Category: North Carolina Construction

Executive Summary

The labor shortage over the past years has caused wages to escalate. According to a report by Zillo Research, at the start of 2017, wages for construction-industry workers were growing slightly slower than wages for other workers – around 2.5% per year. But they are now growing 3.8% per year. This is happening for both skilled laborers and salaried positions. Anirban Basu, ABC’s Chief Economist, states in a Nov. 1 construction employment news release, “one potential cause for concern is growing evidence that wages have begun to rise much more rapidly of late. That, along with other sources of inflation, can be expected to push interest rates higher, which in turn would ultimately translate into more expensive financing for construction projects and fewer construction starts. But for now, it is all systems go for the U.S. nonresidential construction industry.” We’ll be keeping a close eye on how this might impact the industry.

12 Month Performance Summary

The construction industry has seen a 4.4% increase in net new jobs (308,000) since the first of the year. Industry unemployment decreased to 3.4% in July, which is the lowest in recorded history. Construction starts are up 2% Jan.-July 2018 from the same period last year. While these numbers look good, there is still a lack of skilled workers, and the pinch is being felt on construction schedules. Even after careful planning and paying attention to the labor market and concurrent local projects, schedules are being delayed. The consequences of which are felt throughout the project’s duration. Organizations are working to make a difference. Workforce development is a high priority of the Associated Builders and Contractors, Inc. (ABC) and they are pushing to expand apprenticeship opportunities in congressional testimony. Miles-McClellan is an active member of the ABC both in Central Ohio and Charlotte. Trade partners that invest in their people and workforce development programs, generally are also members of ABC. We participate because we want to have relationships with those companies. The apprenticeships that are happening now aren’t necessarily putting more people on jobs right now, but it speaks to the commitment from within the industry to improve the labor market.

According to the latest Associated Builders and Contractors (ABC) Construction Confidence Index (CCI), the majority of commercial and industrial contractors are confident about sales growth, profits, and staffing levels heading into 2018.

“Despite the completion of approximately eight and a half years of economic recovery, both inflation and interest rates remain low,” said Basu. “The combination of elevated wealth and confidence with low borrowing costs drives spending and investment, which supports higher demand for construction services.”

We like that positive news!

Adapted from: Basu, A. (2017, December 7). Buoyed by Healthy Economy, ABC Index Finds Contractors Upbeat. Retrieved from abc.org

The Associated Builders & Contractors reported a slight decline in nonresidential construction employment. Determining why this happened is proving difficult because of the following possible reasons: stalled construction projects, impact from the recent storms, or lack of skilled laborers to take over for the skilled laborers that retired. In our case, the lack of qualified labor to replace/fill positions hurts us the most. We’re curious, have the other two reasons affected your productivity?

12-Month Performance Summary

12 Month Performance Summary

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A Return to Normalcy

by: Salim Furth, Ph.D.

As of the end of 2016, economic growth has been normal for at least a year. With a few exceptions, data indicate an economy
operating at or near its “natural” or “potential” level.

The unemployment rate reached a nine-year low of 4.6 percent in November and has not exceeded 5 percent since September 2015. Experience from previous periods of sustained growth indicates that little further improvement can be expected.

Gross domestic product (GDP) is growing at a steady but unimpressive rate. Adjusted for population growth and inflation, GDP grew 0.8 percent from the third quarter of 2015 to the third quarter of 2016.

Private domestic investment grew rapidly from its recession trough but peaked at 17 percent of GDP in early 2015 and has not grown since then. The lack of further growth is both an indicator and a cause of the end of the recovery: Strong growth in wages and GDP depends on investment. At just 16 percent to 17 percent of GDP, investment is treading water.

Like investment, labor force participation has not reached prerecession levels. Part of that change is due to the retirement of the baby boomers: People born in 1951 turned 65 in 2016. However, prime-age workers are also less likely to be working or
looking for work now than in 2007. Persistently low participation is one of the main challenges facing policymakers in 2017.

Monetary policy is an exception to the prevailing normalcy. Inflation has remained below the Federal Reserve Board’s 2 percent target for years. Consequently, the Fed has left its policy levers in positions that are typical of a recovery and is likely to remain accommodative until inflation reaches 2 percent.

Furth, Ph.D., S. (2017, January 13). Economic Outlook for 2017. Retrieved from heritage.org: http://www.heritage.org/research/reports/2017/01/economic-outlook-for-2017