ConstructConnect announced today that June’s level of U.S. construction starts, excluding residential work, was $34.6 billion, a month-to-month change of +4.2% versus May. For the second period in a row, the step up was almost a match for the usual climb due to seasonality. May, at +9.5%, was a bit faster than the normal +8.0% and June, at +4.2%, was a tad slower than the traditional +4.5%.

Looking ahead, July is the final month in any year when a seasonal lift is expected. From August through February of the following year, the month-to-month tendency is for declines.

The starts volume in June of this year was not as buoyant as in the same sixth month of last year, -4.6%. Year-to-date nonresidential starts, though, in this year’s first half were +11.2% compared with the first half of 2015.

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 May report was 59%; the latter’s was 41%.

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

The latest Employment Situation Report from the Bureau of Labor Statistics (BLS) specifies no change in the total number of U.S. construction workers in June compared with May. Year-to-date, though, there has been a net gain in construction employment of +46,000 jobs.

On a year-over-year basis, the total number of jobs in construction, at +3.4%, has risen twice as fast as for all nonfarm jobs in America, +1.7%. The next speediest employment growth rate has been recorded by ‘education and health services’, +3.0%.

There are two other employment measures with close ties to construction. As a ‘leading’ indicator, – i.e., before there can be onsite activity, projects must be rendered into working drawings by design professionals—the total number of jobs in architectural and engineering services in June was an okay +2.0% year over year. As a ‘coincident’ indicator, the total number of jobs with ‘building material and garden supply stores’ was a pleasingly optimistic +4.2%.

The unemployment rate in construction in June dropped to a remarkably low 4.6%. Rarely does this measure ever fall below 5.0%. A year ago, it was 6.3%. Two years ago, 8.2%.

The +4.2% month-to-month total starts improvement in June was led almost equally by the institutional (+12.0%) and commercial (+10.6%) type-of-structure categories. Heavy engineering/civil work (-2.5%) contracted slightly. The smaller-volume category of industrial work was down a lot (-59.0%), but it can display wild swings depending on the presence or absence of a mega project or two.

The -4.6% performance of starts in June of this year versus June of last year originated in the industrial (-76.4%) and commercial (-21.5%) categories. Heavy engineering was flat (+0.5%) while institutional was ahead nicely (+17.0%).

As for year-to-date starts in June, all three major categories have improved on their first half 2015 results. Institutional (+22.5%) has been the front-runner, with commercial (+15.4%) giving chase and heavy engineering (+6.5%) striving to catch up. Only industrial (-50.7%) has declined.

By nominal value, ‘school/college’ starts comprised the largest portion of the institutional category through the first half of this year, at 62%. ‘Hospital/clinic’ starts were next at 17%.

In June, education facility starts were -0.7% month over month (June 2016 versus June 2015, a.k.a. m/m); but +9.0% year over year (June 2016 versus June 2015, a.k.a. y/y); and +16.9% year to date (January to June 2016 versus January to June 2015, a.k.a. ytd). As for medical facility starts in June, they displayed a surfeit of strength: +156.8% m/m; +134.5% y/y; and +62.7% ytd.

Among commercial work sub-categories, ‘retail’ has accounted for the largest slice so far this year, nearly one-quarter (24.7%). Its June starts were +33.3% m/m; +26.1% ytd; but -19.0% y/y. Also appearing as major contributors to overall commercial starts, the ‘private’ and ‘government’ office sub-categories have experienced good years, with the former +25.1% m/m, +14.7% y/y and +42.7% ytd, while the latter is +28.2% m/m, +50.8% y/y and +38.9% ytd.

Showing mixed results within the commercial category are ‘hotels/motels’ (-9.4% m/m; -61.6% y/y; but +2.1% ytd) and ‘warehouses’ (-10.2% m/m; but +3.0% y/y; and +26.5% ytd).

At 43% and 25%, ‘road/highway’ and ‘water/sewage’ have been providing the two biggest sub-category slices of heavy engineering/civil work through this year’s mid-point. While both remain higher year to date, they have been exhibiting recent weakness. ‘Road/highway’ is -6.7% m/m; -7.6% y/y; but a respectable +6.2% ytd. ‘Water/sewage’ is -20.6% m/m; -9.6% y/y; but a significantly more satisfying +19.1% ytd.

Bridge work has been holding up well (+18.8% m/m; +41.1% y/y; and +17.2% 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.

The slopes of the 12-month moving trend graphs have moderated for some commercial- and engineering-related type-of-structure categories (e.g., retail and roads), but have continued heading upwards for important institutional-labeled work (e.g., schools and hospitals).

With the unemployment rates in the economy as a whole and in construction specifically both below 5.0%, at 4.9% and 4.6% respectively, are wage gains being kicked into overdrive? No, there appears to be a +3.0% ceiling that stayed unchallenged in June. For all workers in the economy, the year-over-year increase in average hourly earnings was +2.6% and in average weekly earnings, +2.3%. The comparable figures for construction were +2.8% and +2.5%.

For only production and nonsupervisory personnel economy-wide in June, average hourly and average weekly earnings were both +2.4% year over year. Average weekly earnings for non-bosses in construction were similarly +2.4%, but average weekly earnings were better, at +2.7%.

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 re-bid, the start date is updated to reflect the new information.

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

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

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

TABLE 2: VALUE OF UNITED STATES CONSTRUCTION STARTS
CONSTRUCTCONNECT INSIGHT VERSION – JUNE 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 nonres building and engineering (i.e., residential is omitted).

Data Source and Table: ConstructConnect.