Capitol Update 8/08/2022
Federal guidance on preventing heat-related illness with rest, water and shade should be followed until new standards are issued, according to presenters at an Associated General Contractors of America conference last week in Washington, D.C. The Occupational Safety and Health Administration issued a “national emphasis program” in April that leaves contractors liable for heat illness incidents under OSHA’s general duty clause.
Full Story: Construction Dive
The Federal Reserve has raised its key interest rate by 75 basis points, the second consecutive increase of that size, as the central bank continues an effort to tame inflation. The Fed plans to approach policy decisions on a meeting-by-meeting basis, says Chair Jerome Powell, who notes, “These rate hikes have been large, and they’ve come quickly, and it’s likely that their full effect has not been felt by the economy, so there’s probably some significant additional tightening in the pipeline.”
Two government reports show continued increases in wages and inflation, which observers say make a 75-basis-point interest-rate increase likely in September. The employment cost index shows pay for civilian workers rose 1.3% in the second quarter, while the core personal consumption expenditures price index climbed 1% in June, bringing the annual rate to 6.8%. Full Story: Financial Times (subscription required) The New York Times CNN
Compensation costs increased 1.3 percent for civilian workers, seasonally adjusted, from March 2022 to June 2022. Over the year, total compensation rose 5.1 percent, wages and salaries rose 5.3 percent, and benefit costs rose 4.8 percent.
Payroll employment rises by 528,000 in July; unemployment rate edges down to 3.5%
Total nonfarm payroll employment rose by 528,000 in July, and the unemployment rate edged down to 3.5 percent. Both total nonfarm employment and the unemployment rate have returned to their February 2020 pre-pandemic levels.
Dodge economist: Recession may be ‘fairly short’
New York City-based data consortium Dodge Construction Network revealed a new quarterly report on Tuesday morning that’s focused on the state of the construction industry in the broader economy. The new report details the economic turmoil gripping the construction industry, caused by sky-high inflation and rising interest rates. It’s not all bad news: The report notes that the $1.2 trillion Infrastructure Investment and Jobs Act will be a vehicle for significant investment into the nonresidential construction industry, and will create opportunities for contractors to gain work.
Women are making strides in construction and proving their worth with hard work and an ambition to excel, Erin Thorburn writes. Thorburn explores how some women have pursued different paths in the industry and the new opportunities opened by mentoring programs, including The National Association of Women in Construction. Full Story: AZ Big Media (Phoenix)
The Senate’s proposed Inflation Reduction Act of 2022 includes a handful of components of interest to state departments of transportation, including $3 billion for the Neighborhood Access and Equity Grant Program and $2 billion to support the use of low-embodied carbon construction materials and products in projects. It also includes $100 million to support environmental reviews for surface transportation projects. Full Story: AASHTO Journal
US firms facing tight labor market revise pay, reward plans
U.S. companies confronting a tight labor market and the worst price pressures in four decades are expanding employee training, offering workplace flexibility and increasing both the amount and frequency of pay raises, according to Willis Towers Watson. Nearly nine out of 10 employers (86%) are hiring employees at the higher end of salary ranges, 84% have given staff more flexibility in where they work and 81% offer sign-on bonuses, WTW found in a survey of companies in North America. More than half of the companies (55%) are expanding training opportunities and 65% use retention bonuses, especially for managers. “Employers are leaving no stones unturned in their battle to find and keep talent,” according to Lesli Jennings, WTW’s North America leader for work, rewards and careers. C-suite executives “recognize that they will need to pull levers in addition to compensation and reinforce a connection to the overall employee experience.”
Construction job openings plunged by 71,000 in June
The construction industry had 71,000 fewer job openings in June, providing more evidence that a once-scorching employment market is starting to cool. There were 334,000 open jobs across construction in June, a 17.5% plummet from May, according to the Bureau of Labor Statistics’ monthly Job Opening and Labor Turnover Survey. But that was still 4% higher than the number of job openings in the sector a year ago. “Demand for workers is clearly fading due to rising borrowing costs, increasingly pervasive pessimism and growing risk of recession,” said Anirban Basu, chief economist for Associated Builders and Contractors in a release that analyzed the data. “While debate regarding whether or not the United States is in recession rages on, one thing appears clear: the U.S. economy is poised to slow.”
US commercial and multifamily construction starts rose 18% in the first half of the year, and in the top 20 metropolitan areas, starts were up 24% from a year before, according to Dodge Construction Network. Results were even stronger in the top 10 metro areas, where the year-to-year gain was 28%.
Full Story: Dodge Data & Analytics
US construction spending in the first half of 2022 rose 10.7% from the year before, although June spending was down 1.1% from May at a seasonally adjusted annual rate of nearly $1.77 trillion, the US Census Bureau reported. However, the figures are not inflation adjusted, according to an analysis by the Associated General Contractors of America. Full Story: The Construction Broadsheet
Total sales for the world’s 200 largest construction contractors last year climbed to a record $1.968 trillion, including $246 billion for US contractors, according to International Construction magazine. More than 30 US-based contractors made the list, but China-based companies occupied most spots in the top 10. Full Story: Construction Europe
Hotel construction is on the decline in San Diego County, in line with the trend across California, according to a report from hotel brokerage and retail firm Atlas Hospitality Group. The quiet period is attributed to rising costs and interest rates as well as recession worries. Full Story: San Diego Business Journal
All 50 states as well as US territories have seen investments under the bipartisan infrastructure law since its passage eight months ago, according to new fact sheets from the White House. Projects are listed by jurisdiction.
Full Story: The White House
Disadvantaged businesses seeking contracts for federal aviation, highway and transit projects would receive further consideration under proposed rule updates for the Disadvantaged Business Enterprise Program. The proposals from the Biden administration and Transportation Department clarify some technical language and adjust for inflation rules governing such factors as personal net worth, program size limits and materials suppliers. Full Story: Construction Dive
Hundreds of workers have died from heat exposure over the past decade, but a House bill seeks to address that and other safety concerns with a mandated 15-minute break every four hours for construction workers. The breaks would count as paid time under the bill introduced by Rep. Sylvia Garcia, D-Texas. Full Story: Construction Dive
Permitting regulations under the National Environmental Policy Act strengthened by the Biden administration would be rolled back under a bill narrowly passed in the Senate. The bill faces strong opposition in the House, and President Joe Biden says he would veto the legislation if passed. Full Story: Route Fifty
The newly passed Inflation Reduction Act of 2022 includes $3 billion to curb air pollution at the nation’s seaports. The money, which is available through grants and rebates, can be applied to installation of zero-emission cargo-handling equipment, although fully automated equipment is excluded. Full Story: FreightWaves
There are currently no high-speed rail routes in US despite efforts to build them that date to legislation passed in 1965. Dan Zukowski reviews the long, largely unproductive history up to today as three projects show some promise. Full Story: Smart Cities Dive
Granite’s Q2 profit, revenue dip as company continues strategic shift
Infrastructure builder and materials producer Granite Construction saw its profits and revenue fall from this time last year, though both metrics jumped from the previous quarter. The company is burning through its portfolio of less profitable projects as planned, and doing so caused its profit margin to take a hit, the company’s president said in a second quarter earnings call Thursday. The Watsonville, California-based contractor lowered its EBITDA margin guidance for 2022 from 6%-8% to 5.5%-6.5%, but its projections for revenue and other metrics remained unchanged. Granite’s operating income stands at $5.5 million in Q2, down from $34.8 million during the same period last year. Granite’s backlog grew 7.1% from last quarter to $4.2 billion, with California leading its markets. President and CEO Kyle Larkin said he expects to benefit from the federal Infrastructure Investment and Jobs Act in the second half of the year, and also plans to wrap up the less-profitable projects in its old risk portfolio.
A focus on construction manager-general contractor procurement for transportation projects and a three-year shift to smaller infrastructure jobs are beginning to pay off for Granite Construction, executives say. Although Granite in the first half continued to post a net loss from continuing operations, net income switched to positive and the company says that only $50 million of profit-thin projects will be left to work through by next year. Full Story: Engineering News-Record (tiered subscription model)
Skanska CFO: ‘We probably have the best balance sheet in the industry’
Swedish contractor Skanska reported Thursday that second quarter profit decreased roughly 1.3% year-over-year to about $186 million (1.9 billion Swedish Krona), or less than one cent per share. Meanwhile the contractor’s revenue reached roughly $4.4 billion for the April through June 2022 period. That’s up from around $3.5 billion a year ago, representing an increase of 18% when adjusting for currency effects like inflation, the contractor said. “I think we stand extremely strong at the moment,” Magnus Persson, CFO, told Construction Dive. “We’ve done that for a long time, but if you look on our balance sheet, we probably have the best balance sheet in the industry.”
Tutor Perini posts wide-ranging loss, pulls guidance for 2022
Los Angeles-based contractor Tutor Perini posted a loss of $63 million, or $1.23 per share for the second quarter Friday, widely missing analysts’ expectations for profits of 41 cents per share, according to stock tracking site Seeking Alpha. Revenue fell to $0.9 billion, a 25% decline from the $1.2 billion the company showed a year ago. Analysts had expected revenue of $1.1 billion. The company withdrew its financial guidance for the rest of the year, and said it would issue new guidance once it had greater visibility, but that it expects to post a net loss for 2022.
Jacobs reports higher profits, more backlog but forecasts weak fourth quarter
Jacobs Engineering Group reported $196 million in profits for its third fiscal quarter Monday, or $1.52 per share, up from $165.8 million a year ago. Revenue increased to $3.83 billion, up 7% from $3.58 billion 12 months earlier, as the company won key projects in aerospace and infrastructure. Adjusted earnings per share from continuing operations hit $1.86, up 13% year-over-year, according to a press release. The results beat analysts’ expectations of both $3.75 billion in revenue and $1.83 per share, according to Zacks Investment Research. Despite the earnings beat, Jacobs lowered its financial guidance. The firm now expects fourth quarter earnings per share of $1.75-$1.85, which implies downside to the average analyst estimate of $1.93, according to Matt Arnold, industrial analyst with financial services firm Edward Jones.
Code updates, sustainability spur mass timber’s US adoption
Cross-laminated timber, also known as CLT, is gaining popularity in North America. Originally developed in the 1990s in Europe, the building material is popular overseas, but has progressed at a much slower pace in North America. That is changing, according to Montreal-based CLT firm Nordic Structures. The firm’s projects range from the John W. Olver building at UMass Amherst to the Shawnee Mission School District Aquatic Center (pictured above) in Lenexa, Kansas. Here, David Croteau, the vice president in charge of operations and engineering at Nordic Structures, spoke with Construction Dive about the growing popularity of the material in the U.S. and Canada, his vision for the company and what he would say to developers hesitant about the material.
Freddie Mac expects multifamily contraction through the end of 2022
While multifamily fundamental growth held strong in the first half of 2022, government-sponsored mortgage lender Freddie Mac anticipates that the pace of growth will moderate through the rest of the year, and expects multifamily origination volume to contract to between $440 billion and $450 billion, down 8% to 10% from 2021. Inflation and volatile Treasury rates are among the major headwinds pushing against multifamily growth, according to the Freddie Mac Multifamily Midyear Outlook. The likelihood of a recession has risen from the first half of the year to the second, and rising interest rates have cut into multifamily volume as borrowers and investors avoid volatile environments. Despite these expectations, Freddie Mac maintains that fundamentals will remain strong, and gross multifamily income will outperform year-end expectations.
ENR California Announces 2022 Best Projects Winners
ENR California is pleased to announce the winners of its 2022 Best Projects competition.
In addition to the main categories, there are two special awards to regional projects that made significant achievements in safety and sustainability.
Winners of the Excellence in Sustainability award, is in its second year, were chosen from a field of nine candidates. Judges considered how well project teams went above and beyond baseline industry requirements, a project’s overall sustainability strategy, choice of materials, energy savings and environmental impacts within its own footprint and on the community it serves.
A proposal to move water from Northern to Southern California has been revised from two tunnels to just one to help reduce the project’s environmental impact. The single tunnel proposal will still put endangered species in harm’s way, critics said. Full Story: The Associated Press
Three more highway projects in California and Texas have been added to the agenda for California-based Granite Construction. The Texas job is for $40 million worth of work on State Highway 288, and in California Granite was signed up for two projects on Interstate 5 totaling $38 million.Full Story: Construction Dive
Google plans to mostly demolish the Sunlite Bakery Bread Depot building in downtown San Jose, Calif., but save the valued Art Moderne entryway as the company advances plans for a transit-focused neighborhood. Infrastructure work and further site preparation are also scheduled for this year. Full Story: San Jose Mercury News (Calif.) (tiered subscription model)
Lendlease breaks ground on $1.15B San Francisco tower
Australia-based firm Lendlease has begun construction on its largest investment in North America: a $1.15 billion, 47-story mixed-use tower in San Francisco. 30 Van Ness, located in the city’s Hayes Valley neighborhood, will encompass 290,000 square feet of office and retail space along with 333 condominium units and is designed to achieve net zero emissions during construction and ongoing operations. Designed by SCB Architects with anticipated LEED-Platinum certification, the all-electric building will be complete in 2025, according to a release. Lendlease is the property’s developer, builder and owner.
Three bidders for redevelopment of the San Diego area’s Sports Arena aim to establish an entertainment destination without the prospect of attracting a major league sports franchise. The project is considered unlikely to merit a subsidy for needed changes that would accommodate an NBA or NHL team. Full Story: Voice of San Diego
The San Diego City Council will consider proposals in the fall to help expedite infrastructure projects by clearing away a series of bureaucratic approvals and by easing restrictions on consultants and contractors. One major change would increase the size of a project requiring City Council attention, but there would also be greater transparency with the public disclosure of more information about which firms complete city work and how they’re compensated. Full Story: The San Diego Union-Tribune (tiered subscription model)
Construction has kicked off on the 1,600-room Gaylord Pacific Resort and Convention Center, the main part of the 535-acre Chula Vista Bayfront project in California. The development phase of the project is valued at $1.35 billion, and initial construction will include the hotel and convention center, a park, roads, garage and infrastructure. Full Story: KPBS-TV/KPBS-FM (San Diego)