June Construction Insider: Sector’s post-pandemic recovery, better job rate & more

June Construction Insider: Sector’s post-pandemic recovery, better job rate & more

July 1, 2020

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

Commercial construction poised to recover post-pandemic

Despite a drop in contractors’ confidence during the second quarter of 2020, the construction sector is well poised to recover after the pandemic is over, according to a study conducted by the US Chamber of Commerce and the USG Corporation. US Chamber

  • The overall Commercial Construction Index dipped from 74 in Quarter 1 to 56 in Quarter 2 as contractor confidence in business and revenue expectations both fell by 26 points.
  •  The Index was based on the survey results conducted in April, when construction shutdowns and other quarantine measures were put in place to address the COVID-19 pandemic.
  • Despite the plunge in contractor confidence, more than 8 in 10 contractors have moderate to high confidence that more business opportunities will open next year. One in three contractors, or 32% of the participants, also say that they plan to hire more workers in the next 6 months.
  • “We underwent a severe contraction in the economy in late March and into May, but now we’re starting to see a rebound of the data and the economy’s getting slightly better,” said U.S. Chamber Senior Economist Curtis Dubay.

US residential construction improves in May

After suffering steep declines due to the recent construction shutdowns, US home construction rebounded by 4.3 percent in May, according to Commerce Department data. CDR

  • The seasonally adjusted annual rate for new homes was at 974,000 in May, which was a slight improvement from the data from March and April.
  • Applications for building permits also rose by 14.4 percent or an annual rate of 1.22 million units in May. An increase in building permit applications is a good indication of future home construction activity.
  • Industry analysts warn that if cases of coronavirus infections rise again, the rebound in housing sales may be derailed.
  • “We look for strong demand…and an ongoing shortage of supply to support growth in housing starts over the rest of the year, but we still expect starts to be down on average across 2020 overall,” said US financial economist Nancy Vanden Houten.

US construction jobs increase in May

US construction employment improved by 464,000 jobs in May, following a loss of 995,000 in April and 65,000 in March. KHL

  • Despite the rebound in construction employment, the total number of jobs still remained 596,000 below the industry employment peak in February.
  • The construction unemployment rate was at 12.7 percent, the highest for May since 2012 according to the Associated General Contractors of America (AGC).
  • The improvement in construction jobs may be attributed to the loosening of restrictions and the receipt of Paycheck Protection Program loans, according to AGC chief economist Ken Simonson.
  • “Nevertheless, the industry remains far short of full employment, and more layoffs may be imminent,” said Simonson.

Builder confidence spikes in June

Builder confidence was reported to be at 58 in June, a 21-point leap from the previous month’s data and an indication of a positive outlook in the market, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). HBS Dealer

  • All HMI indices showed improvement in June, with sales expectations surging from 46 to 68 and prospective buyer traffic jumping from 21 to 43.
  • As COVID-19 restrictions are being lifted, mortgage applications increase due to low interest rates.
  • “Builders report increasing demand for families seeking single-family homes in inner and outer suburbs that feature lower density neighborhoods,” said NAHD Chief Economist Robert Dietz.
  • However, the high unemployment rate and risks for local virus outbreaks continue to threaten the housing market, according to Dietz.

Plywood prices surge in North America

A spike in demand caused a surge in plywood prices in North America in June, according to Madison’s Lumber Reporter. Lesprom

  • Demand for 8- and 10-inch-wide plywood soared in Canada after buyers realized that permanent closures of some British Columbia sawmills could mean limited supply.
  • Prices for #2&Btr and High Line, two of the most in-demand grades, ranged between $10 and $28. The increase in price is seen as a potential beginning of a “real price surge,” says the Lesprom analysis.
  • Prices for softwood lumber were reportedly moderate, with some items improving and others staying flat. Demand for oriented strand boards was also not as high as the plywood demand.