ConstructConnect announced today that December’s level of U.S. construction starts, excluding residential activity, was $24.0 billion, an increase of 3.4% versus the dollar volume in the period before. The gain, small though it may have been, was welcome nonetheless since November-to-December’s long-term average change, on account of inhibiting winter weather, has been -5.0%.

December of 2016, however, compared with December of 2015 was -5.6%. But it’s encouraging that total nonresidential starts for full year 2016 stayed ahead of full-year 2015 by +6.8%.

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 November 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., December 2016) is one month ahead of the reporting period for the investment series (i.e., November 2016.)

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After hiring improvements in September (+26,000 jobs), October (+14,000) and November (+17,000) of last year, staffing in the construction sector flattened out in December (-3,000), according to the latest Employment Situation Report from the Bureau of Labor Statistics (BLS). December’s year-over-year percentage change in construction jobs was +1.5%, exactly the same as for all jobs in the whole economy. Services-providing work was better at +2.0%. The jobless rate in construction in December was 7.4% (NSA), about the same as 12 months prior (7.5%).

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 December was +2.0% year over year. In nominal terms, design services jobs (1.454 million) have finally reached and surpassed, although by the slimmest of margins, their previous peak achieved in February 2008 (1.453 million). As a ‘coincident’ indicator, the total number of positions at retail outlets specializing in selling building materials and supplies was +3.0% year over year in 2016’s final month.

December’s month-to-month uptick in total starts (+3.4%) arose mainly in the commercial (+9.3%) type-of-structure category, with a helpful assist from heavy engineering/civil (+2.9%) as well. Institutional (-9.2%) held back the overall advance. Industrial starts (+217.2%) were up in a big way, but that was relative to a small base number, plus this is a category that displays wide swings in any given month depending on the presence or absence of a mega project or two.

As for the December-2016-on-December-2015 decline (-5.6%), the three major type-of-structure categories suffered losses, with heavy engineering (-12.0%) down the most, followed by institutional (-3.9%) and commercial (-1.7%). Industrial stayed about even (+0.3%).

The increase in 2016’s total full-year volume of starts (+6.8%) compared with its counterpart level in 2015 was by led institutional (+11.5%), with commercial (+10.6%) almost in a tie. Heavy engineering (-0.5%) was on an unruffled plane. Industrial (-13.2%) was notably down.

With a 58% share, ‘schools/colleges’ was the dominant subcategory in institutional starts in 2016 and it was +7.9% month to month (m/m); -5.0% year over year (y/y; i.e., December 2016 versus December 2015); and +9.7% year to date (ytd). (As a point of clarification, when December has been reached, the year-to-date number is the same as the full-year figure).

The second biggest slice (16%) of the full-year 2016 institutional pie belonged to ‘hospitals/clinics’. In December, the medical facility subcategory of starts did not fare well. It was -45.2% m/m and -30.1% y/y, but it did manage to hang onto a positive performance of +12.3% ytd. ‘Nursing/assisted living’ starts in December were -32.8% m/m; -1.5% y/y; but +38.0% ytd.

‘Retail/shopping’ accounted for 26.0% (one-quarter) of full-year commercial starts in 2016. In the ending period of last year, shopkeeper groundbreakings were +15.0% m/m; and +24.9% ytd; but -10.5% y/y. ‘Private office buildings’ (with a 16% share of commercial) in December was +45.4% m/m; and +10.5% ytd; but -39.5% y/y. ‘Government office buildings’ (an 11% share of commercial) recorded stellar statistics in December: +53.9% m/m; +98.8% y/y; and +20.4% ytd.

The ‘laboratory’ subcategory within commercial should also be mentioned, due to its outsized percentage increases of +1804% m/m and +1466% y/y. Novo Nordisk has initiated new pharmaceutical capital spending in North Carolina. The ytd figure for laboratories was +84.7%.

‘Road/highway’ starts is the biggest subcomponent (a 43% share) of the heavy engineering type-of-structure category and in the latest month, it was -1.7% m/m; -8.7% y/y; but +1.6% ytd. ‘Water/sewage’ work is next most prominent in the engineering category, with a 25% or one-quarter slice, and its most recent numbers were +22.0% m/m; +4.0% y/y; and +6.8% ytd.

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.

All of the 12-month moving average trend graphs have either stalled, lost upward momentum or have fallen into mild, sometimes verging on severe, decline. Twelve-month smoothed ‘retail’ and ‘private office building’ starts have pulled back a little. ‘Miscellaneous civil’ starts, which includes electric power and oil and natural gas work, have retreated a lot.

With respect to year-over-year compensation increases in December, as reported by the BLS in its latest Employment Situation Report, construction workers had a mixed basket of rewards. Whereas all workers throughout the economy received average hourly earnings increases of +2.9% when supervisory personnel were included in the mix and +2.5% when overseeing staff were left out, the construction sector’s corresponding compensation rises were slightly better at +3.0% and +3.3% respectively. Average weekly earnings, however, were a different story. The all jobs average weekly earnings gains were +2.3% including bosses and +1.9% omitting bosses. The comparable changes for on-site hard-hat workers were considerably slower at +0.6% and +0.7%. The onset of harsher winter weather undoubtedly restricted time spent in the field.

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 non-residential 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.

A “start” is determined by taking the announced bid date and adding a short time lag (30 to 60 days). ConstructConnect continues to follow the project via its network of researchers. If it is abandoned or re-bid, the start date is updated to reflect the new information.

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

Click here for the Top 10 featured construction projects in the U.S. – December 2016.

Click here for the Nonresidential Construction Starts Trend Graphs – December 2016.

TABLE 1: VALUE OF UNITED STATES
CONSTRUCTION STARTS – DECEMBER 2016
YEAR TO DATE
(CONSTRUCTCONNECT)

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

TABLE 2: VALUE OF UNITED STATES
CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION
– DECEMBER 2016
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 online product ‘Insight’.

Source: ConstructConnect.
Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES
NATIONAL
CONSTRUCTION STARTS – DECEMBER 2016 – 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
* — CONSTRUCTCONNECT

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

Data Source and Table: ConstructConnect.