Now that we’ve hit the mid-year mark for 2018, we wanted to gauge the health of the US construction industry and get a feel for what we can expect in the near to mid future. To get an idea of how things are going, we looked at some data reports for construction employment and spending, residential construction and architecture firms. Below, we’ve complied some of our findings and also discussed two challenges currently facing the construction industry.
According to a recent article published by the Associated General Contractors of America (AGC), construction employment reached a 10 year high in June as the industry added 13,000 jobs. Overall, 282,000 construction jobs have been added over the past year. Additionally, the AGC reported that construction employment increased in 256 out of 358 metro areas between April 2017 and April 2018, declined in 63 and was unchanged in 39. Construction employment reached a new high in 54 metro areas.
Los Angeles is a major market for us at Workyard, where we have over 20,000 contractors using our marketplace to hire subs and find jobs. In LA, construction employment is surging and is projected to grow by 3.75% in 2018 and 6.4% in 2019, as reported by the Los Angeles County Economic Development Corporation (LAEDC).Ken Simonson, the AGC’s chief economist, had this to say about the construction industry’s employment gains:
“The employment gains are occurring in both residential and nonresidential construction. However, the industry is having to rely more and more on workers without construction experience, as the pool of unemployed construction workers has nearly evaporated.”
Construction spending reached a record level of $1.309 trillion in May (value of construction put in place, seasonally adjusted annual rate), increasing 0.4% from the April rate and 4.5% from the May 2017 rate.Breakdown by category (YOY growth):
According to the US Census Bureau, privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,350,000. This is 5% above the revised April estimate of 1,286,000 and is 20.3% above the May 2017 rate of 1,122,000.
According to the National Association of Home Builders (NAHB), building permits across the country are up 8% from last year. In the West, Mountain and Pacific regions, permits are up 18%, 19% and 16% respectively.
Business data reported by architecture firms is another key indicator of the health of the construction industry. The American Institute of Architects (AIA) reported that May marked the eighth consecutive month of billings growth. The AIA's Architecture Billings Index (ABI) score was 52.8 in May 2018 and 52.5 in May 2017 (any score over 50 indicates billings growth).
Currently, the construction industry is facing two main challenges: the difficulty of finding qualified workers and the rising cost of materials.
As noted in a previous blog post, last year, the NAHB conducted a survey and found that 82% of builders cited the cost and availability of labor as their number 1 issue. In another survey distributed by the AGC, 70% of construction firms reported that they are having a hard time filling hourly craft positions.
According to a recent Construction Industry Confidence Survey, 86.4% of survey respondents are experiencing materials price pressure, a more than 12% increase from the first quarter. Looking at materials prices more directly, prices for inputs to the overall U.S. construction industry expanded by 2.2% in May, the largest monthly increase in 10 years.
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