ConstructConnect announced today that May’s level of U.S. construction starts, excluding residential work, was $33.0 billion, +9.6% versus April. That was a healthy but not extraordinary increase, since the usual or long-term average gain between those two months, due to seasonality, is +8.0%.

Comparing the starts volume for May of this year with May of last year, the change was +5.9%. Year-to-date nonresidential starts in 2016, however, thanks to fairly consistent improvements in almost all the months of this year so far, was a strong +16.2%.

The starts figures throughout this report are not seasonally adjusted. 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 April report was 59%; the latter’s was 41%.

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

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In May’s “Employment Situation Report” from the Bureau of Labor Statistics (BLS), employment in construction contracted by 15,000 jobs. Year to date, they are ahead by 48,000. On a year-over-year basis, they are +3.4%, which leads all major industrial sub-sectors. ‘Education and health services’ is in the second spot with a +3.1% gain year over year. The total number of U.S. jobs, at +1.7%, rose by exactly half the construction industry’s pace. Manufacturing in May was -0.3%.

The unemployment rate in construction has now dropped to a quite low 5.2%. Only rarely, throughout history, has the sector’s jobless rate fallen below 5.0%. A year ago, construction’s unemployment rate was 6.7%. Two years ago, in May 2014, it was 8.6%. Three years ago, in May 2013, it was in double-digit percentages, at 10.8%.

Before there can be onsite construction activity, projects must be contemplated and planned by owners and rendered into working drawings by design professionals. The total jobs figure in architectural and engineering services in May was +0.1% month over month and +1.9% year over year. Whereas the total number of jobs in construction is still about one million below its pre-Great Recession peak, the total number of jobs in architectural and engineering services is on the cusp of reaching its former summit. It is only 19,000 jobs short of reattaining the 1.453 million jobs in the sector that were the prior pinnacle employment level in February 2008.

The +9.6% month-to-month total starts improvement in May was led by the commercial structure subcategory, +21.4%. Institutional work was also nicely ahead, +9.4%, but heavy engineering stayed flat, +0.8%. The smaller-volume category of industrial was +9.2%. Industrial starts can display wild swings depending on the presence or absence of a mega project or two.

The +5.9% total starts uptick in May of this year versus May of last year arose from almost equal improvements in the commercial (+30.3%) and institutional (+26.7%) subcategories. Civil work (-6.2%), however, fell off the pace to a relatively minor degree. Industrial starts (-86.3%), as is often the case, displayed an outsized percentage change, this time in a negative direction.

May’s year-to-date total starts increase (+16.2%) was also led by commercial (+30.9%) and institutional (+27.0%), with heavy engineering (+8.3%) joining in as well, although not to the same enthusiastic degree. Industrial starts (-59.7%), meanwhile, have been faltering.

Within commercial, the ‘retail/shopping’ and ‘private office building’ segments have accounted for the most starts so far this year. In May, the former was +12.0% month over month (m/m); ahead by one-third or +33.2% year over year (y/y); and up by half, +50.9%, year to date (ytd). The latter was little changed either m/m (+3.1%); or y/y (-0.4%); but better ytd (+45.7%).

Also important in the commercial category, ‘hotel/motel’ work has experienced a stellar year so far in 2016: +31.6% m/m; +103.9% y/y; and +52.2% ytd. ‘Government office’ starts, though, have shown variety: -11.3% m/m; +18.9% y/y; and +46.6% ytd. Also helping the commercial results have been buoyant ‘warehouse’ starts: +104.9% m/m; +191.9% y/y; and +48.7% ytd.

At 62%, nearly two-thirds, of total institutional starts so far in 2016, ‘schools/colleges’ are a dominant force. Such educational facility work has been elevated according to all three measurements over time: +9.1% m/m; +25.3%, or up by one-quarter, y/y; and +19.6% ytd.

‘Hospital/clinic’ starts were 15% of the institutional total through May in 2016. In the latest period, they may have been -10.0% m/m, but they were +58.7% y/y and +52.3% ytd.

‘Road/highway’ and ‘water/sewage’ starts have taken the hungry-man slices of the total engineering pie in the first five months of 2016, with 43% and 26% shares respectively. The three percentage-change performances of the former have ranged from a low of -4.7% y/y to a high of +19.5% m/m, with +9.9% ytd sitting in the middle. The latter registered a drop m/m in May (-10.9%), but recorded almost equally redeeming increases both y/y (+27.4%) and ytd (+28.2%).

Bridge starts in May were -24.9% m/m; and -10.6% y/y; but a still respectable +12.4% ytd.

Probably on account of the tight unemployment rate in the sector (5.2%), earnings in construction in May moved forward a little faster than for all jobs in the economy. In the latest month, year-over-year wages for all workers in construction, including supervisors, were +2.6% hourly and +2.8% weekly. At the same time, all wage earners in the economy were being compensated a little less generously, +2.5% and +2.2% respectively. Omitting bosses, construction’s results were +2.4% hourly and +2.9% weekly, which compared with a same +2.4% hourly but a less favorable +2.4% weekly for the broader labor force.

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.

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 rebid, the start date is updated to reflect the new information.

Click here to download the Construction Industry Snapshot Package – May 2016 PDF.

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

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

TABLE 2: VALUE OF UNITED STATES
CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION
– MAY 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 on-line product ‘Insight’.

Source: ConstructConnect.
Table: ConstructConnect.

TABLE 3: VALUE OF UNITED STATES
NATIONAL
CONSTRUCTION STARTS – MAY 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 nonresidential building and engineering (i.e., residential is omitted).

Data Source and Table: ConstructConnect.