Capitol Update 1/16/2023
What’s keeping contractors up at night?
Builders are bullish on infrastructure work this year thanks to federal funding, but expect supply chain snarls and hiring difficulties to persist, according to Associated General Contractors of America’s 2023 Construction Outlook National Survey. COVID-19 continues to impact the industry, hitting supply chains in particular. That’s the top concern for builders in the survey, as the uncertainty has caused a variety of negative ripple effects that ultimately mean higher costs and lower profits. As inflation and the specter of a recession continue to loom, contractors are feeling less confident about private sector work. Builders have reason to be worried: last year 36% of respondents had projects canceled or postponed but not rescheduled. The main reason given, for about half the projects, was rising costs. The association received 1,032 responses overall, primarily from general contractors. Although contractors are optimistic overall, that doesn’t mean there aren’t rocky times ahead, said AGC Chief Economist Ken Simonson in a webinar last week about the survey. “Even when we’ve had recessions or slow growth expectations for the economy, contractors are by nature optimists,” Simonson said. “But it is notable that in nearly all of these categories, particularly on the private side, contractors have lower net positive readings or deeper negative readings than they did in previous years.”
California Storms Costs Could Add Up to Nation’s First Billion-dollar Disaster of 2023
As severe storms continue to hit California , a climate expert warns that the costs to the state could be in excess of $1 billion . The total is a reflection of “physical damage to homes, businesses and municipal properties,” said Adam Smith, an applied climatologist and disaster expert with the National Oceanic and Atmospheric Administration .
Strong performances in the commercial and institutional sectors buoyed a 6.6% month-to-month increase for the Dodge Momentum Index in December. Richard Branch, chief economist for Dodge Construction Network, characterized 2022 as a year of positive sentiment for nonresidential construction, and although that optimism may subside in the new year due to economic conditions, data centers, laboratories and health care buildings will still “provide a solid floor for the construction sector.”
Institutional construction this year should total around $171 billion nationwide, about the same as last year in nominal dollars, according to Dodge Construction Network Chief Economist Richard Branch. Branch credits federal stimulus spending for the sustained outlays, with particular strength expected from planned construction of labs, hospitals and recreation and transportation facilities. Full Story: Construction Dive
Commercial construction starts are projected to decline by an inflation-adjusted 13% this year, according to Dodge Construction Network. The outlook isn’t entirely bleak, with manufacturing facilities expected to see gains even as retail, traditional offices and hotel projects fall off, according to Richard Branch, chief economist at Dodge Construction Network. Full Story: Construction Dive
The construction industry saw its eighth consecutive monthly rise in jobs with 28,000 positions added in December, according to the Bureau of Labor Statistics. The largest jump among subsectors was nonresidential specialty trade construction, with an increase of 10,200. Full Story: Engineering News-Record (tiered subscription model)
The Environmental Protection Agency is seeking comments on a draft released last week for stiffer national air standards for soot pollution. Construction industry groups and others have expressed wariness over new rules after the expenditure of millions of dollars to conform to tighter standards mandated in 2012. Full Story: Engineering News-Record (tiered subscription model)
In December, the Consumer Price Index for All Urban Consumers decreased 0.1 percent, seasonally adjusted, and rose 6.5 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in December (SA); up 5.7 percent over the year (NSA).
Strong backlog report includes warning of tighter financing
Construction backlog remained unchanged in December at 9.2 months, according to Associated Builders and Contractors. The numbers provide a cushion for the sector against a potential recession, but the organization’s economist said reason for caution remains, as higher costs for capital stymied some projects. ABC’s Construction Backlog Indicator reached its highest level in November since the second quarter of 2019, as contractors with under $30 million in revenue landed new jobs faster than expected. That high water mark was matched again in December. “Contractors enter the new year with plenty of optimism,” said Anirban Basu, ABC chief economist, in the release, but added “contractors may soon show more concern. Anecdotal evidence suggests that financing commercial real estate projects is more difficult.”
Sector watch: ‘A lot of money on the table’ for civil construction this year
Editor’s note: To kick off 2023, Construction Dive is taking a look at the outlook for the country’s top construction verticals. Click here for the second story in the series.
The Infrastructure Investment and Jobs Act will boost activity in the civil construction space in 2023, according to Dodge Construction Network. Dodge expects civil construction starts, such as public transit, roads, bridges, EV charging stations, water-related projects and power plants, to total $281 billion in 2023, a 16% jump from last year. That’s because infrastructure funds will steadily flow into the market in 2023. As of July 2022, only a small fraction of IIJA dollars had entered the market, according to Dodge. Out of all the IIJA dollars already allocated for projects, 19% has made its way to road and bridge projects, 21% to public transit projects, 15% to EV charging stations and 14% to water infrastructure, said Branch. “There’s a lot of money still on the table waiting to be spent,” said Branch. “We continue to think 2023 and 2024 are the best years for infrastructure construction,” he said, though it’s possible that timeline could get pushed out by a year.
While construction equipment has used electric power for some time, there’s been a recent push toward using it at general job sites, as evidenced by recent news from the likes of Volvo Construction Equipment, JCB North America and Doosan Infracore North America. “While we’re going to produce diesel equipment for a long time, there are customers and applications that really want this new EV technology,” says Doosan Bobcat’s Joel Honeyman. Full Story: For Construction Pros
Rep. Sam Graves, R-Mo., a former ranking member of the House Transportation and Infrastructure Committee, will head up the panel in the new, Republican-led Congress. Graves says the committee will focus on improvements in supply chains and other transportation-related policies as well as oversight of spending under the bipartisan infrastructure law. Full Story: Transport Topics
The average wage of $33.15 an hour for nonsupervisory construction workers in December was up 6.1% from a year before, topping the 5% average gain for workers in the private sector, according to analysis by the Associated General Contractors of America. Meanwhile, the construction jobless rate fell to 4.4% from 5% in December 2021, and the number of unemployed construction workers eased to 443,000, a record low for the month, AGC said. Full Story: Construction Europe