1. Construction Spending, Labor & Materials Outlook
Beck Presentation
Dallas, January 12, 2016
Ken Simonson
Chief Economist, AGC of America

2. Construction spending & employment, 2006-15
Total spending, Feb. ‘06 (peak)-Nov. ‘15
billion $, seasonally adjusted annual rate (SAAR)
Total employment, Apr. ’06 (peak)-Dec. ‘15
thousands, seasonally adjusted
7.7 million
$1.21 trillion
$1.12 trillion
(7% below peak)
6.5 million
Total
Total
(15% below peak)
Private Residential
Nonres (10% below peak)
Private nonresidential
Residential (27% below peak)
Public
November 2014-November 2015: Total: 10%
private res. 11%, private nonres. 14%, public 6%
December 2014-December 2015:
Total: 4.2%, residential 5.7%, nonresidential 3.2%

3. Private residential spending: MF continues to outpace SF
seasonally adjusted annual rate (SAAR): Jan. ‘11 ($238 B)-Nov. ’15 ($428 B)
Multifamily (MF)
(Nov. ‘15: $57 B)
Single family (SF)
(Nov. ‘15: $227 B)
Improvements
(Nov. ‘15: $144 B)
12-month % change: January 2011 (-5.3%)-November 2015 (10.8%)
Multifamily: 25%
Total: 11%
Single family: 9%
Improvements: 8%
Source: Census Bureau construction spending reports

4. 2016 residential spending forecast: 5-9%
SF: 6-9%; ongoing job gains add to demand; student debt, fears of lock-in, limited supply will cap growth
MF: 8-12%; 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: 0-10%; newly corrected Census data shows loose relationship to SF spending
Source: Author

5. Population change by state, July 2014-July 2015 (U.S.: 0.79%)
decrease
0-0.49% % %
1.5%+
1.5%
1.2%
0.9%
-0.1%
1.5%
2.3%
0.6%
NH 0.2%
0.1%
0.2%
0.2% VT
-0.1%
0.6%
0.3%
0.9%
1.9%
0.5%
0.1%
MA 0.6%
1.7%
0.7%
-0.2%
0.1%
0.3%
1.9%
-0.3%
0.3%
0.7%
CT -0.1%
RI 0.1%
0.3%
0.3%
1.5%
1.0%
-0.02%
0.8%
0.8%
DE 1.1%
NJ 0.2%
1.8%
0.4%
1.4%
-0.04%
0.3%
1.2% MD
0.5% DC
1.9%
0.5%
0.2%
1.8%
HI 0.8%
Source: U.S. Census Bureau News

6. AGC members’ expectations for 2016
Net % (US/TX) who expect dollar volume of projects to be higher
34/44
All projects
12/30
K-12 school
21/23
Retail/warehouse/lodging
12/17
Public building
19/13
Private office
8/13
Water/sewer
19/34
Hospital
6/20
Highway
14/ 2
Multifamily
3/20
Other transportation
13/30
Higher education
1/ 0
-1/-12
Power
Direct federal construction
Source: AGC Construction Outlook Survey, Jan (1,580 responses, 175 from Texas)

7. Nonresidential segments: year-to-date, 2016-17 forecast
Jan.-Nov. YTD 2015 vs. 2014
July-Nov annualized
2016 and 2017 (per year)
Nonresidential total (public+private) 9 % -2
4-8
Power (incl. oil & gas structures, pipelines)
-15
-16
0 to 10
Educational 7 8
3 to 5
Highway and street
1 to 4
Manufacturing 47
-10
-10 to +10
Commercial (retail, warehouse, farm) 14
Office 22
5 to 15
Transportation 2
0 to 5
Health care 5 1
3 to 8
Sewage and waste disposal
-24
Amusement & recreation 26
-20
Lodging 31
-10 to +15
Other (communication; water; public safety; conservation; religious): 8% of total 6
Source: Census Bureau construction spending report; Author’s forecast

8. Construction spending: industrial, heavy (billion $, SAAR)
Power (88% private)
Manufacturing (99% private)
Total
Total
Electric
Chemical
Oil & Gas
Other
Latest 12-mo. change: 5% (oil & gas 29%; electric -4%)
Latest 12-mo. change: 29% (chemical 39%; other 19%)
Transportation facilities (70% public)
Public & private transportation facilities
Public
Private
Latest 12-mo. change: 3%
Latest 12-mo. change: private 7%; public 2%
Source: Census Bureau construction spending reports

9. Key points: power, mfg., transportation
Cutbacks in coal-fired plants, oil & gas fields have hit bottom; surge in gas-fired plants, pipelines into ‘18
Mfg growth led by chemicals (petrochemical plants, ethane crackers, LNG) and transportation equipment (cars, light & heavy trucks, jets, railcars, barges); cuts in plants tied to farming, mining or exports
Private (mainly rail) investment in transportation will slow; flat funding for public airports, ports, transit
Source: Author

10. Construction spending: public works (billion $, SAAR)
Highways (99.6% public)
Sewage/waste (99% public)
Latest 12-mo. change: 5%
Latest 12-mo. change: -2%
Amusement & recreation (48% public)
Water supply (96% public)
Latest 12-mo. change: 16%
Latest 12-mo. change: -5%
Source: Census Bureau construction spending reports

11. Key points: roads, recreation, sewer/water
Only slight rise in federal highway funding even with long-term bill; gradual pick-up in state funding & P3s
Amusement & recreation spending is very “lumpy”—a few big stadiums at irregular intervals; but funding for local, state, federal parks keeps eroding
Eastern & Midwestern cities under orders to make long-term upgrades to sewer systems that should boost spending; water utilities hurt by drought, conservation
Source: Author

12. Construction spending: institutional (private + state/local)
Total education (79% public)
Education (state & local K-12, higher; private)
S/L preKindergarten-12th grade
S/L higher ed
Private
Latest: state/local preK-12 24%, higher 7%; private 9%
Latest 12-mo. change: 14%
Total healthcare (77% private)
Hospitals (private, state & local)
Private
S/L
Latest 12-mo. change: 5%
Latest 12-mo. change: private 18%; state & local -8%
Source: Census Bureau construction spending reports

13. Key points: education & health care
Higher-ed enrollment is shrinking, so colleges need fewer dorms & classrooms; apts. (MF) replacing dorms (ed.)
PreK-12 enrollment is flat; more children staying in cities and filling underused or charter schools, so construction no longer matches population growth
Hospitals face more competition from standalone urgent care, outpatient surgery, clinics in stores; more investment in small facilities, short stays
Source: Author

14. Construction spending: developer-financed (billion $, SAAR)
Retail (private)
Office (86% private)
Total
Private
Public
Latest 12-mo. change: -1%
Latest 12-mo. change: 21% (private 23%; public 7%)
Warehouse (private)
Lodging (private)
Latest 12-mo. change: 6%
Latest 12-mo. change: 28%
Source: Census Bureau construction spending reports

15. Key points: retail, warehouse, office, hotel
Retail now tied to mixed-use buildings & renovations, not standalone stores or shopping centers; consumer pivot to online buying will continue
Warehouse market largely built out for now but may heat up if Panama Canal changes distribution lanes
Employment sets records each month but office space per employee keeps shrinking; growth mainly in cities & renovations, not suburban office parks
Ongoing RevPAR gains still driving hotel growth but market is vulnerable to sudden reversals
Source: Author

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

17. Construction Employment in United States, 1/90-11/15
(seasonally adjusted; shading = recessions)
Peak: Apr. ‘06
-16% vs. peak
Construction Employment in Texas, 1/90-11/15
(seasonally adjusted; shading = recessions)
Peak: Nov. ‘11
Source: BLS

18. Construction Employment Change from Year Ago 1/08-11/15 (not seasonally adjusted)
Dallas-Plano-Irving, TX Div.* 2% (150 out of 358)
Texas 2%
(36 out of 51)
Source: BLS

19. Change in construction employment, 11/14-11/15 not seasonally adjusted (NSA)
Metro area or division
12-mo. empl. change (NSA)
Rank (out of 358)
Statewide (Construction only) 2%
Laredo* 0%
191
Statewide* (Const/mining/logging)
-2%
Longview* 3%
126
Abilene*
150
Lubbock*
Amarillo*
McAllen-Edinburg-Mission*
Austin-Round Rock* 5% 92
Midland*
0.3%
190
Beaumont-Port Arthur*
13% 19
Odessa* 1%
173
Brownsville-Harlingen*
San Angelo*
College Station-Bryan*
-1%
256
San Antonio-New Braunfels
10% 38
Corpus Christi* 6% 78
Sherman-Denison*
Dallas-Plano-Irving Div.*
Texarkana, TX-AR*
-8%
330
El Paso*
Tyler*
Fort Worth-Arlington Div.*
-7%
322
Victoria*
11% 31
Houston-The Woodlands-Sugar Land
Waco*
Killeen-Temple*
-6%
315
Wichita Falls*
-5%
306
*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.
Source: AGC rankings, calculated from BLS state and area employment reports

20. Construction employment change by TX metro, 11/14-11/15
El Paso
Amarillo
Lubbock
Odessa
San Angelo
Mid
land
Abilene
Wichita Falls
Brownsville-Harlingen
McAllen-Edinburg-Mission
Laredo
San Antonio- New Braunfels
Austin-
Round Rock-
Killeen- Temple
Waco
Corpus Christi
Victoria
Houston-The Woodlands-Sugar Land
Beaumont-Port Arthur
College Station- Bryan
Longview
Tyler
Sherman- Denison
Dallas- Plano- Irving Div.
Fort Worth- Arlington Div.
Texarkana, TX-AR
Over 10%
5.1% to 10%
0.1% to 5% 0%
-0.1% to -5%
-5.1% to -10%
Over -10%
Shading based on unrounded numbers
Source: BLS state and regional employment report

21. State construction employment change (U. S. : 4
State construction employment change (U.S.: 4.2%) 11/14 to 11/15: 44 states + DC up, 6 down
Over -10%
-5.1% to -10%
-0.1% to -5% 0%
0.1% to 5%
5.1% to 10%
Over 10% 6%
11% 3%
-0.4% 2%
NH 3% 2%
-4% 7% 1% 9% VT 1%
12% 5% 6%
MA 7%
12%
CT 3%
RI -7% 9%
-1% 7%
0.4% 2% 1%
NJ 7%
0.1% 8%
-15% MD 5%
DE 5% 5% 3% 7% 6% 5% 3%
-1% 6%
0.2% 2%
12% 8% 3% 6% 3% DC 1% 3% 3% 7%
Shading based on unrounded numbers
HI 12%
Source: BLS state and regional employment report

22. Metro construction employment change 11/14 to 11/15: 190 metros up, 64 unchanged, 104 down
Over -10%
-5.1% to -10%
-0.1% to -5%
0.1% to 5%
5.1% to 10%
Over 10% 0%

23. Hardest positions to fill
Source: AGC Member Survey, Sept (1,358 responses; 116 from Texas

24. How contractors are coping with worker shortages
Source: AGC Member Survey, Sept. 2015

25. Unemployed construction workers, Dec. 2000-Dec
Unemployed construction workers, Dec Dec (not seasonally adjusted)
Source: BLS

26. Producer price indexes for key inputs, 1/11-11/15 (Jan. 2011=100)
Gypsum products
Copper & brass mill shapes
Latest 1-mo. change: -1.7%, 12-mo.: -1%
Latest 1-mo. change: -3.0%, 12-mo.: -16%
Flat glass
Aluminum mill shapes
Latest 1-mo. change: 0.0%, 12-mo.: 6%
Latest 1-mo. change: -1.4%, 12-mo.: -13%
Source: Author, based on BLS producer price index reports

27. Producer price indexes for key inputs, 1/11-11/15 (Jan. 2011=100)
Diesel fuel
Concrete products
Latest 1-mo. change: -3.5%, 12-mo.: -38%
Latest 1-mo. change: 0.5%, 12-mo.: 3%
Paving mixtures
Steel mill products
Latest 1-mo. change: -0.2%, 12-mo.: -6%
Latest 1-mo. change: -3.3%, 12-mo.: -18%
Source: Author, based on BLS producer price index reports

28. Spending, materials and labor forecast
2014
actual
2015 forecast
annual average
forecast
Total spending
10%
10-12%
6-10 %
Private – residential
14%
5-10
– nonresidential
11%
11-13%
Public 2%
5-7%
2-5%
Materials PPI
-0.9%
-3 to -5%
0-2
Employment cost index
1.8%
2-2.5%
3-4.5
Source: 2014: Census, BLS; : Author’s ests.

29. AGC economic resources (email simonsonk@agc.org)
The Data DIGest: weekly 1-page (subscribe at
monthly press releases: spending; PPI; national, state, metro employment
state and metro data, fact sheets:
webinars