December Construction Insider: Construction job increase, new tariff reliefs, more

December Construction Insider: Construction job increase, new tariff reliefs, more

January 6, 2020

Construction Insider is a monthly roundup of the latest news and insights in construction.

Construction jobs rise by 146,000

Construction employment soared by 146,000 or by 2% over the last 12 months, as reported by the Associated General Contractors of America, based on their analysis of government data .AGC

  • Modest monthly increases in construction employment could be attributed to the difficulty in finding workers rather than a decrease in job demand, according to AGC officials.
  • A slight increase in average weekly hours of construction employees was also observed as the numbers grew from 38.7 in November 2018 to 39.1 in November 2019.
  • “One takeaway from these numbers is that contractors are adding workers faster than other sectors,” said Ken Simonson, chief economist of AGC.
  • The average hourly wage in construction also increased by 2.7 over the year and is currently at $31.08. The private-sector average is 10.2% lower at $28.29, according to Simonson.

Housing starts increase by 3.2% in November 2019

US housing starts rose by 3.2% in November to a seasonally adjusted rate of 1.365 million, according to the Department of Housing and Urban Development and the Department of Commerce. HW

  • The reported increase was still short by 135,000 compared to the long-term average, according to Lawrence Yun, chief economist of the National Association of Realtors.
  • However, the Housing Market Index reached a 10-year high in homebuilder confidence, indicating that more home construction could be expected.
  • “More home construction appears to be on the way as we move into 2020, as reflected in the very high confidence of home builders,” Yun said.

Tariff relief announced following new trade deal

A new trade deal between the US and China makes way for some tariff relief, including the reduction of some tariffs from 15% to 7.5%. HBS Dealer

  • The so-called “Phase One Deal” will scrap the previously announced 15% tariff on additional imported goods from China, which was supposed to take effect on December 15.
  • The National Lumber and Building Material Dealers Association (NLBMDA) welcomed the news but noted that there were no reliefs announced for items on Lists 1-3, “which contains many products used in residential and commercial construction,” said CEO Jonathan Paine.
  • Current imports from China (items on lists 1-3) will remain at 25% while negotiations continue for Phase Two.

Construction Backlog Indicator remains unchanged in 9 months

The Construction Backlog Indicator of the Associated Builders and Contractors (ABC) was unchanged for practically 9 months in October, showing only a 0.2% increase from September’s records. FPC

  • “The fact that backlog did not decline is significant given all the uncertainty facing various economic decision-makers in the context of a weakening global economy [and] political uncertainty emerging from Washington,” said ABC chief economist Anirban Basu.
  • One likely factor that caused the unchanging backlog was the raising of the key short-term interest rates by the Federal Reserves. The interest rate rose nine times between December 2015 and December 2018, according to Basu.
  • The rates were decreased three times in recent months as inflationary pressures have not been as bad as anticipated.
  • “State and local government finances in America remain generally healthy in the context of the lengthiest economic expansion in U.S. history, which should help smooth out backlog in the infrastructure category going forward,” Basu said.

Investment in construction equipment to rise in 2020

Investment in construction equipment is predicted to “increase moderately” in 2020, based on a report from the Equipment Leasing & Finance Foundation. Construction Equipment

  • The Foundation cited a 4 percent investment increase in the third quarter of 2019, which could point to “modest growth in construction machinery investment growth over the next two quarters.”
  • The Foundation is also looking at a possible slowdown in business confidence in early 2020 due to “several headwinds.”
  • “However, a strong labor market and still-confident U.S. consumer base should keep the broader economy above water, even as investment in several key equipment verticals slows or remains weak,” said Foundation chair Scott Thacker.