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By Bassem Hamdy
November 14, 2016
As of Monday, November 14 our national Construction Health Indicator score is 82.2.
In the days since the election, stock markets have stabilized and U.S. construction companies saw stocks rise to record heights. Engineering and construction firms that saw increases include: Caterpillar, which rose 7.7%; Jacobs Engineering, up 9.8%; Fluor, rising 10.1%; and AECOM, which went up 12.6%.
Two-thirds of our nations general contractors continue to struggle finding skilled labor to fill available positions. As of October 2016, the national unemployment rate was a mere 5.7%. This number has increased over each of the past three months.
Meanwhile, construction backlog for large contractors remains at a peak of 14.06 months, according to the Associated Builders and Contractors Construction Backlog Indicator. While we struggle to fill the meager 11,000 net new jobs added in October, the industry will need a plan to fill the demand of future infrastructure investments. This is the sixth month out of seven that has experienced employment declines. However, it was offset by a gain of 4,100 jobs among nonresidential specialty trade contractors.
Meanwhile, the residential building sector gained 4,500 net new jobs in October. Heavy and civil engineering contributed an additional 3,400 net new positions. With the increase in available positions, the industry experienced a 16.7% drop in unemployment duration, which is a shift in trends from the previous two months.
The annualized value of construction initiatives was $880 billion in September. This was relatively high compared to the $863 billion average annualized value observed over the past 12 months––but still an astonishing 55.9% higher than the all-time low.
Contrary to previous predictions based on favorable interest rates, overall August construction spending dropped 0.7% to a seasonally adjusted annual rate of $1.14 trillion––the lowest spending figures since the beginning of the year. The Commerce Department also revealed that a 0.9% dip in residential spending was in line with reports of a 5.8% decline in housing starts despite growing demand.
Our commodities and materials score is up four points from last week. We will have to wait until Wednesday when the Bureau of Labor Statistics releases the monthly Producer Price Index reports to see what was the major factor. However, as of last month, materials prices rose 0.3%.
Procore’s Chief Economist, Anirban Basu, said the month-to-month and year-over-year rise in prices was due to stabilized energy prices and wage inflation. A recent uptick in oil prices, from historic lows of below $30 a barrel earlier this year, continues to boost prices building materials with no signs of decreasing. This is most notably reflected in the figures for the producer price index of concrete (1.9% increase) and other sand, gravel, and stone products––increasing a total of 4.4% since November 2015.
The race is over. Republican candidate Donald Trump will be the 45th president of the United States. That means three things: fewer regulations, lower taxes, and a singular devotion to deal-making. After years of underfunding, the nation's aging infrastructure is about to get a massive investment in new and rebuilt highways, bridges, airports, and other public projects, according to the president-elect.
Donald Trump has proposed a $1 trillion infrastructure plan driven by private investment and massive tax credits. However, a post-election posting on his transition web page cites a $550-billion program. Although industry experts have questioned the funding sources and feasibility of his proposal, construction and engineering stocks soared following Trump's win.
Only time will tell how Trump’s proposed immigration and trade agreement plans will affect our industry in the future. One things is for sure, we will be providing insights every step of the way.
That’s all we have for now. Keep building and we’ll keep crunching the numbers. Check back here daily as numbers refresh and we’ll continue to translate this into meaningful digests that will help you make informed decisions all week long.
Click here for recaps from Construction Health Updates from past weeks.
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Procore Construction Health Indicator
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