1. Construction Spending, Labor & Materials Outlook Associated Contractors of New Mexico Albuquerque, October 6, 2015 Ken Simonson Chief Economist, AGC of America simonsonk@agc.org

2. Total spending, Mar. ‘06 (peak)-Aug. ‘15 billion $, seasonally adjusted annual rate (SAAR) Construction spending & employment, 2006-15 Total employment, Apr. ’06 (peak)-Sep. ‘15 thousands, seasonally adjusted $1.21 trillion $1.09 trillion (-10% below peak) 7.7 million 6.4 million (-17% below peak) Private Residential Total Public Private nonresidential Nonresidential Residential Total August 2014-August 2015: Total: 14% residential 16%, nonresidential 17%, public 7% September 2014-September 2015: Total: 3.3%, residential 4.2%, nonresidential 2.8%

3. Construction is growing, but unevenly 3 trends helping many sectors and regions: ‘Shale gale’—mainly downstream after oil price plunge Panama Canal expansion Residential—multifamily (MF) topping single-family (SF) 3 trends holding down construction growth: Public infrastructure, school spending remain subdued Consumers continue to shun stores for online buying Employers shrink office space per employee, move to city Source: Author

4. F Shale plays in lower-48 states Current play – oldest stacked play Current play – intermediate depth/ age stacked play Current play – shallowest/ youngest stacked play Prospective play Basin F Source: U.S. Energy Information Administration, based on data from various published studies

5. Shale’s current impacts (+ or -) on construction - Onsite: Each well requires access road, site prep, pad, storage pond, support structures, pipes - Nearby: Products, water require trucking, rail, pipeline, processing - Local spending by drilling firms, workers, royalty holders - Upstream: orders for fracking sand, rigs, compressors, pumps, pipe, tanks, trucks, railcars, processing facilities + Downstream: Petrochemical, power, steel plants; LNG export terminals, fueling stations; NG-powered vehicles - Losers: coal; maybe wind, solar, nuclear & their suppliers Source: Author

6. U.S. ports affected by Panama Canal expansion Source: U.S. Army Corps of Engineers Baltimore NY-NJ Norfolk Seattle & Tacoma Charleston San Diego Oakland Miami Savannah Jacksonville Mobile Columbia River at Mouth, OR & WA Los Angeles/ Long Beach New Orleans Houston

7. Panama Canal expansion’s impacts on construction Ports: investing in dredging, piers, cranes, land access Nearby: Storage, warehouse, trucking, rail facilities Bridge, tunnel, highway improvements Inland: possible changes in distribution, manufacturing Source: Author

8. seasonally adjusted annual rate (SAAR): Jan. ‘11 ($241 B)-Aug. ’15 ($383 B) 12-month % change: January 2011 (-5.5%)-August 2015 (16%) Private residential spending: MF continues to outpace SF Multifamily (MF) (Aug. ‘15: $53 B) Single family (SF) (Aug. ‘15: $219 B) Improvements (Aug. ‘15: $111 B) Improvements: 17% Single family: 14% Multifamily: 25% Total: 16% Source: Census Bureau construction spending reports

9. 2015 residential spending forecast: 7-11% SF: 9% to +14%; rising for now but tight credit, fear of lock-in, demographic shifts may limit increases MF: +16 to +25%; upturn should last through 2016 – low vacancies, high rent growth encourage investors – millennials show continued preference for cities – nearly all MF construction is rental, not condo – public MF is growing but remains tiny (1% of total) Improvements: -10 to +10%; should track SF sales but unreliable Census shows wide swings, revisions Source: Author

10. -0.1% 1.3% 1.1% 1.0% 1.3% 0.9% 0.2% 1.7% 1.5% 1.6% -0.1% 2.2% 0.9% 0.7% 0.3% 0.6% 1.7% 0.6% 0.5% 0.3% 0.4% 0.3% -0.1% 0.1% 0.4% 0.3% 0.1% 0.3% 0.2% 0.3% 0.05% 0.7% 1.0% 1.5% 0.1% -0.2% 0.3% 1.4% HI 0.8% 1.3% VT -0.05% CT -0.1% RI 0.2% DE 1.1% NJ 0.3% MD 0.6% DC 1.5% NH 0.3% decrease0-0.49%0.5-0.99%1.0-1.49% MA 0.5% Population change by state, July 2013-July 2014 (U.S.: 0.75%) 1.5%+ Source: U.S. Census Bureau News 0.8%

11. Jan.-Aug. YTD 2015 vs. 2014 2015 forecast 2016 and 2017 (per year) Nonresidential10 % 7-12%6-10% Power (incl. oil & gas structures, pipelines) -20 -14 to -50 to 10 Educational 43 to 5 Highway and street 64 to 6-1 to +3 Manufacturing 5740 to 57-10 to +10 Commercial (retail, warehouse, farm) 117 to 110 to 10 Office 2415 to 245 to 15 Transportation 96 to 90 to 5 Health care 53 to 63 to 8 Sewage and waste disposal 138 to 13 Amusement & recreation 3019 to 30 Lodging 3225 to 31-10 to +15 Other (communication; water; public safety; conservation; religious): 8% of total 64 to 8 Nonresidential segments: year-to-date, 2015-17 forecast Source: Census Bureau construction spending report; Author’s forecast

12. Construction spending: public works (billion $, SAAR) Source: Census Bureau construction spending reports Highways (99.7% public) Amusement & recreation (48% public) Sewage/waste (99% public) Water supply (96% public) Latest 12-mo. change: 7%Latest 12-mo. change: 9% Latest 12-mo. change: 35% Latest 12-mo. change: 5%

13. Power (86% private)Manufacturing (99% private) Construction spending: industrial, heavy (billion $, SAAR) Source: Census Bureau construction spending reports Transportation facilities (70% public)Public & private transportation facilities Latest 12-mo. change: 12% Latest 12-mo. change: private 26%; public 7% Public Private Latest 12-mo. change: -7% (oil & gas 21%; electric -16%) Electric Oil & Gas Total Latest 12-mo. change: 58% (chemical 99%; other 33%) Other Chemical Total

14. Total education (79% public) Construction spending: institutional (private + state/local) Source: Census Bureau construction spending reports Total healthcare (78% private) Education (state & local K-12, higher; private) Hospitals (private, state & local) Latest 12-mo. change: 5% Latest 12-mo. change: 9% Latest 12-mo. change: private 27%; state & local -6% S/L preK-12 Private S/L higher ed S/L Private Latest: state/local preK-12 2%, higher 14%; private 8%

15. Construction spending: developer-financed (billion $, SAAR) Source: Census Bureau construction spending reports Retail (private) Warehouse (private) Office (85% private) Lodging (private) Latest 12-mo. change: -1% Latest 12-mo. change: 9% Latest 12-mo. change: 43% Latest 12-mo. change: 25% (private 28%; public 13%) Private Public Total

16. Seattle Major locations for data centers Portland Silicon Valley Southern California Las Vegas Phoenix Salt Lake City Denver Colorado Springs Dallas Houston Kansas City Omaha Minneapolis Des Moines Chicago St. Louis Atlanta Northern Florida Northern Virginia Boston Philadelphia Northern New Jersey Source: www.DataCenterKnowledge.com, from CBRE, ASHRAE

17. CT 3% 6% 8% 3% 6% 10% -0.4% 8% 6% -5% 0% 3% -0.2% 8% 6% 2% -1% 9% 0.5% -2% 2% 3% 5% -3% 3% -7% 4% -6% 2% 4% 3% 1% 6% -2% -15% 14% 3% HI 6% 9% VT -2% MD 4% DC 1% NH 1% Over -10%-5.1% to -10%-0.1% to -5%0.1% to 5% MA 4% State construction employment change (U.S.: 3.6%) 8/14 to 8/15: 36 states + DC up, 1 unchanged, 13 down 5.1% to 10%Over 10% Shading based on unrounded numbers 0% Source: BLS state and regional employment report 2% NJ 3% DE 6% RI -8% 7%

18. Construction Employment in United States, 1/90-8/15 (seasonally adjusted; shading = recessions) Construction Employment in New Mexico, 1/90-9/14 (seasonally adjusted; shading = recessions) Source: BLS Peak: Apr. ‘06 -17% vs. peak Peak: Jun. ‘06 -30% vs. peak

19. Construction Employment Change from Year Ago 1/08-8/15 (seasonally adjusted) New Mexico -5.2% (47 out of 51) U.S. 3.6% Source: BLS

20. Change in construction employment, 8/14-8/15 (NSA) Source: AGC rankings, calculated from BLS state and area employment reports Metro area or division 12-mo. empl. change (NSA) Rank (out of 358) Statewide (construction)-5% Statewide* (Const/mining/logging)-4% Albuquerque*4%91 Las Cruces*-19%355 Santa Fe*-22%358 *The Bureau of Labor Statistics reports employment for construction, mining and logging combined for metro areas in which mining and logging have few employers. To allow comparisons between states and their metros, the table shows combined employment change for these metros. Not seasonally adjusted statewide data is shown for both construction-only and combined employment change.

21. Construction employment change by NM metro, 8/14-8/15 21 Over -10% -5.1% to -10% -0.1% to -5% 0.1% to 5% 5.1% to 10% Over 10% Shading based on unrounded numbers 0% Source: BLS state and regional employment report Las Cruces* Santa Fe* Albuquerque*

22. Metro construction employment change 8/14 to 8/15: 163 metros up, 42 unchanged, 153 down

23. 12-month % change in construction spending & employment % of states (51 incl. DC) & metros (358) with 12-month increases Construction spending picks up but job gains shrink Source: Census Bureau construction spending reports Spending (8/15: 13.7%) Employment (9/15: 3.3%) States Metros

24. Hardest positions to fill (% of respondents who are having trouble filling) 24 Source: AGC Member Survey, Sept. 2015 Hourly craft professionals79% Carpenters73 Sheet metal installers65 Concrete workers63 Electricians60 Salaried professionals52% Project managers/supervisors55 Estimators43 Engineers34

25. How contractors are coping with worker shortages 25 Source: AGC Member Survey, Sept. 2015 Increasing compensation: HourlySalaried Raising base pay56%48% Providing incentives/bonuses2329 Increasing contributions/benefits23 Paying more overtime16 4 Increasing use of: Subcontractors 43% Staffing company 33 Labor-saving equipment, tools, machinery 19 Lean construction 13 Offsite prefabrication 9 Unions 9 Building information modeling (BIM) 7

26. Unemployed construction workers, Sep. 2000-Sep. 2015 (not seasonally adjusted) Source: BLS

27. Flat glass Producer price indexes for key inputs, 12/10-8/15 (Dec. 2010=100) Source: Author, based on BLS producer price index reports Gypsum productsCopper & brass mill shapes Aluminum mill shapes Latest 1-mo. change: -0.9%, 12-mo.: -1% Latest 1-mo. change: 0.9%, 12-mo.: 5% Latest 1-mo. change: -4.0%, 12-mo.: -14% Latest 1-mo. change: -0.3%, 12-mo.: -10% 12/10

28. Producer price indexes for key inputs, 12/10-8/15 (Dec. 2010=100) Source: Author, based on BLS producer price index reports Paving mixtures Concrete products Steel mill products Latest 1-mo. change: -2.2%, 12-mo.: -38% Latest 1-mo. change: -0.9%, 12-mo.: -4% Latest 1-mo. change: -0.3%, 12-mo.: 3% Latest 1-mo. change: -0.7%, 12-mo.: -14% Diesel fuel 12/10

29. Trends: 2015-2017 Spending growth: 7-12% in ‘15; 6-10% in ‘16 &’17 – all segments strong in ’15; slightly slower res & nonres spending, flat public spending in ’16 & ‘17 – mfg, multifamily, lodging strong now but will slow; hospitals, schools may pick up in ’16 & ‘17 Materials costs: -2 to -3% in ‘15, 0 to 2% in ’16 & ‘17 Labor costs: +2.5% to + 5% Labor supply: widespread shortages possible due to retirements, competition from other sectors, fewer vets Source: Author

30. Summary for 2014, 2015-17 forecast Source: 2014: Census, BLS; 2015-17: Author’s ests. 2014 actual 2015 forecast 2016-17 annual average forecast Total spending5%9-11%6-10% Private – residential4%7-11%5-10% – nonresidential11%6-12%5-10% Public2%4-6%near 0 Materials PPI-0.9%-3%0-2% Employment cost index1.8%2.5-3%3-5%

31. AGC economic resources (email simonsonk@agc.org)simonsonk@agc.org The Data DIGest: weekly 1-page email (subscribe at http://store.agc.org)http://store.agc.org monthly press releases: spending; PPI; national, state, metro employment state and metro data, fact sheets: www.agc.org/learn/construction-data www.agc.org/learn/construction-data webinar: 11/19 w/ AIA, CMD (email for link)