Capitol Update 5/06/2022
Total nonfarm payroll employment increased by 428,000 in April, and the unemployment rate was unchanged at 3.6 percent. Job growth was widespread, led by gains in leisure and hospitality, in manufacturing, and in transportation and warehousing.
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Compensation costs increased 1.4 percent for civilian workers, seasonally adjusted, from December 2021 to March 2022. Over the year, total compensation rose 4.5 percent, wages and salaries rose 4.7 percent, and benefit costs rose 4.1 percent.
US Productivity Fell The Most Since 1947 In First Quarter
Bloomberg reports that “U.S. productivity dropped in the first quarter by the most since 1947 as the economy shrank, while labor costs surged and illustrated an extremely tight job market. Productivity, or nonfarm business employee output per hour, decreased at a 7.5% annual rate from the previous three months, according to Labor Department figures Thursday.” Bloomberg says “that compared to a 6.3% gain in the fourth quarter and the 5.3% projected decline in a Bloomberg survey of economists.” CNBC reports on its website, “At the same time, unit labor costs soared 11.6%, bringing the increase over the past four quarters to 7.2%, the biggest gain since the third quarter of 1982.” According to CNBC, “The metric calculates how much employers pay workers in salary and benefits per unit of output.”
Stock Indices Plummet, Erasing Wednesday’s Post-Fed Rate Hike Gains
CNBC reports that “stocks pulled back sharply on Thursday, completely erasing a rally from the prior session in a stunning reversal that delivered investors one of the worst days since 2020.” The Dow Jones Industrial Average “lost 1,063 points, or 3.12%, to close at 32,997.97,” the Nasdaq “fell 4.99% to finish at 12,317.69, a fresh closing low for the year,” and the S&P 500 “fell 3.56% to 4,146.87, marking its second worst day of the year.” CNC notes that “the moves come after a major rally for stocks on Wednesday, when the Dow surged 932 points, or 2.81%, and the S&P 500 gained 2.99% for their biggest gains since 2020. The Nasdaq Composite jumped 3.19%.” Reuters reports that “technology megacaps slumped. Google-parent Alphabet, Apple, Microsoft, Meta Platforms, Tesla and Amazon.com all fell between 4.3% and 8.3%.”
The AP reports that “the yield on the 10-year Treasury note rose to 3.04%.” The AP notes that on Wednesday, the Federal Reserve “raised its benchmark interest rate by half a percentage point as part of an effort to slow consumer borrowing and tamp down inflation, which is at a four-decade high.” The Washington Post says, “Faced with soaring prices and a hot job market with record numbers of job openings, the Fed is betting that a steady series of hikes will slash inflation, cool the economy and get the coronavirus recovery on more sustainable footing, at a time when much uncertainty looms in the global economy.” The New York Times points out that “investors are also about to get two more widely watched updates on the economy. The Labor Department will publish its monthly report on hiring on Friday,” and “the government will also release its latest update of the Consumer Price Index next Wednesday
California High-Speed Rail Connection to Silicon Valley Approved
A critical 90-mile section of California’s high-speed rail extending the system from the Central Valley into the San Francisco Bay Area has been unanimously approved by the High-Speed Rail (HSR) Authority Board of Directors. The Final Environmental Impact Report/Environmental Impact Statement (EIR/EIS) for the San Jose to Merced project section in Northern California was approved by the board on April 28. The action completes the environmental clearance for nearly 400 miles of its entire 500-mile Phase 1 alignment from San Francisco to Los Angeles/Anaheim. With the environmental process complete, the High Speed Rail Authority—the entity responsible for planning, designing, building and operating the nation’s first high-speed rail system—now has a plan moving forward, says HSR spokesman Anthony Lopez. “We know what the alignment will be and where we will be building, and generally the approach we are going to take with that alignment,” he says. The next step is the design-build and preconstruction phase, which can begin as soon as funding is secured, says Lopez. In the meantime, he says the main focus of work is in the Central Valley, where there are 35 active job sites spanning 119 miles. “The 119 miles will serve as a test and certification track (for the HSR project), as there is currently no place planned or under construction anywhere in the country where we could achieve our voter mandated speeds of 200-plus miles per hour,” says Lopez. The planned San Jose to Merced project section will connect the existing construction in the Central Valley to San Jose’s Diridon Station, the city’s central passenger rail depot and a major intermodal transit center for Santa Clara County and Silicon Valley. Officials say the high-speed rail system will make the trip from Fresno to San Jose in one hour, compared to three hours by car today.
Double-digit year-to-year cost increases are evident in 13 out of 15 Producer Price Index series listed in a table of construction material costs documented in March. And there’s little sign of change, with double-digit gains in nine out of the 15 categories over the latest three months. Full Story: Daily Commercial News (Ontario)
The Office of Management and Budget has issued new guidance to minimize any possibility of “fraud, waste and abuse” of funds from the bipartisan infrastructure law. The guidance draws on lessons from implementation of the American Rescue Plan and addresses the use of data and evidence in program development, compliance, documentation, reporting and governmental stakeholder engagement. Full Story: Route Fifty
Granite posts nearly 20% quarterly revenue loss as it works through less profitable projects
Granite Construction posted a loss in the first quarter of 2022, one it said was expected as it shifts its portfolio away from less profitable areas. The company’s Q1 profits fell by $4 million to $50 million, from nearly $54 million last year. Granite attributed the loss in part to a $29 million revenue decline in its Central group, the region where it’s working through what it calls “old risk portfolio” projects. The Watsonville, California-based company builds a variety of public projects including bridges, airports and the Florida I-4 Express lanes pictured above. The company on Wednesday also announced revenue of $548 million, down $18 million from last year’s $566 million, and $135.2 million less than last quarter. Stock prices fell slightly to $28.74 per share Thursday morning before climbing to $29.9 by market close, down from Wednesday but 23.2% lower year over year.
Despite $21.6M loss, Tutor Perini sticks to its guidance
Los Angeles-based contractor Tutor Perini Wednesday posted a loss of $21.6 million, or 42 cents per share for the first quarter, widely missing analysts’ expectations of 9 cents in profits, after writing off a combined $43.1 million in charges for two projects in its civil segment. The firm’s revenue also tumbled to $952 million, down 21% from $1.21 billion a year ago, a decline it attributed to reduced execution on two projects in California as well as an adverse legal ruling in a dispute for a completed bridge project in New York, and continued overhang on operations from the COVID-19 pandemic. But Tutor Perini’s backlog, or the amount of work won but not started yet, ticked up sequentially from $8.2 billion a quarter ago to $8.3 billion now, which was also 2% higher than the $8.1 billion it reported last year. The company said its operating cash flow dramatically improved to $120.7 million as it collected money owed by clients, a record first quarter amount that compared to negative cash flow of $46.7 million a year ago.
Skanska posts 21% dip in Q1 profits
Sweden-based construction firm Skanska reported Wednesday that first-quarter profit dropped roughly 21% year over year to $151 million (1.5 billion Swedish Krona), or about 18 cents a share. Although the global contractor and developer doesn’t have projects in Ukraine, the Russian incursion there poses continued uncertainty for what was an already stressed supply chain, CEO Anders Danielsson said, while also slightly hindering the contractor’s book-to-build ratio in Europe. Danielsson said the effects of the COVID-19 pandemic appear to be subsiding in many regions where Skanska does business, leading to a return to higher bookings and increased backlog.
New McCarthy CFO: Jobs crisis industry’s ‘biggest challenge’
Kristine Newman got started at McCarthy — her first job in construction — by discovering a posting on Monster.com. Seventeen years later, on April 8, the St. Louis-based contractor announced Newman’s appointment to CFO. Prior to McCarthy, Newman began her career at Arthur Anderson LLP, working on audit and consulting engagements. After more than a decade as a controller for McCarthy’s Southwest Region, Newman was promoted to a vice president position in 2016. McCarthy, which ranked No. 19 in ENR’s top 400 contractors 2021, is employee owned. The builder has locations around the country, working on projects in sectors like hospitality, education and healthcare – such as the Loma Linda University Medical Center in California (pictured above). Here, Construction Dive talks with Newman about the biggest issues the industry faces as she steps into her new role. The following has been edited for brevity and clarity.
Revisions to the state building code in Washington state now require electric heat pumps in the place of natural gas, marking one effort out of several by states to bring about gas bans. It’s part of a broad effort using building codes to promote clean energy that continues to face stiff opposition from the gas industry and others who argue the moves pose a threat to the energy grid and shut out other green solutions. Full Story: E&E News
Technology will help builders achieve new levels of efficiency in delivering the nation’s infrastructure projects. Cyndee Hoagland, senior vice president of public sector at Trimble, reviews how technological solutions can be applied to reporting on how infrastructure dollars are spent, designing with 3D models and managing assets over their life cycles. Full Story: American City & County
Twenty-one water resource projects planned by the US Army Corps of Engineers would be funded under a bipartisan bill that the Senate Environment and Public Works Committee is expected to vote on this week. The $24.6 billion in federal funds would go toward flood and hurricane protection, harbor dredging and other projects. Full Story: Engineering News-Record (tiered subscription model)
Report: GCs more likely than subs to get paid on time
Contractors working on residential jobs say their rate of prompt payment is significantly better than those on commercial or public jobs, according to a new report from construction software company Levelset. Contractors working on residential projects are more than twice as likely as those working on public projects to report getting paid within 30 days, with residential construction contractors saying they are paid in 30 days or less 48% of the time and public construction contractors saying that only happens 21% of the time. In addition, significantly slow payments of 60 days or more are three times more likely on public construction projects than on residential construction projects, according to the 2022 Levelset Cash Flow and Payment Report released Monday. Residential contractors say it happens rarely, just 6% of the time, while public project contractors say it happens nearly one out of five times (18%).
Transit megaprojects in California are often beset by poor planning and suboptimal procurement methods, but shifting away from design-bid-build and giving builders more of a voice in the design stage can help, according to a report by the University of California at Berkeley. The report looks at five case studies to illustrate how big rail projects run over budget and behind schedule. Full Story: Construction Dive
Experts: Consider extreme weather, tech shifts to build resilient infrastructure
As the Infrastructure Investment and Jobs Act rolls out, relevant agencies and organizations are planning how to best make use of the funds. That means taking advantage of the five-year influx of spending to build for the needs of a rapidly shifting world, said presenters at a National Institute of Building Sciences webinar on April 19. “Things are changing in terms of how we view infrastructure…we’re not just thinking about business and economic development only, we’re thinking of how we affect the entire community,” said Dan Pippenger, COO at the Port of Portland, Oregon, at the webinar. His organization manages airports and marine terminals in the Portland area. “Our infrastructure has to be adaptable and reliable, and it’s not today,” Pippenger said. “It’s not made for the future challenges we’re going to have.” The American Society of Civil Engineers gave the country’s infrastructure a C- grade in its latest report card. Many sectors have massive maintenance backlogs and don’t meet current and future demand, the 2021 analysis found.
Construction on Reno, Nev.’s Spaghetti Bowl Xpress project has passed the 75% completion mark, according to a project manager for the Ames Construction/Q&D Construction joint venture overseeing it. The $181 million project is adding one lane on Interstate 580 where it crosses over Interstate 80, and three lanes have been added beyond the I-80 eastbound and westbound on-ramps’ merger with southbound I-580. Full Story: Northern Nevada Business Weekly (Reno)