Business conditions at architecture firms entering 2022 were essentially the same as when they ended 2021, with an Architecture Billings Index score of 51.0 in January, the same as the revised December score (any score over 50 indicates billings growth). This makes 12 straight months of positive readings for the ABI. However, over this period the pace of growth of the ABI has clearly moderated. For the first nine months of this design recovery, the average ABI score was almost 56, an unusually high level for such an extended period. Over the past three months, the average score was barely over 51. This more modest growth in the ABI no doubt reflects challenges in the construction sector—supply challenges for both labor and materials—as well as ongoing staffing constraints at architecture firms.
In spite of this moderation in ABI scores, workloads at architecture firms should continue to be robust. New project inquiries remain very strong, and new design projects continue to come into architecture firms at a healthy pace. The monthly new design contracts score has exceeded the billings score at firms in ten of the 12 months since the design upturn got underway, suggesting that project backlogs at firms continue to grow. This expanding backlog will serve as a cushion to ensure healthy future workloads over the coming quarters.
Despite these healthy workloads, there remains considerable variation in business conditions geographically and by firm specialization. Firms in the Northeast continue to see the weakest conditions, reporting five straight monthly declines in billings. Firms in the West are also reporting billings declines in recent months. Firms in the South, however, are reporting accelerating growth in billings activity, and in January saw their strongest monthly increase in billings since well before the Great Recession. Likewise with firm specialization, firms focusing on the commercial/industrial market are seeing billings accelerate, institutional firms are reporting billing declines, while multifamily residential firms are reporting stable business conditions.
The broader economy remains supportive of continued growth in design and construction activity. Gross domestic product for the U.S. increased by 5.7% last year, more than offsetting all the losses during the past recession. The $1.2 trillion infrastructure package will spur further gains, particularly for the construction sector. Additionally, the employment situation has seen solid improvement since the early days of the pandemic, with the national unemployment rate hovering around 4% in recent months. An additional 647,000 payroll positions were added to the economy in January, on top of the 6.7 million that were added in 2021. Construction and architectural services have benefitted from this upturn in employment. The construction sector added 163,000 payroll positions in 2021, almost exactly offsetting the 168,000 lost in 2020. However, a cold January dampened construction activity, as 5,000 positions in this industry were lost nationally on a seasonally adjusted basis. Architecture firms added 12,100 payroll positions in 2021, and like with construction, these additions almost exactly offset the 12,700 positions lost in 2020. However, over the last three months of 2021 architecture firms added 4,500 new positions on net—a pace that would net 18,000 on an annual basis—indicating that employment growth at architecture firms is accelerating heading into 2022.
