Capitol Update 8/29/2022
State Water Resources Control Board Construction Stormwater Permit
The State Water Resources Control Board Construction Stormwater Program has posted the August 9, 2022 Construction Stormwater General Permit Reissuance public workshop presentation and video recording under the “Past Meetings” section of the NPDES Construction Stormwater General Permit Reissuance webpage.
Federal Reserve Chair Jerome Powell is expected to emphasize in his Jackson Hole speech this week that the Fed will do what it takes to bring down inflation, even if that leads to a recession, with some economists saying he could signal another 75-basis-point rate hike. “I think Powell will say with passion, and back it up with fact, that, in the long run, being really tough now is going to be much better for employment, much better for markets and much better for growth,” said Carl Tannenbaum, chief economist at Northern Trust. Full Story: MarketWatch (tiered subscription model) Bloomberg
Fed unlikely to avoid recession: economists
The Federal Reserve will probably fail to steer the economy away from a recession as it fights the worst inflation in four decades by aggressively withdrawing stimulus, according to 73% of economists surveyed this month by the National Association for Business Economics (NABE). Nearly half of economists (47%) believe a downturn will begin by the first quarter of next year, while 19% believe the economy is already shrinking, the NABE found in a survey released Monday. “Panelists are not confident that the Federal Reserve will be able to bring inflation down to its 2% goal within the next two years without triggering a recession,” NABE Policy Survey Chair Juhi Dhawan said in a statement.
As economists remain divided on the prospects of a near term recession, it’s prudent for construction firms to ready for a potential slowdown and focus on reliable segments of work, industry insiders say. Public and publicly funded projects are the “safest bet,” according to Brian Turmail from the Associated General Contractors of America, who added that another area to target would be electric vehicle plant construction. Full Story: Construction Dive
Difficulties finding skilled workers are partially to blame for construction employment lagging prepandemic levels in 15 states, according to an analysis of federal figures by the Associated General Contractors of America. Demand for projects is strong, says AGC Chief Economist Ken Simonson, but “the high level of openings and low unemployment rate among experienced construction workers shows the industry needs more workers.” Full Story: Builder online (free registration)
Jacobs Engineering Group is changing its name to Jacobs Solutions to demonstrate its commitment to intelligence, infrastructure, cybersecurity and space functions. The change also reflects new company directions that focus on digitization and opportunities to upgrade global infrastructure to meet climate challenges. Full Story: Construction Dive
The ‘bonus’ tax deduction in the Inflation Reduction Act for construction firms
While most of the tax deductions and incentives to build climate-friendly structures in the Inflation Reduction Act go to building owners, one area can significantly benefit contractors as well, a construction tax expert said. Phillip Ross, leader of the construction industry group at New York City-based accounting advisory firm Anchin, detailed how contractors can earn up to a $5-per-square-foot tax deduction (increased from $1.88 currently) for certain projects under the new law starting in 2023. Contractors can qualify for the full deduction by designing and installing qualified energy-efficient systems in certain buildings, if they also meet prevailing wage and apprenticeship requirements. “If you can take this deduction, it’s really found money,” Ross told Construction Dive.
Recent economic numbers reveal a mixed bag of news, with inflation moderating a little but US housing starts down over the past three months, writes Alex Carrick, chief economist for ConstructConnect. Carrick reviews 10 recent economic reports, noting on the positive side that infrastructure work is on tap under the bipartisan infrastructure law.
Full Story: Daily Commercial News (Ontario)
Public firms report lower profits, muted outlooks
Several construction industry giants saw profits fall and lowered their outlooks for the remainder of the year amid continued impacts from COVID-19 and inflation. With the first half of 2022 over, large public construction firms reported earnings for the second quarter, with varied results. Several of these industry giants reported lower profits in their most recent financial periods while Tutor Perini and Lendlease saw outright losses. Many lowered their financial guidance for the remainder of the year. Corporate leaders cited a range of reasons for the challenges, including the continuing impact of COVID-19, inflation, staffing issues and changes in their companies’ portfolios.
The IHS Markit PEG Engineering and Construction Cost Index has edged down to 68.6 this month but still indicates surging prices at well above the break-even mark of 50. The labor component jumped to 85.2 from 81.8 in July while the material and equipment component registered a 61.5 reading. Full Story: Engineering News-Record (tiered subscription model)
JLL predicts further growth in the construction industry, fueled in part by the bipartisan infrastructure law even as activity eases a bit from recent peaks. Major markers of activity remain strong despite recession fears and continued challenges posed by supply chain snags and labor shortages. Full Story: GlobeSt (free registration)
The US Department of Transportation is distributing $4.8 million to California, New Mexico, New York, Ohio and Texas under the Regional Infrastructure Accelerators program. Noel Fletcher examines how the money will be used in each case. Full Story: Transport Topics
SEC charges Granite with fraud, firm pays $12M
In the culmination of an investigation that caused Granite Construction to restate three years of its financial results, the Securities and Exchange Commission charged the California-based contractor and a former executive with financial reporting fraud. Granite agreed to pay $12 million to settle the SEC’s charges against the company. The agency named Granite and former senior vice president Dale Swanberg in its Thursday announcement. It alleged Swanberg, who oversaw Granite’s heavy civil group, hid cost increases and manipulated profit margins in the flagging unit beginning in 2017. The alleged scheme unraveled in mid-2019 when several projects neared completion, and the recognition of increased costs could no longer be deferred. In separate administrative proceedings, the company’s former CEO, James H. Roberts, and former CFOs, Laurel Krzeminski and Jigisha Desai, while not charged with misconduct, agreed to return more than $1.4 million, $327,000, and $176,000, respectively, in bonuses and compensation to Granite, according to the SEC.
The top and bottom 5 states for construction employment
The construction unemployment rate hovered in June below 2% in 10 states, but was at a high of 6.5% in New Mexico, according to an analysis of Bureau of Labor Statistics data by the Associated Builders and Contractors. Overall, the national unemployment rate for construction was 3.7% in June, slightly higher than the 3.6% unemployment rate in the overall workforce for the same time period. Within the construction industry, the residential sector continued to outpace nonresidential for employment, and had 112,000 more workers than before the pandemic, despite recent pullbacks in the housing market. Nonresidential employment was still 66,000 jobs below its pre-pandemic peak though, according to ABC. ABC segmented the employment numbers by state, and highlighted the top and bottom five.
These five states had the lowest construction unemployment rates in June 2022:
- Idaho, 0.9%.
- Nebraska, 0.9%.
- South Dakota, 1.3%.
- Utah, 1.5%.
- Minnesota, 1.6%.
Idaho, Minnesota and Nebraska each posted their lowest June estimated, non-seasonally adjusted construction unemployment rates on record, according to ABC.
These five states had the highest construction unemployment rates in June 2022:
- Delaware, 5.4%.
- Michigan, 5.7%.
- New York, 5.8%.
- West Virginia, 6.3%.
- New Mexico, 6.5%.
While New Mexico had the highest unemployment rate, it also had the largest year-over-year improvement, down from 7.9% in June of 2021, ABC said.
More than $12 billion in federal funding is going to Western states to fund projects directed at addressing the region’s severe, yearslong drought, according to Interior Secretary Deb Haaland and other officials visiting California’s drought-stricken San Joaquin Valley. The funds under the bipartisan infrastructure law and newly signed Inflation Reduction Act “represent some of the largest investments to drought resilience in the nation’s history,” Haaland said. Full Story: The Fresno Bee (Calif.) (free registration)
Extended drought has placed greater demand on groundwater in California’s Central Valley, causing the ground around Tulare to sink at a faster-then-expected pace and greatly reducing the carrying capacity of water canals. Efforts to shore them up have proved inadequate, but construction is underway on the first 10-mile phase of a new Friant-Kern canal. Full Story: KPIX-TV (San Francisco)
The proposed $75 million, 150-million-cubic-foot-per-day expansion of the Gas Transmission Northwest, which moves gas from Canada to Idaho, Washington and Oregon, should be rejected because it is unnecessary and conflicts with state climate change laws, said the attorneys general from Washington, Oregon and California in comments to the Federal Energy Regulatory Commission. The states also claimed that the FERC’s environmental analysis of the GTN Xpress project is flawed and fails to take into account associated greenhouse gas emissions. Full Story: Argus Media E&E News
The automated people mover project at Los Angeles International Airport has topped out its last station. LINXS Constructors, a joint venture led by Balfour Beatty and Fluor, placed the last beam at the people mover’s West Central Terminal Area station, which will ultimately cover 1.2 million square feet and link Terminals 3, 4 and 5 and the Tom Bradley International Terminal. Full Story: The Construction Index (UK)
The million-square-foot Crypto.com Arena, the home of the NBA’s Los Angeles Lakers, is undergoing a multiyear renovation that will include a tree-lined public plaza leading to L.A. Live and a new indoor-outdoor experience where the upper seats are located. It could be what sports management professor Michael Veley sees as an effort “to keep up with the Joneses,” namely SoFi Stadium, the upgraded Los Angeles Memorial Coliseum and the Los Angeles Clippers’ future Intuit Dome. Full Story: Los Angeles Times (tiered subscription model)
Construction has officially begun in California on the $1.1 billion Otay Mesa East port of entry on the US-Mexico border in San Diego. The crossing is designed to be tolled and reduce border crossing times from hours to about 20 minutes. Full Story: KNSD-TV (San Diego)
High-speed rail officials in California have approved design contracts for a 33.9-mile rail connection between Merced and Madera and an 18.5-mile section from Shafter to Bakersfield. “These contracts demonstrate our ability to leverage lessons learned from past contracts, increase project readiness and prepare for continued progress on this transformative project,” said Tom Richards, chair of the California High-Speed Rail Authority. Full Story: California Globe