Construction Trends

July 2008

ABC Applauds Introduction of Green Jobs Improvement Act
Associated Builders and Contractors voiced its strong support for the "Green Jobs Improvement Act” (H.R. 6220), introduced in the U.S. House of Representatives by Rep. John Kline (R-Minn.) June 11, 2008. The legislation would expand a provision in the "Energy Independence and Security Act of 2007” (H.R. 6) to allow merit shop training programs to receive federal funding to help create an energy efficiency and renewable energy skilled workforce.

"Contractors—both union and nonunion—support the concept of "green jobs” training as they strive to meet the growing demand of these professionals in the construction workforce.” said ABC President and CEO Kirk Pickerel. "This legislation will open the door to 86 percent of the U.S. construction workforce who chose to be merit shop employees.”

The provision, as it is currently written, limits training grant funding to entities that "partner with labor organizations.” The "Green Jobs Improvement Act” eliminates the mandate so that labor organizations, along with merit shop training programs, can qualify for the federal funding.

In a letter sent to Congress, ABC pointed out that its "organization and member companies continuously train workers in a wide variety of skilled occupations, including green jobs, and are constantly striving to keep pace with technology and innovation in order to make certain America has the skilled workforce it deserves, and that all American workers, regardless of labor affiliation, enjoy equal opportunity of access to critical job training.”

April Construction Advances 9 Percent
The value of new construction starts in April climbed 9 percent to a seasonally adjusted annual rate of $553.5 billion, according to McGraw-Hill Construction, a division of The McGraw-Hill Companies. Much of the increase came as the result of a strong performance by nonbuilding construction, which is comprised of public works and electric utilities. Nonresidential building showed moderate improvement in April, while residential building stayed unchanged from its March pace. For the first four months of 2008, total construction on an unadjusted basis came in at $170.4 billion, down 17 percent from the same period a year ago. Excluding residential building, new construction starts in the first four months of 2008 rose 3 percent.

April’s data produced a reading of 117 for the Dodge Index (2000=100), up from a revised 108 for March, and equal to the average for January and February.

"While housing is still in the process of reaching bottom, and tighter lending standards are raising concern about the prospects for commercial building, publicly-financed construction is expected to hold up relatively well during 2008,” stated Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction. "The strength shown by the public works categories in April, along with the elevated activity for several institutional structure types, supports this belief.”

Nonresidential building in April grew 5 percent to $210.6 billion (annual rate), after dropping 25 percent in March. Healthcare facilities had a particularly strong April, jumping 41 percent, as five large hospitals reached groundbreaking in New York, Tennessee, Indiana, Maryland and Washington. Substantial gains were also registered by two of the smaller institutional structure types. The amusement category soared 82 percent, aided by the start of a $400 million convention center expansion in Philadelphia, plus the start of several large theater and performing arts facilities in California, Florida and Washington, D.C. Transportation terminal work climbed 52 percent, led by a $126 million terminal renovation at Miami International Airport and a $90 million terminal expansion at Washington Dulles International Airport. Church construction also helped out, climbing 10 percent in April. On the negative side, the public buildings category fell 25 percent after an exceptional March. And, educational buildings—the largest nonresidential category by dollar volume, settled back 10 percent in April after heightened contracting in March.

The commercial structure types generally showed modest weakening in April. Office construction eased back 1 percent, although April did include the start of four sizeable projects, located in Washington D.C., Atlanta and New York City. Hotel construction in April dropped 5 percent, sliding for the second month in a row after the robust volume reported at the outset of 2008. Store construction in April fell 8 percent, and Murray noted that "the store category in particular is vulnerable this year, as retailers pull back on expansion in the face of tighter credit conditions and weaker consumer spending.” Warehouse construction in April edged up 1 percent, yet its pace so far in 2008 lags behind last year. Manufacturing plant construction in April climbed 63 percent after a very weak March, as two large ethanol plants reached groundbreaking, located in North Carolina and Indiana.

Residential building, at $180.5 billion (annual rate) in April, was essentially unchanged from March. Single-family housing continued to lose momentum, slipping 1 percent. Although the decline was relatively small, it did extend the downward trend that has been under way for more than two years now.

By major region, single-family housing in April showed further reductions in the South Atlantic, down 6 percent; the West, down 2 percent; and the South Central, down 1 percent; while modest improvement was reported in the Northeast, up 3 percent; and the Midwest, up 4 percent.

Multifamily housing in April increased 3 percent.
Murray stated, "There is still the occasional month that includes large multifamily projects, like April, but the number of such projects reaching groundbreaking has become considerably less than a year ago, given the unraveling of the condo boom.”

The 17 percent decline for total construction in the first four months of 2008 relative to last year was due to this pattern by sector: residential building, down 39 percent; nonresidential building, up 1 percent; and nonbuilding construction, up 5 percent.

By geography, four of the five major regions experienced diminished contracting in the January–April period—a 25 percent reduction in the South Atlantic and 19 percent declines in the West, Midwest and South Central. The Northeast was the only major region able to register a year-to-date gain for total construction, climbing 12 percent.

Nonresidential Construction Employment Continues Downward Trend

Nonresidential building construction suffered additional job losses in May as employment declined by 5,900 jobs on a seasonally-adjusted basis, according to the June 6 employment report by the U.S. Department of Labor’s Bureau of Labor Statistics. Over the 12-month period from May 2007 to May 2008, seasonally adjusted, nonresidential building construction employment was down by 30,000 jobs. The downward trend in the nonresidential sector pales in comparison to those generated among firms operating in the residential building sector. Between May 2007 and May 2008, residential building contractors shed slightly more than 100,000 positions. Total construction employment in May 2008 was 386,000 lower than in May 2007, a decline exceeding 5 percent. In terms of monthly comparison, total construction employment fell by 34,000 jobs in May and 33,100 in April. Since an employment peak in September 2006, construction has lost 475,000 jobs ending in May. Total building construction is down by 130,800 jobs over that same period, or by 7.4 percent on a seasonally adjusted basis.

The most remarkable aspect of the May job report was the unexpectedly sharp increase in national unemployment. The unemployment rate rose from 5 percent in April to 5.5 percent in May. Total nonfarm payroll employment also continued to trend lower, falling by 49,000 in May compared to April. The change in April employment was also revised lower, from an initial reading of a decline of 20,000 jobs to a decline of 28,000 jobs.

Associated Builders and Contractors notes that today’s report will shift the debate about whether the United States is or is not in a recession—toward those economists who believe the nation is currently in a recession or is headed into one. The marked increase in unemployment is likely to further suppress both consumer confidence and spending in the months ahead, despite the national distribution of tax rebate checks.

Because indices for many nonresidential construction segments lag behind the nation’s other economic indicators, this most recent report could also be interpreted as a precursor of nonresidential construction’s near-term future. Despite the positive news from April’s nonresidential construction spending report, ABC suggests that there may be further slowing of many nonresidential construction activities through the balance of 2008 and into 2009.

Armstrong Awards College Scholarships to 20 Students
The Armstrong Foundation of Armstrong World Industries, Inc., Lancaster, Pa., awarded four-year college scholarships to 20 graduating high school seniors in six states.

The Armstrong Foundation annually awards scholarships to the sons and daughters of Armstrong employees and retirees who achieve high scores on the Preliminary SAT/National Merit Scholarship Qualifying Test. The Armstrong scholars, chosen by the National Merit Scholarship Corporation, receive $2,000 annually for four years.

The Armstrong Foundation contributes more than $200,000 to higher education scholarship programs each year.

Lafarge Acquires Southeastern Louisiana Sand and Gravel Assets of Texas Industries, Inc.

Lafarge, Herndon, Va., announced June 3 that it has completed the purchase of the southeastern Louisiana sand and gravel assets of Texas Industries, Inc. The acquisition consists of four sand and gravel pits, allowing Lafarge to enter the southeastern Louisiana aggregates market.

This acquisition will expand Lafarge’s presence in southeastern Louisiana. The operations will be integrated into Lafarge’s Eastern U.S. Aggregates and Concrete region.

People & Companies In the News
ICC Evaluation Services (ICC-ES) has issued an evaluation report (ESR-2282) on the 1496 Seismic Perimeter Clip from Chicago Metallic Corporation, Chicago. The seismic perimeter clip, which is used in suspended ceilings to stabilize main and cross tees at the perimeter, has been evaluated and found to meet the applicable section of the IBC 2006 for use in seismic design categories A, B, C, D, E and F. The clip can be used in lieu of stabilizer bars that are designed to prevent the tees from spreading apart during seismic activity, and allows for the use of 15/16” wall angle instead of the standard 2” angle in design categories D, E and F. C. H. Hanson Company, a family-owned and managed operation in Naperville, Ill., has named Phil Hanson, executive vice president, as its director of sales and customer support. Hanson has been charged with goals of increasing sales revenue, improving end-user brand awareness, gaining placement of new products and programs, and further penetrating new and existing channels of distribution.

Kraft Tool introduces a new Web site at www.KraftTool.com. It features all products with descriptive specifications and colorful images, along with quarterly updates to the section on new and featured items.

Quail Run Building Materials, a manufacture of cold-formed building products headquartered in Phoenix, Ariz., has appointed Fred Serpico as vice president of marketing and product development. Serpico has joined Quail Run after 22 years of experience with Marino\Ware.

Smoky Mountain Materials Inc. opened a new branch in Mobile, Ala., last month. This new location will be doing business as Emerald Coast Building Materials. Kris Lanning is the branch manager.