Construction Trends

April 2008

Stiffer Fines Announced for Employers of Illegal Immigrants
The federal government is on the move again to crack down on employers who knowingly hire illegal aliens, and it is raising civil penalties for employers that violate immigration law.

On Feb. 22, U.S. Attorney General Michael Mukasey announced that stiffer fines amounting to a 25 percent increase will be imposed on employers who knowingly hire illegal immigrants. The fines, which were published Feb. 26 in the Federal Register, take effect March 27.

Under the Immigration and Nationality Act, employers who violate employment eligibility requirements are subject to civil monetary penalties. Employers may be fined under the act for knowingly employing unauthorized aliens or for other violations, including failure to comply with the requirements relating to employment eligibility verification forms, wrongful discrimination against job applicants or employees on the basis of nationality or citizenship, and immigration-related document fraud. For each of these violations, the employer has the right to a hearing before an administrative law judge in the Executive Office for Immigration Review.

The average civil penalty adjustment is approximately 25 percent. The minimum penalty for knowing employment of an unauthorized alien increases by $100, from $275 to $375. Some of the higher civil penalties are increased by $1,000; for example, the maximum penalty for a first violation increases from $2,200 to $3,200. The biggest increase raises the maximum civil penalty for multiple violations from the current $11,000 to $16,000. These penalties are assessed on a per-alien basis; therefore, if an employer knowingly employed, or continued to employ, five unauthorized aliens, that could result in five fines.

In addition to the higher civil penalties, measures announced included expanded prosecutions and removals of criminal aliens, a streamlining of existing guest worker programs, and a new Southwest Border Enforcement Initiative. The Southwest Border Enforcement Initiative includes a $100 million request in new Justice Department funding for FY 2009 for new hiring and resources to better enable the United States to combat the flow of illegal immigration, drugs and weapons across the Southwest Border, and to arrest, detain, prosecute and incarcerate violent criminals, drug offenders and immigration violators along the Southwest Border.

Meanwhile, at the joint briefing of the U.S. Department of Justice and the Department of Homeland Security Secretary Michael Chertoff announced that additional immigration rules, which will be released in the future, will require federal contractors to participate in E-Verify, an online identity and work authorization verification system. "This will significantly expand the use of E-Verify, and continue to build capabilities that will help people comply with the law and make it harder to violate,” Secretary Chertoff said. The proposed new rule is due this month.

DHS reports they are adding 1800 new E-Verify users weekly, totaling more than 53,000 employers now using the system. More than 1.7 million new hires have been queried this fiscal year under the system, according to DHS.

January Construction Jumps 8 Percent
New construction starts increased 8 percent in January to a seasonally adjusted annual rate of $551.3 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. After a weak December, substantial gains were reported for nonresidential building and nonbuilding construction, as both of these major sectors were lifted by the start of several very large projects. In contrast, residential building witnessed further erosion in January, continuing the steady downward trend that has been present over the past two years.

The latest month’s data produced a reading of 117 for the Dodge Index (2000=100), up from a revised 108 for December, though still below the full year 2007 average for the Index at 130.

Nonresidential building in January climbed 20 percent to $221.4 billion (annual rate). A major push came from office construction, up 123 percent, boosted by the start of two massive projects at the World Trade Center site in lower Manhattan. Hotel construction in January soared 126 percent. Rounding out the commercial categories, store construction in January advanced 4 percent, but warehouses moved in the opposite direction with a 29 percent decline.

On the institutional side of the nonresidential market, the educational building category climbed 15 percent in January. Healthcare facilities improved 7 percent in January, and amusement-related work climbed 41 percent. The other institutional categories showed declines in January: transportation terminals, down 30 percent; churches, down 41 percent; public buildings, down 50 percent; and the manufacturing plant category, down 28 percent.

Residential building in January dropped 11 percent to $192.8 billion (annual rate). Single-family housing fell an additional 9 percent, and has now registered declines in 21 out of the past 24 months. The January weakness for single-family housing was widespread on a regional basis: The largest decline was reported in the West, down 16 percent; followed by the Midwest, down 11 percent; the Northeast, down 7 percent; the South Atlantic, down 6 percent; and the South Central, down 4 percent.

Multifamily housing in January retreated 18 percent, following a brief upturn in December. The multifamily amount in January included a few large condominium projects, such as one in Chicago ($105 million), but compared to 2006 the amount of condominium work is down considerably. January did include several large apartment projects, such as one in San Francisco ($91 million), and apartments now comprise a growing share of the multifamily total.

On an unadjusted basis, total construction in January 2008 was reported at $39.1 billion, down 19 percent from January 2007. Nonresidential building was the one major sector able to register a year-over-year gain, advancing 4 percent. Nonbuilding construction in January was down a moderate 6 percent, while residential building came in a substantial 41 percent below its year ago amount. By region, total construction in January 2008 showed this pattern relative to January 2007: the Northeast, up 5 percent; the West, down 12 percent; the South Central, down 17 percent; the Midwest, down 25 percent; and the South Atlantic, down 37 percent.

Builder Confidence Remains Unchanged in March
Builder confidence in the market for new single-family homes remained unchanged in March, according to the March 17 NAHB/Wells Fargo Housing Market Index. The HMI held firm at 20, which is near its historic low of 18 set in December 2007 (the series began in January of 1985).

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good,” "fair” or "poor.” The survey also asks builders to rate traffic of prospective buyers as either "high to very high,” "average” or "low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.

Two out of three of the HMI’s component indexes were unchanged in March from the previous month. The index gauging current sales conditions for newly built single-family homes held firm at 20 while the index gauging traffic of prospective buyers stayed at 19 following a significant gain in February. The index gauging sales expectations for the next six months edged downward by a single point to 26.

Regionally, the HMI was mixed, with the Northeast posting a two-point decline to 21, the Midwest holding even at 16, the South reporting a two-point gain to 26 and the West showing a one-point decline to 15.

National Gypsum Enters Joint Venture to Produce Cement Board in Mexico National Gypsum Company, headquartered in Charlotte, N.C., has entered a joint venture with Panel Rey S.A. to produce PermaBase® cement board in Mexico. The new joint venture company will be PermaBase de Americas.

The joint venture plans to open its first plant in Monterrey, Mexico, during the fourth quarter of 2008. The product, used as exterior sheathing and as an underlayment for tile, will be sold in Central and South America as well as Mexico. For the past seven years, Panel Rey has sold PermaBase to more than 300 distributors throughout Mexico and Latin America under an agreement with National Gypsum.

The joint venture also will produce PermaBase Flex. National Gypsum has four PermaBase plants—one in Bromont, Quebec, and three in the United States in Jacksonville, Fla.; Clinton, Ind.; and Dallas.

Panel Rey, headquartered in Monterrey, produces and distributes gypsum wallboard, metal studs and joint treatment products to the Mexican and Central and South American markets.

PrimeSource Building Products, Inc. Acquires 3-G’s Supply
PrimeSource Building Products, Inc., Carrollton, Texas, has acquired 3-G’s Supply, a family-owned building materials wholesaler headquartered in Strongsville, Ohio. The transaction closed Feb. 21, 2008.

With the acquisition of the assets of 3-G’s Supply, PrimeSource now has acquired all rights to 3-G’s state-of-the-art distribution center in Strongsville, Ohio. PrimeSource has also acquired the assets of 3-G’s Supply East, located in East Brunswick, N.J.

Customers and suppliers of both companies should expect normal business operations to continue throughout the course of the transaction. PrimeSource Building Products, Inc. and 3-G’s Supply products and brands will continue to serve the market in their current form.

People & Companies in the News
California Expanded Metal Products Co., Los Angeles, has appointed Don Pilz to product manager for the company’s Water Management line.

Pilz has been working as a consultant to CEMCO in developing the new line of accessories. In his new full-time role, Pilz will continue to manage production of the line, as well as assist contractors and architects in proper product selection.

Pilz comes to CEMCO with more than 22 years of experience in cold-formed steel framing and lath and plaster systems. As a foreman, he not only installed and supervised large-scale jobs from the steel framing to the stucco assembly, he also worked alongside designers and architects to balance function and design while creating watertight assemblies.

Since 2005, Pilz has been in the construction defects industry as a building envelope consultant and has served as an expert witness specializing in stucco wall systems. He has been working with CEMCO on its Water Management accessories line since 2007.

Steven Leach, an experienced sales professional working for leading building-related companies in the Midwest, has been named the Midwest regional sales manager for Dryvit Systems, Inc., West Warwick, R.I.

Leach has spent most of his career working in the sealant industry, most recently with S&S Panel Sales of IL where he was responsible for the sales and service of their sealant business. His territory covers Northern Illinois, Wisconsin, Minnesota and Iowa.

Illinois Tool Works, Inc., Glenview, Ill., has acquired Belgium-based hsbCAD. hsbCAD is a leading developer of software for computer-aided design and computer-aided manufacturing in the prefabricated building component manufacturing industry. hsbCAD software offers modules for timber-frame, stick-frame, light gauge steel frame, structural insulated paneling, roof and floor elements as well as log home design.

Negwer Materials Inc., St. Louis, Mo., has created NM Specialties, a new division that offers a one-stop shop for CSI Division 10 specialty products such as toilet compartments, bumper guards, protective wall coverings and fire protection specialties.

The company has named Julie Davis, who was an integral part of starting up NM Specialties, as the lead for the division. She has 13 years of experience working with specialty products and will be responsible for inventory, managing stock lists and bidding items for the new division.

ParexLahabra, Anaheim, Calif., has promoted Marc Brown to plant manager of ParexLahabra’s Riverside, Calif., location, and has added Charlie Bailey and Jonathan Harris to the company’s sales team.

Brown, who joined ParexLahabra in 2004 as a quality control manager and quickly rose to the position of assistant plant manager, will have the primary responsibility of overseeing the operations of the manufacturing facility.

Bailey will cover the Georgia, Alabama, and Tennessee regions. Before joining ParexLahabra, he worked with companies such as BlueLinx and Johnson Industries.

As the newest ParexLahabra sales representative covering Utah and Arizona, Harris brings energy and enthusiasm to the industry. Prior to his current role at ParexLahabra, he was employed with LKL Associates.

Techtronic Industries Co. Ltd. has named Mike Farrah as Power Tool Division president for TTI-North America.

In his new position as president of the South Carolina-based Power Tool Division, Farrah will have full responsibility for the business as it relates to the Ryobi® and RIDGID® brands, including operations, product development, sales and marketing.

Farrah joined TTI in March 2007 as senior vice president of power tool sales, marketing and product development.