SBE News

Capitol Update 7/11/2022

Construction’s labor, economic numbers begin to show cracks

Contractors reported fewer unfilled job openings in May as overall nonresidential construction spending dipped and signs of the slowing economy began to play out on jobsites. Associated Builders and Contractors reported that the number of open construction jobs declined to 434,000 in May. While just 6,000 fewer openings than a month before — and 126,000 more than a year earlier — the decline is notable in a tight labor market where hiring has been robust. At the same time, Associated General Contractors of America reported a drop in nonresidential projects in May, marking the third consecutive month of decline. According to ABC, total nonresidential spending fell 0.6% to $832.5 billion, though it was still up 1% in the last year.

San Francisco ranked the world’s most expensive city for construction

new report by Turner & Townsend quantifies what contractors who work in San Francisco already know: Doing business there is expensive. The report, published on July 5, found that construction in San Francisco costs $4,728.50 per square meter ($439.29 per square foot) due to a perfect storm of inflation, supply chain issues and demand from tech companies such as Google, Apple and more. Last year’s top city, Tokyo, fell to the No. 2 spot on the list, followed by Osaka, Japan, which was included on the list for the first time this year. In total, North America had four markets in the top 10. Aside from San Francisco, New York City ranked fourth, Boston ranked eighth and Los Angeles ranked ninth, per the report. Large shifts in North American markets were driven primarily by the strengthening of the U.S. dollar, higher building material costs driven by supply chain disruptions and high labor costs, according to a press release.

US construction spending drops 0.1% in May from April

US construction spending in May rose 9.7% from a year before to nearly $1.78 trillion, although it was down 0.1% from April, according to the Census Bureau. Seasonally adjusted private construction spending, at an annual rate of nearly $1.4 trillion, was steady between April and May, but public-sector construction was down 0.8%. Full Story: The Construction Broadsheet

Inflation takes a toll on infrastructure drive

Funds provided under the bipartisan infrastructure law are at risk of melting away under roaring inflation, and some projects across the US may need to be reprioritized. Snarls in the supply chain, strong consumer and business demand, and the conflict in Ukraine are all factors driving up prices, with the cost of construction materials often rising faster than the overall inflation rate. Full Story: The Associated Press

California Trade Report for May 2022

Below are highlights from the recently released trade data from the US Census Bureau and US Bureau of Economic Analysis. To view additional data and analysis related to the California economy visit our website at

The May data in general saw California exports continuing recovery in nominal terms, but when viewed in real dollars, exports were essentially level when compared to the prior year and remained substantially below the pre-pandemic level in 2019.  Imports, however, continued to surge both in nominal and real terms.  Total trade activity through the state’s ports—while continuing to lose ground to #1 Texas in relative terms—was up more strongly likely in response to shipper efforts to get ahead of potential transportation strikes this summer.

Talks with West Coast dockworkers continue without conclusion, although work also continues even after the previous contract expired.  Potential labor actions by 12 unions with far broader effects on rail activity moved into the next stage, with the process now turning to a 30-day cooling off period.  Combined with potential administrative actions at the end of that period, without resolution, rail shutdowns could begin just prior to the November elections.

In the latest results for July 1, a total of 18 container ships were in the backup off the San Pedro Bay ports, including one anchored and 17 slow speed steaming or loitering outside the 25-mile Safety and Air Quality Area.  At least a portion of this relief, however, comes as shippers have begun diverting to other ports due to the risk of a ports strike.  While this congestion is down considerably offshore, the effects have spread inland as shipments are now backing up due to rail congestion both within Southern California and as containers accumulate at core hubs such as Chicago, lack of warehouse space within Southern California—now operating with a vacancy rate of only 0.3%—and as soaring diesel prices affect trucking operations. 

Globally, similar issues are adding to the supply chain disruptions, affecting both destination markets and critical component supplies.  In addition to the more broadly covered pandemic problems in China, strikes have already slowed goods movement in South Korea and the EU.   The same issues producing massive delays in air travel within the US could also spread quickly to air freight, an alternative that would become in even higher demand in the event of a ports or rail strike.

As measured by the New York Federal Reserve Global Supply Chain Pressure Index, supply congestion has eased in recent months, but the overall level remains at substantially elevated levels.  Some progress has been made, but nowhere near enough.

Payroll employment rises by 372,000 in June; unemployment rate remains at 3.6%

Total nonfarm payroll employment rose by 372,000 in June, and the unemployment rate remained at 3.6 percent. Notable job gains occurred in professional and business services, leisure and hospitality, and health care.

HTML | PDF | RSS | Charts | Commissioner’s Statement

Coalition seeks extension to Buy America waiver

A coalition of nearly 50 trade groups has implored Mitch Landrieu, senior adviser to President Joe Biden, to extend the 180-day waiver for compliance with Build America Buy America requirements for infrastructure projects in light of ongoing inflation and supply chain challenges. The coalition says “prospects for the rest of the year are worse,” running the risk of delayed or reduced projects. Full Story: Transport Topics (7/6) 

Nonresidential surge fuels May construction starts

A 20% gain in nonresidential starts anchored an overall 4% rise in construction starts in May, according to Dodge Construction Network. Residential starts were down 4% for the month as nonbuilding eased 2%, while the first five months of the year saw a 6% increase from the year-earlier period. Full Story: Dodge Data & Analytics

U.S. unemployment rate holds at 3.6 percent in June

A new federal jobs report released Friday showed the U.S. labor market maintained its torrid pace in June, even as the Federal Reserve raised interest rates and worries of a hiring slowdown or a possible recession grew. But with inflation spiking and other indicators more mixed, the new data leaves a confusing picture of what, exactly, the economy is doing and what policymakers, businesses and consumers should do to prepare for the future.Employers added 372,000 new positions last month, the Bureau of Labor Statistics reported, with gains across a range of industries and private-sector employment recovering all of its pandemic losses. The unemployment rate, meanwhile, remained steady at 3.6 percent for a fourth straight month. “The U.S. labor market is defying gravity,” said Becky Frankiewicz, chief commercial officer for the staffing firm Manpower Group. “Fears of a possible recession stoked by inflation and an aggressive Fed are eclipsed by the simple reality that employers can’t hire fast enough to meet demand.” The strong job growth keeps pressure on the Fed to continue raising interest rates when it meets later this month. After years of keeping interest rates at or near zero, the central bank has so far hiked rates three times this year, by a total of 1.5 percentage points, in the hope of slowing the economy just enough to curb inflation, which is at 40-year highs, without pushing it into a deep recession.

How a $55M Alaska highway win reflects Granite’s new strategy

Granite Construction won a $55 million highway contract for work in Alaska, the Watsonville, California-based contractor announced this week. Federal funds will pay for the project through the Alaska Department of Transportation.  The Knik-Goose Bay Road Reconstruction Phase 1 project near Wasilla — about 45 miles northeast of Anchorage — will expand 4 miles of the roadway from two lanes to four. The Alaska Department of Transportation said on its project website the corridor currently experiences congestion and high collision rates due to a number of driveways connected directly to the highway.  Granite expects the project to begin in August and conclude by Q3 2024. Work will comprise drainage improvements, intersection improvements, grading, paving, pathways, illumination and signalization. Granite will include the win in its second quarter 2022 financial results.

$2.3B Energy Dept. program aimed at grid resilience

States, tribes and territories can apply for a piece of a $2.3 billion federal formula grant program intended to fortify the nation’s power grid against the various challenges posed by climate change. The Preventing Outages and Enhancing the Resilience of the Electric Grid program makes $459 million available annually over five years to upgrade grid resilience. Full Story: Department of Energy

Pete Buttigieg announces California airports get $100 million – Los Angeles Times

Standing atop an observation deck at Los Angeles International Airport, the nation’s top transportation official announced Thursday a near $100-million award to upgrade terminals and improve roadways in California’s airports as part of a $1-billion program for 85 airports across the country. “Airports like LAX are gateways to American cities and they are gateways to America,” said U.S. Transportation Secretary Pete Buttigieg. “Americans flew here from every corner of the country for the Super Bowl, and in 2028, athletes will come here from every corner of the globe to compete for Olympic gold. … When they do, we will be able to demonstrate that America really has so much to be proud of and the best infrastructure.” LAX is the nation’s second-busiest airport and has consistently ranked as one of the most congested and toughest to navigate.  Under the grant program it will receive $50 million for a multiyear project to increase passenger capacity by reconfiguring and repaving roadways around the airport, along with upgrading the entrance to the central terminal area parking. The infusion of capital for the nation’s airports is part of last year’s $1-trillion infrastructure bill. “America is a country that brought the modern aviation age to the world,” Buttigieg told reporters on a conference call Wednesday. “And yet around the world in most rankings of airport quality, not one of our airports ranks among the top 25. That’s something that we have to change.” LAX has been in a near constant state of construction over the last few years, undergoing a $15-billion modernization that’s expected to be completed as soon as 2023. A $4.9-billion people mover connecting the airport to the region’s fast-growing rail network is expected to be finished by next year, well ahead of the 2028 Olympics, when about 1 million travelers are expected to come to the region. “This is the airport of the future,” Mayor Eric Garcetti said at the news conference at LAX.

Amazon has delayed or canceled plans for at least 13 facilities in its distribution network this year, according to local news reports. Shifts in plans have affected locations in Texas, Florida, Louisiana, Tennessee and California, per reports. Many of these adjustments surfaced following the company’s acknowledgement that it overbuilt its warehouse footprint in April. Amazon is delaying some warehouse openings so it can reduce 2022 operating expenses following a rocky Q1 earnings report, Marc Wulfraat, president and founder of supply chain consulting firm MWPVL International, said in an email. The change will allow Amazon to avoid incurring further labor costs until at least next year when it needs more network capacity, Wulfraat added.

Calif. affordable housing not so affordable to build

Seven publicly subsidized housing projects in Northern California are coming in at a cost of more than $1 million per apartment. The inflated price tags are associated with stringent regulatory requirements within the state’s control as well as the soaring cost of materials and labor shortages. Full Story: Los Angeles Times (tiered subscription model)

Groundbreaking set for $140M Southern Calif. bike path

Groundbreaking is scheduled for today on a 5.5-mile Southern California bike path extending from Inglewood through South Los Angeles. The $140 million route will run along an unused rail corridor and link light-rail lines with a rapid transit bus corridor on the 110 Freeway. Full Story: Los Angeles Daily News

Future of key California high-speed rail line solidified with $4.2B

An unprecedented budget surplus allowed the California legislature to come to an agreement Thursday night to fund construction of the first phase of the state’s embattled $113 billion, 520-mile-long high-speed rail project, which is designed to one day connect San Francisco and Los Angeles. Lawmakers voted to release a critical $4.2 billion in bond funds to finish building the 171-mile Central Valley line, and also authorized $3.65 billion for other transit efforts across the state for fiscal year 2022-2023. The Central Valley extension — which will link Bakersfield and Merced — is now slated to run trains by 2030. The Central Valley extension is currently under construction, and bridges other lines on both ends. However, even with the last of the bond money released and revenue from California’s cap-and-trade program, the $23.8 billion line will likely require even more funding to get it finished.

L.A. survey: Public favors rail tunnel over monorail

An LA Metro public survey reveals 93% support for a tunnel instead of a monorail to provide a transit link between Los Angeles’ Westside and the San Fernando Valley. Those who commented on the tunnel option said it would make for speedier travel and better transfer options to existing and future rail transit lines. Full Story: Los Angeles Daily News