, as tight government budgets, plunging commodity prices and weak overseas demand lead to project cancellations in some states even while activity accelerates elsewhere."

The four states ahead of Michigan over the past year in construction jobs growth were Arkansas (+14.9 percent), Idaho (+13.7 percent), Nevada (+10.7 percent) and Washington (+9.6 percent).

Bottom-feeders for the past year included No. 48 Ohio, which has lost 13,800 construction jobs for the 12 months prior to July 2015, No. 49 Rhode Island (-7.9 percent) and No. 50 West Virginia (-16 percent).

Meanwhile, Dodge Data and Analytics reported on Aug. 20 that overall new U.S. construction starts were flat at $629.4 billion in July 2015 compared to the month before. However, through the first seven months of 2015, total construction starts on an unadjusted basis were $397.0 billion, up 19 percent from the same period a year ago.

The July Dodge Index for construction activity was also flat in July, but was still a bit above the 2014 number. “The first half of 2015 showed wide swings in the pattern of total construction starts, affected by the presence or absence of unusually large projects,” said Robert A. Murray, chief economist for Dodge Data & Analytics. “Amidst these top-line swings, the underlying trend of activity has been generally upward relative to last year."

He said for nonresidential building, support has come primarily from its institutional segment, including educational facilities, transportation-related buildings, and amusement and recreational facilities. The commercial categories showed some deceleration during the early months of 2015, but positive real estate market fundamentals are expected to encourage renewed growth. Residential building has benefited from this year’s heightened amount of multifamily starts, Murray said, and even the single family side of the market is showing some hesitant signs of strengthening.

"The nonbuilding construction sector experienced robust activity during the opening months of 2015, for the most part related to the start of unusually large projects, and it now appears to be settling back to a more sustainable pace," Murray said. "The improved performance of the U.S. economy in the second quarter of 2015, with GDP rising 2.3 percent after a very weak first quarter, should help both nonresidential building and housing going forward."