ConstructConnect announced today that January’s level of U.S. construction starts, excluding residential activity, was $24.6 billion, a decrease of 9.1% versus the dollar volume in the period before. The month-to-month drop was almost an exact match for the usual December-to-January decline of -8.5%. Due to harsh winter weather – which is another way of saying ‘seasonality’ – January is traditionally the worst month of the year for construction groundbreakings or starts.  

Starts in January 2017 versus their level in January 2016 were also down, -11.6%. January 2017 compared with average January starts over the five years, 2012 to 2016, was +6.0%.

The starts figures throughout this report are not seasonally adjusted (NSA). Nor are they altered for inflation. They are expressed in what are termed ‘current’ as opposed to ‘constant’ dollars.  

‘Nonresidential building’ plus ‘engineering/civil’ work accounts for a considerably larger share of total construction than residential activity. The former’s combined proportion of total put-in-place construction in the Census Bureau’s December report was 61%; the latter’s was 39%.

ConstructConnect’s construction starts are leading indicators for the Census Bureau’s capital investment or put-in-place series. Also, the reporting period for starts (i.e., January 2017) is one month ahead of the reporting period for the investment series (i.e., December 2016.)

View this information as an infographic.

Jobs in the construction sector in January 2017 rose by a quite healthy +36,000 month to month, according to the latest Employment Situation Report from the Bureau of Labor Statistics (BLS). Throughout 2016, the monthly average change in construction payrolls was a more restrained +12,000. On a year-over-year percentage change basis, U.S. construction activity has most recently accounted for a fieldwork uptick of +2.6%, which beats the economy-wide improvement of +1.6%.   The construction sector’s NSA unemployment rate in January of this year, however, at 9.4%, was a deterioration from January 2016’s figure of 8.5%.   

There are two other data series with close ties to construction appearing in Table B-1 of the monthly Employment Situation Report. As a ‘leading’ indicator, – i.e., before there can be field activity, projects must be rendered into working drawings by design professionals − the total number of jobs in architectural and engineering services in January 2017 was +2.2% year over year.  As a ‘coincident’ indicator, the total number of positions at retail outlets specializing in selling building materials and supplies was +2.0% year over year in 2017’s first month.

January’s month-to-month setback in total starts (-9.1%) originated in the commercial (-14.4%) and heavy engineering/civil (-12.3%) type-of-structure categories. Moving in the opposite direction, institutional starts recorded a nice pickup, +6.3%. Smaller-dollar-volume industrial work was down by almost half, -46.8%, but this is a category that can display a wide percentage swing in any given month depending on the presence or absence of a mega project or two.

As for the January-2017-to-January-2016 total starts decline of -11.6%, the weakness again centered in the commercial (-18.9%) and engineering (-15.4%) type-of-structure categories. Industrial (-9.2%) was also down. Institutional (+3.5%) squeaked out a small increase.

For eleven of the 12 months of the year, the write-up for this Industry Snapshot would now go on to discuss year-to-date results. In every January period, however, there is equivalency (i.e., there is no difference) between the individual monthly results and the year-to-date numbers.

Within the commercial category of construction in January 2017, the ‘miscellaneous’ designation claimed the biggest share, at 30%. The catch-all subcategory of commercial is mainly made up of transportation terminals and sports arenas. In the latest month, ‘miscellaneous commercial’ was +516.3% month over month (m/m) and +240.4% year over year (y/y). Large arena projects in Fort Worth and San Francisco are featured among the Top 10 Projects of this Industry Snapshot.

‘Retail/shopping’ claimed the second biggest share (20%) of commercial work in January 2017. Store starts in January were -19.3% m/m and -32.8% y/y. It’s an uphill battle for ‘bricks and mortar’ retail enterprises these days, with numerous outlet closings grabbing headlines. 

‘Private office buildings’ and ‘government office buildings’ claimed the next largest slices of commercial work in the latest month, at 12% and 13% respectively. Note that the combination of the two, adding up to 25%, made ‘total offices’ a bigger player in commercial than ‘retail’.

Starts on ‘private offices’ in January were -44.0% m/m and -55.7% y/y. Groundbreakings on ‘government office buildings’ were also down but not as severely, -33.8% m/m and -12.8% y/y.

Heavy engineering/civil starts obtained nearly half (45%) of their total from ‘road/highway’ work in January. In the latest month, the volume of street starts was -5.0% m/m and -15.7% y/y.

Next most important in the engineering category of construction is ‘water/sewage’ work, which took a nearly one-quarter share (22%) in January, after being -34.1% m/m and -23.0% y/y.

Thankfully, the institutional category of starts was able to provide some rays of sunshine in the latest period. The ‘school/college’ subcategory − with an outsized contribution to total institutional of 62% − was +14.6% m/m and +18.9% y/y. ‘Hospital/clinic’ groundbreakings – accounting for 14% of total institutional starts – were +55.5% m/m, but -31.1% y/y.   

Table 2 reorders and provides more detail on some of the type-of-structure categories in Table 1. The reasons for this ‘second view’ are set out in the footnote.

The 12-month moving average trend graphs highlight upward movement in ‘total commercial and ‘school/college’ starts. Unfortunately, though, there are more categories with slopes that are descending. Type-of-structure categories that have been tailing off include: ‘total institutional’, ‘retail’, ‘private office buildings’ and especially ‘miscellaneous civil’.

With respect to the national income data recorded in the latest Employment Situation Report, on-site workers in the construction sector realized gains that exceeded all-jobs averages. Including supervisory personnel, January 2017 year-over-year earnings by all workers in the economy were +2.5% hourly and +1.9% weekly. The construction contingent fared better at +3.2% and +2.2% respectively. Among only production and nonsupervisory personnel (i.e., leaving out bosses), all-jobs earnings were +2.4% hourly and +2.1% weekly. More bullish hard hat earnings climbed above the significant +3.0% benchmark, registering +3.5% hourly and +3.1% weekly.

The value of construction starts each month is summarized from ConstructConnect’s database of all active construction projects in the U.S. Missing project values are estimated with the help of RSMeans’ building cost models.

ConstructConnect’s nonresidential construction starts series, because it is comprised of total-value estimates for individual projects, some of which are ultra-large, has a history of being more volatile than many other leading indicators for the economy. 

ConstructConnect has now moved to a better-targeted and research-assigned ‘start’ date. Prior to this latest month, January 2017, the ‘start’ date was recorded as occurring within 30 to 60 days of the announced bid date. In concept, a ‘start’ is equivalent to ground being broken for a project to proceed. If work is abandoned or re-bid, the ‘start’ date is updated to reflect the new information.

Click here to download the Construction Industry Snapshot Package – February 2017 PDF.

Click here for the Top 10 Project Starts in the U.S. – January 2017.

Click here for the Nonresidential Construction Starts Trend Graphs – January 2017.

TABLE 1: VALUE OF UNITED STATES
CONSTRUCTION STARTS
JANUARY 2017
– CONSTRUCTCONNECT

Source: ConstructConnect Research Group and ConstructConnect.
Table: ConstructConnect.

TABLE 2: VALUE OF UNITED STATES
CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION
– JANUARY 2017
Arranged to match the alphabetical category drop-down menus in INSIGHT

Table 1 conforms to the type-of-structure ordering adopted by many firms and organizations in the industry. Specifically, it breaks nonresidential building into ICI work (i.e., industrial, commercial and institutional), since each has its own set of economic and demographic drivers. Table 2 presents an alternative, perhaps more user-friendly and intuitive type-of-structure ordering that matches how the data appears in ConstructConnect’s on-line product ‘Insight’.

Source: ConstructConnect.
Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES
NATIONAL
CONSTRUCTION STARTS – JANUARY 2017 – CONSTRUCTCONNECT
Billions of current $s, not seasonally adjusted (NSA)

Data Source and Table: ConstructConnect.

TABLE 4: U.S. YEAR-TO-DATE REGIONAL STARTS
NONRESIDENTIAL CONSTRUCTION STARTS
* — CONSTRUCTCONNECT

*Figures above are comprised of nonres building and engineering (i.e., residential is omitted).

Data Source and Table: ConstructConnect.