Capitol Update 10/24/2022
The Federal Reserve cannot risk suspending interest-rate increases after reaching 4.5% to 4.75% if a key indicator shows inflation continues to gather momentum, Federal Reserve Bank of Minneapolis President Neel Kashkari says. “Core services inflation — which is the stickiest of all — keeps climbing, and we keep getting surprised on the upside,” Kashkari says. Full Story: BNN Bloomberg (Canada)
Many economists surveyed by The Wall Street Journal believe a recession is likely in the next 12 months, with the average respondent putting the probability at 63%. Economists expect the federal-funds rate to reach a high point in June 2023, and a majority believe the Federal Reserve could start cutting rates again later that year or in 2024. Full Story: The Wall Street Journal
Almost half of construction workers responding to a StrongArm Technologies survey say they are experiencing stress at work, with the main causes being difficulty finding workers and worries about adequate pay. Among industrial workers as a whole, roughly one-fifth said their profession is unwilling to promote a healthier work-life balance. Full Story: Construction Dive
The construction industry added 19,000 jobs in September, but that paired with a better-than-expected overall US job gain of 263,000 for the month raised fears of a further sharp increase in interest rates. Much of the construction gain was in the nonresidential sector, with 13,100 added jobs, but Ken Simonson, chief economist for the Associated General Contractors of America, noted that while hourly wages grew at the fastest rate in four decades, contractors are still struggling to find qualified labor. Full Story: Engineering News-Record (tiered subscription model) (10/7)
An 11.7% jump in the institutional component led the Dodge Momentum Index to a 5.7% gain and a reading of 183.2 in September. The commercial component rose 2.9%. Full Story: Dodge Data & Analytics (10/7)
Lower-quality office buildings are expected to see the biggest decline as remote work trends pull down office valuations in New York City as much as 39% by 2029, according to a report from the NYU Stern School of Business and Columbia University Business School. The trend is expected to affect other cities as well, while in New York City the overall valuation drop is predicted at $453 billion. Full Story: Construction Dive (10/10)
North American crane count holds steady in Q3
The number of cranes in North America’s major cities has held steady from Q1 to Q3 2022, according to the latest Rider Levett Bucknall Crane Index. Measured cities are down by only three cranes, less than 1%, for that time period. Los Angeles, Seattle and Denver topped the list of U.S. cities with 46, 42 and 32 cranes respectively, while Toronto remained at the very top of the overall list with 230. RLB published the crane count in conjunction with its quarterly construction cost report, which indicated commercial construction has remained strong amid recessionary fears, higher staffing costs and continued inflation.
Labor crunch could ‘rob the US’ of critical infrastructure: McKinsey
The federal Infrastructure Investment and Jobs Act is expected to create hundreds of thousands of new job openings over its roughly five-year duration, but worker shortages in construction and related industries could stymie the effort, according to new analysis from management consulting firm McKinsey. McKinsey estimated the shortfall attributable to the infrastructure act by 2028 will be more than 160,000 workers in the contractor and subcontractor sector, 145,000 workers in the materials sector and 40,000 workers in the engineering and technical-services sector. Not addressing the issue soon threatens to waste the potential of the historic funding for U.S. infrastructure. “Failing to do so may rob the United States of tens of thousands of miles of roads, thousands of bridges, and miles of water and electrical infrastructure that could have been funded by this bipartisan investment and made our lives better for years to come,” the authors wrote.
Turner: Labor shortage prompts contractors to be selective about jobs
The Turner Building Cost Index, a measure of cost in the U.S. nonresidential construction market, increased to a value of 1311 in the third quarter of 2022, marking a 2.18% increase from the second quarter and an 8.62% increase year over year. The report, released by New York City-based Turner Construction, found that the industry is experiencing a thriving market with numerous megaprojects in the works. Nonetheless, costs continue to rise. The skilled labor shortage allows contractors to be selective in projects they pursue, said Attilo Rivetti, Turner vice president, in a release. Wages have risen to attract more labor into the industry and to incentivize more workers to travel for projects.
Speedier work on projects associated with the bipartisan infrastructure law is the goal for a White House summit that kicked off this morning with mayors and governors. “We’re going to really push hard to make it go faster and try to do it better, and try to get at least all the federal agencies focused on accelerating the pace of design, construction, permitting,” says Mitch Landrieu, the Biden administration’s infrastructure coordinator.
Full Story: The Associated Press
A labor squeeze and long lead times for materials are causing contractors to be selective about the jobs they choose as the Turner Building Cost Index rose 2.18% in the third quarter from the second. On a year-over-year basis the index was up 8.62%.
Full Story: Construction Equipment Guide
A Bloomberg Economics model puts the probability of a recession within 12 months at 100%, compared with 65% in the previous forecast. The model, which looks at 13 macroeconomic and financial indicators, also shows higher expectations of a recession within 10 months and within 11 months. Full Story: BNN Bloomberg (Canada)
California has begun work on its Broadband for All program, a $6.5 billion, 10,000-mile broadband internet network that will be built over the next several years. A total of $3.25 billion will be spent to build, operate and maintain the high-speed internet network, with $2 billion to fund last-mile broadband connections for homes and businesses. Full Story: California Globe
A net balance of 12% of heavy side manufacturers realized a drop in construction product sales during the third quarter while a net balance of 17% of light side manufacturers noted a rise in product sales, according to a Construction Products Association survey. However, heavy side and light side manufacturers expect declines in the coming 12 months. Full Story: The Construction Index (UK)
Experts expect millions of new construction jobs in the coming months and say immigration reform is the best way to increase the labor pool and ease shortages. Any long-term immigration reform likely won’t be possible until after this year’s elections, but short-term solutions could include a temporary visa program for construction and charging fees for Foreign Labor Certification applications to help speed up processing, they say.
Full Story: Construction Dive
Labor shortages continue to plague the construction industry, with more than 90% specialty contractors saying work has been affected by the skilled-labor shortage, according to a report from Dodge Construction Network and Procore Technologies. The report also found that concrete contractors face much smaller profit margins than mechanical, electrical, plumbing and steel contractors. Full Story: GlobeSt (free registration) Concrete Products
Some cities are revitalizing their downtowns and combating housing shortages by converting empty office buildings to residential units. Cities such as San Francisco are looking toward the model of Calgary, Alberta, where Canadian government officials launched a 10-year, $1 billion initiative — equivalent to about $721 million US dollars — to assist local developers with the high costs of construction. Full Story: San Francisco Chronicle (tiered subscription model)
More than 2,300 companies are signed up for the second annual Construction Inclusion Week, an industry-driven effort to combat hate and exclusionary behavior on job sites through a greater commitment to diversity and fostering belonging. For its part, Turner Construction has reduced bias-related incidents on its job sites by having twice daily checks for graffiti and racial bias incidents on sites as well as addressing the incidents in weekly town halls, and CEO Peter Davoren says he often personally visits sites of racial bias and brings together trade partners to relay a message of “active caring.” Full Story: Construction Dive Construction Dive
The Infrastructure Investment and Jobs Act has helped reinvigorate the debate about transport infrastructure and the role it can play in helping communities to flourish. This November, voters will have their say on proposals such as a tax on millionaires in Massachusetts to fund better public transport, improvements to bus services in Detroit, and a one-cent sales tax increase to finance a number of transportation projects in Orange County, Fla. Full Story: Governing
The bipartisan infrastructure law has in its first year provided federal funding for the upgrade or replacement of 2,400 bridge projects nationwide, with around $5.5 billion of $40 billion appropriated paid out this year. Up to 7.5% of the 617,000 bridges in the US are estimated to have some sort of structural defect, and the American Society of Civil Engineers estimates the country has a repair backlog as high as $125 billion. Full Story: The Daily Wire
The Biden administration will provide $7.1 million in grant funding to 25 state departments of transportation as part of the Federal Highway Administration’s Climate Challenge. The initiative provides funding and know-how to investigate life cycle assessments and environmental product declarations for paving materials and other products on highway design projects. Full Story: Department of Transportation E&E News
In September, unemployment rates were lower in 11 states and the District of Columbia, higher in 9 states, and stable in 30 states. Nonfarm payroll employment increased in 9 states, decreased in 1 state, and was essentially unchanged in 40 states and the District.
In September, the Consumer Price Index for All Urban Consumers increased 0.4 percent, seasonally adjusted, and rose 8.2 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.6 percent in September (SA); up 6.6 percent over the year (NSA).
The Producer Price Index for final demand increased 0.4 percent in September. Prices for final demand services and for final demand goods both rose 0.4 percent. The index for final demand advanced 8.5 percent for the 12 months ended in September.
Guidelines issued by California Attorney General Rob Bonta outline measures for local governments to take to avoid litigation and the loss of life by addressing wildfire risk in real estate development plans. Bonta’s recommendations include mandating the use of fire-resistant construction materials, pursuing greater housing density and weighing factors such as an area’s fire history. Full Story: BNN Bloomberg (Canada)
Construction that’s underway on the project to add a third lane to California’s Highway 101 between Santa Barbara and Carpinteria will get a cash-flow boost from a new $75 million federal loan. The Santa Barbara County Association of Governments is co-managing the project with Caltrans and is now “the first in our region to pursue and close on a TIFIA loan as an innovative financing option to deliver a public infrastructure project,” SBCAG spokeswoman Lauren Bianchi Klemann said. Full Story: The Tribune (San Luis Obispo, Calif.)/Noozhawk
The University of California at Davis will add a $40 million 40,000-square-foot research hub to study agricultural practices. Funding for the project comes from a $50 million donation from billionaire farmers Lynda and Stewart Resnick of The Wonderful Co. Full Story: Los Angeles Times (tiered subscription model)
Demolition of four buildings and excavation are underway on the site where Google plans to build the Downtown West neighborhood in San Jose, Calif. The development will include 7.3 million square feet of offices, 4,000 housing units and 500,000 square feet of retail space. Full Story: San Jose Mercury News (Calif.) (tiered subscription model)
California has announced a $1.2 billion package of improvements to port facilities at Los Angeles and Long Beach. The California State Transportation Agency said the measures are intended to make the port operations more efficient and improve operational resilience and sustainability. Full Story: Supply Chain Dive