Capitol Update 12/19/2022
A study by the Associated General Contractors of America found about a 10% increase in total costs for the construction industry over the past year. The study looked at building materials, fuel and labor and found persistent supply chain bottlenecks, while “the cost of labor for all kinds of construction firms has been going up at a rapid rate,” says AGC Chief Economist Ken Simonson. Full Story: Spokane Public Radio (Wash.)
Federal Reserve Chair Jerome Powell has spotlighted wages in the central bank’s continued mission to bring inflation under control, noting last week that pay is rising at a rate “well above what would be consistent with 2% inflation.” Fed officials will have to gauge whether recent pay increases represent a readjustment in the market or a sign of a long-term trend that could feed inflation far into the future. Full Story: BNN Bloomberg (Canada) USA Today
Inflation slows to 7.1% for November, another sign the economy is cooling off
Consumer price growth cooled in November, indicating a slowing economy and a sign that the Federal Reserve’s aggressive rate-raising campaign to fight inflation is starting to pay off. On a year-over-year basis, inflation hit 7.1%, a slowdown from the 7.7% in October and lower than the 7.3% expected by analysts. It’s the smallest 12-month increase since December 2021, when it was 7.0%, according to the U.S. Bureau of Labor Statistics. On a monthly basis, inflation climbed just 0.1%, compared to 0.4% in October. Persistent high prices have severely eroded earnings in the United States. On an inflation-adjusted basis, the median weekly take-home pay for all workers in the most recent quarter — $361 — failed to surpass the $362 of the fourth quarter of 2019, and it only just had its first quarterly increase in this stage of the coronavirus pandemic. Still, there are signs across the economy that price growth is cooling. Tuesday’s data captures the first sustained decreases in gas prices. As of last week, gas prices were found to have settled below where they were one year ago. On Tuesday, the national average was $3.24, according to AAA. Prices have already dipped below a $3 average across the Southern and the Plains states, the organization’s data show.
California’s Minimum Wage to Increase to $15.50 per hour
Oakland—California’s minimum wage will increase to $15.50 per hour for all employers on January 1, 2023. Some cities and counties in California have a local minimum wage that is higher than the state rate.
State law requires that most California workers be paid the minimum wage. Workers paid less than the minimum wage are urged to contact the Labor Commissioner’s Office in their area to file a wage claim.
The change in the minimum wage also affects the minimum salary an employee must earn to meet one part of the overtime exemption test. Exempt employees are not subject to the payment of overtime for working overtime hours. An employee must earn no less than two times the state’s minimum wage for full-time work to meet this initial requirement of the exemption test. As of January 1, 2023, employees in California must earn an annual salary of no less than $64,480 to meet this threshold requirement.
In 2016, California passed a law to raise the minimum wage to $15.00 per hour statewide by 2022 for large businesses with 26 or more employees, and by 2023 for small businesses with 25 or fewer employees. This law increased the minimum wage over time, consistent with economic expansion while providing safety valves if adverse economic conditions emerged.
One of the protections outlined in the minimum wage law involves an annual review of the United States Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W) by the Department of Finance. This past July, the Department of Finance found that the inflation rate had increased by 7.9%, which required an increase in the minimum wage by 3.5%, resulting in the $15.50 per hour rate for 2023.
After 2023, the minimum wage will increase based on the lesser of 3.5 percent and the rate of change in the averages of the two most recent U.S. CPI-W unless those averages are negative. If the averages are negative, there shall be no increase or decrease in the minimum wage for the following year.
Employers must post information on wages, hours and working conditions at a worksite area accessible to employees. Notices for the wage orders in English and Spanish can be downloaded and printed from the workplace postings page on the DIR website.
Employers must ensure that the wage rate is displayed on the employee’s pay stub, and that employees are paid at least the minimum wage even when employees are paid at piece rate.
Employees with work-related questions or complaints may contact the Labor Commissioner’s Office Call Center in English or Spanish at 833 LCO-INFO (833 526-4636).
Job growth will likely ease up soon, but inflation might as well, which bodes well for the economy and means the US won’t face a recession in 2023, says Ken Simonson, chief economist for the Associated General Contractors of America. Simonson notes there is strong demand for manufacturing facilities, and the markets for infrastructure and power also appear strong. Full Story: Equipment World
The federal government would be funded through next Sept. 30 under a framework agreed on by leaders of the Senate and House Appropriations Committees. Legislators did not disclose the size or contents of the planned omnibus spending measure, but Senate Appropriations Committee Chairman Patrick Leahy, D-Vt., said the framework “should allow us to finish an omnibus appropriations bill that can pass the House and Senate and be signed into law by the president.” Full Story: Engineering News-Record (tiered subscription model)
Construction may be able to stay in the black in 2023 amid a somewhat improved outlook for the US economy, even though some aspects of a recession remain possible, according to a year-end report from Dodge Construction Network. As for the passing year, the report notes that legislation and further onshoring to address supply chain issues was one key factor lifting construction activity in markets such as manufacturing, life sciences, data centers, health care, infrastructure and multifamily. Full Story: Dodge Data & Analytics
Revenue should rise by 5% year over year and profit is expected to be up as well in fiscal 2022, according to updated guidance from Balfour Beatty. The UK contractor also predicts 5% higher backlog, credited largely to shifts in foreign exchange rates. Full Story: Construction Dive
The world is slowly waking up to the role that reducing embodied carbon in construction must play to address the challenge of climate change, and the industry is moving steadily in this direction on a number of fronts. Heather Clancy reviews examples of advances in areas such as prefabrication, the use of mass timber, production of less carbon-intensive cement and ways to accurately measure environmental impact. Full Story: GreenBiz
Inflation and trends in the economy are likely to have greater effects on construction than the results of November’s midterm elections, according to Peter Tateishi, CEO of Associated General Contractors of California. ConstructConnect Chief Economist Alex Carrick echoes the caution, noting rising interest rates as part of a Federal Reserve inflation strategy and a worrisome plan to slow the economy that “might bring on recessions of who knows what duration or magnitude.” Full Story: Daily Commercial News (Ontario)
At least six states are experimenting with mixes of plastic in roadway paving, with some favorable performance results. Monitoring is underway to determine if usage leaks microplastics into waterways and which mixes are most durable against heavy truck traffic and extreme weather. Full Story: The Pew Charitable Trusts
Removing and subsequently breaking concrete into fill material for bridge approaches is an example of how the Arizona Department of Transportation is looking to extend the life span of materials and reduce waste. Other state DOTs are turning dredged material into concrete barriers and donating damaged concrete pipe to artificial reefs. Full Story: AASHTO Journal
Adaptive reuse, or bringing new purpose and life to old buildings, can greatly limit the harm to the climate, budgets and schedules entailed in building an entirely new structure. Mike Cavanaugh and Scott Waddell of CannonDesign explore the advantages of adaptive reuse and four major examples as well as two smaller ones. Full Story: Building Design + Construction (free registration)
CPI for all items rises 0.1% in November as shelter and food increase
In November, the Consumer Price Index for All Urban Consumers increased 0.1 percent, seasonally adjusted, and rose 7.1 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.2 percent in November (SA); up 6.0 percent over the year (NSA).
In November, unemployment rates were higher in 12 states, lower in 3 states and the District of Columbia, and stable in 35 states. Nonfarm payroll employment increased in 8 states and was essentially unchanged in 42 states and the District.
Contractor Sues Golden Gate Bridge District Over Suicide Net Project
The project to install a suicide-deterrence net and perform other upgrades on the Golden Gate Bridge in San Francisco now is expected to complete five years late and cost more than double the original contract price, its contractors say. The joint venture leading the project filed a breach-of-contract complaint against the agency that manages the bridge seeking $195 million in damages, while the agency counters that delays were caused by changes in the contractor’s ownership. Shimmick/Danny’s Joint Venture, made up of Shimmick Construction Co. Inc. and steel erection contractor Danny’s Construction Co. LLC, is the project prime contractor for the Golden Gate Bridge, Highway and Transportation District. Under a $142-million contract signed In 2017, the project was originally slated to finish by early 2021. The contractor says it now expects to complete work in 2026 at a cost of $398 million—blaming the district for delays and overruns.
First West Coast Offshore Wind Site Auction Ramps to $757M Finale
U.S. firms and giant European developers have offered more than $757 million for five ocean tract leases off central and northern California for offshore wind energy projects in deep water that will require floating wind turbines—the first use of the technology in the U.S. and the first such clean energy development plan in West Coast waters. After 31 rounds of U.S. Interior Dept.-sponsored bidding on Dec. 6- and 7—among those participants that proceeded out of 43 eligible—five entities won the leases, the agency said.
Extensive port infrastructure will be needed if offshore wind power is developed along California’s Central Coast, according to a study by Mott MacDonald, which suggested potential sites for large and small facilities along the coasts of San Luis Obispo and Santa Barbara counties and possible costs. Facilities could assist with assembly or help with operations and maintenance. Full Story: The Tribune (San Luis Obispo, Calif.)
Crews have begun excavating an outlet tunnel at the Anderson Dam in Santa Clara County, Calif., as part of a $1.2 billion rebuild project. The goal is to make the county’s largest dam resilient to earthquakes, and the tunnel — which will extend 1,700 feet with a height of 24 feet — will allow the reservoir to be drained rapidly during a seismic event or extreme storm. Full Story: San Jose Mercury News (Calif.) (tiered subscription model)
The new year is likely to see completion of several $1 billion-plus projects in Los Angeles, including the $2 billion automated people mover project at Los Angeles International Airport. The airport is also home to other major projects set for 2023 completion, including the $2.3 billion modernization of Terminals 2 and 3 and a southern extension of the $1.7 billion West Gates terminal. Full Story: Los Angeles Business Journal (free registration)