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Construction Jobs 2020 down 216,000

Construction closes 2020 down 142,000 jobs comparing Dec 2020 to Dec 2019. Average jobs lost over the year is down 216,000, down 2.9%. Also, average hours worked in 2020 is down. The equivalent jobs lost over the year (jobs x hours worked) is down 3.8% or a loss of 288,000 jobs equivalent.

While construction spending in 2021 is forecast down only 1%, after inflation construction volume is expected to decline 4% in 2021. Residential construction spending is forecast up 10%, volume up almost 6%, but 2021 nonresidential buildings spending is forecast down -11% leading to a decline in volume after inflation of -14%. Nonbuilding Infrastructure spending in 2021 declines -5%, volume drops 8%.

It is notable though, even with residential spending and volume increasing, due to large losses in nonresidential buildings, total construction volume declines every month for the next 9 months. Nonresidential buildings volume declines for the next 18 consecutive months.

Residential could experience jobs growth next year of 150,000 but nonresidential volume declines project to a loss of another 200,000 to 250,000 construction jobs next year in that sector. Nonbuilding Infrastructure is forecast to drop 40,000 jobs. That could hold the annual average jobs losses to only 100,000.

There is an unusual occurrence in the data for 2021. Annual average jobs in 2021 may decline in total by only 100,000, but from Dec. 2020 to Dec. 2021, jobs decline may be nearer to 400,000. The annual average change is much less due to the massive decline in jobs in April 2020, which by itself caused the 2020 average to drop by almost 100,000. Most months in 2021 will show jobs about 3% to 4% or more below the same month in 2020, except for April, which will show 2021 jobs 10% higher than 2020.

Some who read this post will question how I forecast such a drop in nonresidential work, when some other analysts predict far less declines and even some who predict nonresidential work increases in 2021. I would say, it will be very difficult to support a forecast for increased spending in 2021 given a 22% drop in new construction starts in 2020 for nonresidential buildings work, most of which would have occurred in 2021.

https://www.bls.gov/web/empsit/ceseeb1a.htm

Public/Private Construction Spending Forecast 2020-2021

12-18-20

Public Starts and Backlog

Leading into 2020, the Public markets with the highest growth in new starts the previous two years were Transportation and Public Works. Transportation terminals and rail starts were up 15% over two years, 25% in the last three years. Backlog nearly doubled in three years because a large portion of those starts is very long duration projects. Public works starts were up 13%, 20% in three years, and backlog is up 40%. Infrastructure projects typically have the longest duration. Projects contribute spending sometimes up to 5 or 6 years.

Public work backlog leading into 2020 was up an average 8%/year for the last three years. Some of this is very long-term work that started construction in 2017 and it will still contribute spending for the next several years. 40% of all public spending in 2020 comes from projects that started prior to Jan 2019.

2020 losses in new construction starts impact the forecast for the next few years. Total new starts in 2020 for Public work dropped 9%. Transportation starts fell 20%, Educational starts fell 11% and Public works fell 6%. Amusement/Recreation starts fell 40%. Highway/Bridge starts increased 4%.

2021 Starting Backlog for all Public work is down 5%. Backlog for Transportation projects drops only 4%, and that leaves 2021 still 2nd only to the all-time high in 2020. Both Educational and Public Works backlogs drop 7%. Amusement/Recreation backlog falls 40%. Highway backlog increases 3%. Of all public work in backlog at the start of 2021, 43% comes from projects that started prior to Jan 2020.

Public Spending

The two largest markets contributing to public spending are Highway/Bridge (30% of total public spending) and Educational (25%), together accounting for 55% of all public construction spending. At #3, Transportation is only 12% of public spending. Environmental Public Works combined makes up 15% of public spending, but that consists of three markets, Sewage/Wastewater, Water Supply and Conservation. Office, Healthcare, Public Safety and Amusement/Recreation account for about 3% to 4% each.

Highway is 100% public and Public Works 98%. Educational is 80% public, Transportation 70%, Amusement/Rec 50% and Healthcare 20%. 

Total public spending for 2020 is projected to finished up 5% at $350 billion. Spending for every major public market is projected to finish up in 2020. By far, the largest Public spending increases measured in dollars for 2020 are Educational, Transportation and Public Safety.

Total public spending in 2021 is projected to finished up 5% at $370 billion. Transportation provides most of the gains in 2021 and Public Works adds some, but this forecast may come down without support from Highway or Educational.

Public Infrastructure and Public Institutional

A bit less than 60% of all Non-building Infrastructure spending, $198 billion in 2020, is publicly funded. That public subset of work has averaged growth of $5 billion/year from 2013 through 2019, with maximum growth of $16 billion in 2019. 2020 increased only $4 billion. In 2020, Non-Building Infrastructure spending makes up about 60% of Public spending.

About 30% of all Nonresidential Buildings spending, $141 billion in 2020, is publicly funded. It’s mostly Educational. That public subset of work has averaged growth of $6 billion/year from 2013 through 2019, with maximum growth of $10 billion in 2017. 2020 increased $14 billion. In 2020, Nonresidential Buildings spending makes up about 40% of Public spending.

  • Infrastructure = $349 billion, ~25% of all construction spending.
  • Infrastructure is about 57% public, 43% private. In 2005 it was 70% public.
  • Public Infrastructure = $198 billion. Private Infrastructure = $150 billion.
  • Power and Communications are mostly privately funded infrastructure.
  • Nonresidential Buildings is 30% public (mostly institutional), 70% private.
  • Educational, Healthcare and Public Safety are Public Nonres Institutional Bldgs
  • Public Commercial construction and Amusement/Rec. are not included.
  • Public Institutional = $110 billion, mostly Education ($86b).

Public Infrastructure + Public Institutional = $308 billion, 22% of total spending.

Public Infrastructure + Institutional average growth is $12 billion/year. This subset has never exceeded $30 billion in growth in a single year. In 2019 spending increased $20 billion. With 10 months data posted, 2020 is forecast to increase $17 billion.

Although total all public spending may increase for 2021, the select group of Infrastructure + Institutional likely to be funded by an Infrastructure stimulus bill shows 2021 growth is uncertain and may remain flat.

See also Publicly Funded Construction

See also Down the Infrastructure Rabbit Hole

Where is Construction Outlook Headed?

The greatest impact to construction spending from fewer new starts in 2020 comes in 2021 or early 2022, when many of those projects would have been reaching peak spending, near the midpoint of the construction schedule. Nonresidential starts in 2020 are down 15%-25%. Residential starts are up 2%.

Construction Spending for October https://census.gov/construction/c30/pdf/release.pdf…

Up 1.3% from Sept. Sept rvsd up 0.4%. Aug rvsd up 1%

Year to date (ytd) spending is up 4.3% over Jan-Oct 2019. Oct SAAR is now only 2% below Feb highpoint.

However, residential spending ytd is up 9.6%, nonresidential building spending is down -1.2%. Both are expected to keep heading in the direction currently established.

Nonresidential Buildings construction will take several years to return to pre-pandemic levels. Although nonresidential buildings spending is down ytd only -1.2% (as of October data), the gapping hole left by the 15%-25% drop in 2020 construction starts will mostly be noticed in 2021 spending. Project starts that were canceled, dropping out of revenues between April and September 2020, would have had midpoints April to September 2021. Nonbuilding project midpoint could be even later. The impact of reduced new starts in 2020 is reduced spending and jobs in 2021 and 2022.

Construction Jobs are projected to fall in 2021. While 2021 Residential spending will climb about 10%, Nonresidential building spending is forecast to drop -10% and Non-building spending drops -4%.

After adjusting for inflation, Residential volume is up about 4% to 5%, Nonresidential buildings volume is down about -14% and Non-building volume will finish down -8%. Jobs should follow suit.

If jobs increase faster than volume, productivity is declining. Also that means inflation is increasing.

Spending is approximately 50% residential, 30% nonresidential buildings and 20% nonbuilding infrastructure.

Residential Construction Booming

RESIDENTIAL Construction Spending for October Up 2.9% from Sept

Sept spending rvsd up 1.5%, Aug rvsd up 3.5%

August highest new starts monthly total ever.

Year to date Oct. spending now up 9.6% over Jan-Oct 2019

Oct monthly SAAR now 2% higher than Feb highpoint.

Residential construction starts for Jul-Aug-Sep-Oct’20 posted the highest 4mo total ever. 2nd highest was Nov-Dec’19-Jan-Feb’20. In the last 12 months residential construction starts have posted 7 of the top 10 best months ever. Also, spending in Aug, Sep and Oct is the highest since the previous residential boom in 2005-2006. Spending is now already +2% higher than previous high in Feb and 2020 finishes up +10%. Spending climbs +10% higher in 2021.

Advanced Preconstruction Presentation – Construction Economics 11-4-20

Attached

EdZ Presentation Construction Economic Forecast 11-4-20 HW w notes

Here’s a few short notes

  • 2020 spending will close the year UP.
  • 2021 will get dragged down by declines in nonresidential buildings.
  • Reduced new construction starts in 2020 impact 2021 far more than they impact 2020.
  • Residential spending has returned to now only 2% less than the pre-pandemic peak in February.
  • There will be hidden inflation not showing up in wages or material costs – lost productivity, acceleration.

There are other analysts reports that 2020 total construction spending will finish the year down -2%. Here’s why that will not happen.

Through August, year-to-date spending is up +4.2%. To finish the year down -2% (with only 4 months to go) would require each month of the final 4 months spending to come in at -14% year-over-year (yoy =compared to the same month last year). Not a single month this year has posted spending yoy lower than last year. Also, -14% yoy for 3 months would idle more than 1 million jobs for 4 months. That would make the final 4 months of 2020 the absolute worst period ever recorded.

September data is in (not included in the presentation) and makes it even more unlikely. Year-to-date September spending is up 4.1%, so Oct, Nov, and Dec would have to each post yoy spending of -20% for the year to end down 2%. 

Similarly, the data show by an even wider margin, nonresidential buildings spending will not end 2020 down -10%. 

This table updates the slide included in this presentation. It includes September spending year-to-date and Dodge Outlook 2021 for new forecast on construction starts in both 2020 and 2021.

Spend YTD 2020 plus Markets 2020 2021 11-11-20

 

Construction Forecast Update 10-16-20

UPDATES to Construction Outlook 10-16-20 based on

  • Forecast includes US Census Aug 2020 year-to-date spending 10-1-20
  • Forecast includes Dodge September construction starts 10-15-20
  • Actual Jobs data includes BLS Jobs to Sept (12th) issued 10-2-20

This update accompanies pandemic-13-midyear-construction-outlook

Total construction starts year-to-date for 9 months through September are down 14%. Total starts have registered down -14% to -15% YTD for the last four months.

Residential new starts are down year-to-date only 1% from 2019. However, the last three months total residential starts posted the 2nd highest 3mo total in 15 years. The highest 3mo total since 2005 was for the period Dec’19-Jan-Feb’20. So two of the best 3mo periods of new residential construction starts in the last 15 years have occurred in 2020.

Nonresidential buildings starts are down 26% and non-building infrastructure starts are down 18%.

This chart shows a comparison of the cash flows predicted from new all construction starts vs the actual spending. Over time, the cash flows do a very good job of predicting where spending is headed. Note the divergence of residential in Jun-Jul-Aug 2020. Actual spending finished on avg 3%/mo higher than predicted. In 3 months the actual spending pushed 10% higher than predicted. This may be a reflection of forecasting too high an amount for delays and cancelations.

Starts CF 2015-2022 10-16-20

Construction Spending drives the headlines. Construction Volume drives jobs demand. Volume is spending minus inflation. Inflation $ do not support jobs. Current outlook shows (recent) peak volume was 2017-2018. Volume is forecast to decline every year out to 2023.

Construction jobs gained slightly in Sept, but are still down 5% (400,000) from Feb peak. Construction may experience only slight jobs improvement in 2020 (residential spending is increasing), but nonresidential buildings declines through 2021 will drive construction jobs lower over next 18 months.

Jobs are supported by growth in construction volume. We will not see construction volume return to Feb 2020 level in the next three years. This time next year, volume will be 5% lower than today, 14% below the Feb 2020 level.

This is why the construction industry will have a hard time justifying growth in jobs. After 12 years of fairly even growth in jobs vs volume, that relation broke in 2018. Volume is currently at a 5-year low, well below jobs. Declining work volume is indicating by this time next year we may be down 600,000 jobs below the Feb 2020 high.

Jobs vs Volume 2015-Jan 2022 dashed 10-16-20

The following table shows which markets have the largest (and smallest) changes in new construction starts. With the exception of residential, due to longer durations, spending in all other markets is most affected by a decline in new starts, not in this year, but in years following. Residential spending hit bottom in May, will post an increase in 2020. Nonres Bldgs spending won’t hit bottom until 2022.

A recent AGC survey of construction firms asked the question, How long do you think it will be before you recover back to pre-Covid? The survey offered “longer than 6 months” as an answer choice. My current forecast is longer than 6 years.

Some effects have not even begun to show up in the data. A 20% decline in new nonres bldgs starts in 2020 means a huge decline in spending and jobs in 2021-2022. How long before construction returns to the level it was at in Feb? 6 to 8 years.

Many nonresidential buildings have durations that last 24 to 36 months, with peak spending 12 to 18 months from now. With the drop in new starts this year, that peak spending 12 to 18 months from now will be impacted. Some nonbuilding markets have project durations that go out 5 or 6 years, so the impact of a decline in 2020 starts may be felt at least until 2025.

If construction starts in 2020 do not outperform 2020 construction spending, then starting backlog Jan. 1, 2021 will be lower. My current forecast (starts down 11%) is indicating 2021 starting backlog will be down by almost 10%. Spending declines into 2021 and remains depressed through 2023.

The last time starting backlog decreased was 2011. Starting backlog will fall 10% in 2021 and 2% in 2022. Except for residential, about 80% of annual spending comes from starting backlog.

The next table shows spending year-to-date through August (released 10-1-20) and the spending forecast for the year. 2nd quarter construction spending activity low-point is down only 5.5% from the Feb peak. Construction spending in August YTD is up 4.2%.

Residential ytd is up 7.2%. Single Family is +3.0%, multifamily is +2.7% and renovations is Reno +15.6%. Nonresidential buildings ytd is down -0.3% and Nonbuilding Infrastructure ytd is +5.8%.

Take note here, the YTD spending for Nonresidential Buildings is currently -0.3% and my 2020 forecast shows Nonres Bldgs ending the year down -2.6%. Some forecasters are predicting spending for nonresidential buildings will end the year down much worse than -2.6% compared to 2019.

With only 4 months remaining, in order for Nonres Bldgs spending to finish down even -5%, the monthly rate of spending compared to 2019 would need to drop to -14%/mo for each of the remaining 4 months of 2020. (8mo x avg -0.3% + 4 mo x avg -14%) / 12mo = -5% total for the year. To end the year down -8%, nonres bldgs spending for the next 4 months would need to come in 25% lower than 2019. That’s “Great Recession” territory.

How unlikely is this to occur? The greatest monthly declines in 2020 so far are July and August in which the monthly rate of spending dropped -3% to -4% compared to same month 2019. Essentially, for nonresidential buildings spending to end the year down -5%, the bottom would need to drop out of the nonresidential markets, beginning back on Sept 1 and continuing for the final 4 months of the year.

Not sayin’ it can’t happen. This is 2020!

Pandemic #13 – Midyear Construction Outlook

See Also this update   Construction Forecast Update 10-16-20

SEE ALSO   Pandemic #14 – Impact on Construction Inflation

Midyear Construction Outlook 8-14-20 based on

  • Actual Spending data includes revisions 2018-2019 issued 7-1-20
  • Actual Jobs data includes BLS Jobs to July (12th) issued 8-7-20
  • Forecast includes US Census June 2020 year-to-date spending 8-3-20
  • Forecast includes Dodge construction starts Midyear Update 8-6-20

The first important thing to note is that the US Census, on 7-1-20, revised all spending data back several years. This is an annual occurrence. This analysis includes all revised data, which adds about $30 billion to 2018, $60 billion to 2019, half of all adding to residential, and revises 2020 data. Not everyone has yet updated to this recently revised data, so you may see differences when comparing forecast reports among several firms. If needed, refer to the percent.

Initial impact on spending from project delays/shutdowns

This compares the current construction spending data to a 2020 Forecast from April 1 before any Pandemic Impacts were recorded. It compares actual to what was expected Pre-Pandemic. The change in year-to-date (ytd) all occurred in 2nd quarter data. In fact, 1st quarter ytd growth was forecast at 7% and it came in at 9.5%. 2nd quarter growth was forecast at 6.8% and it came in at 1%.

Construction Spending 2020 year-to-date (ytd) thru June vs 2019

Actual ytd vs Pre-Pandemic Forecast ytd. Nearly all this change is due to projects delayed/shutdown.

  • Nonres Bldgs down 2.4% ytd in 6mo vs pre-pandemic forecast
  • NonBldg UP 3.0%
  • Residential down 4.9%
  • TOTAL down 1.9%

The measure of decline due to Pandemic delays and shutdowns is not the difference between Q1 and Q2 growth in ytd spending. Nor is the impact measured by the current difference in ytd performance vs 2019. It’s the difference between what was forecast for ytd growth pre-pandemic vs actual ytd growth.

For instance, Residential construction spending thru Q2, as reported in the US Census June construction spending release, is up ytd 7.8%. But pre-pandemic it was forecast to be up 12.7% ytd after 6 months. Hence, residential spending has been impacted by a 12.7% – 7.8% = 4.9% decline from original forecast thru June.

Future impact on spending from lost construction starts

Part one of the decline in construction spending was due to delays/shutdowns. Part two will be the impact of reduced construction starts. That has very little affect right now, but will play out over the next few years. But remember once again, the impact in 2021 is not measured by the difference between 2020 and 2021, its the difference between current forecast for 2020/2021 and the pre-pandemic forecast for 2020/2021.

Year-to-date, total construction starts are down 14%. Residential new starts are down 5%, nonresidential buildings down 22% and non-building infrastructure starts are down 14%.

Dodge updated their forecast to show 2020 construction starts for nonresidential buildings fall on average 20%, less in some markets, but -30% to -40% in a few. Only warehouses is up. Non-building starts fall on average 15%. Only Highway/Bridges is up. Residential starts may fall only 5%-10%.

How those lowered starts affect spending is spread out over cash flow curves for the next few years. This has a major impact on jobs later in 2020 and all of 2021 into 2022. For nonresidential buildings, the greatest impact to spending and jobs affected by a reduction of new starts in 2020 occurs from 2021 into 2022 when many of those lost starts would have been reaching peak spending.

Only about 20% of new starts gets spent in the year they started. 50% gets spent in the next year. The effect of new starts does not show up immediately. If new nonresidential buildings starts in 2020 are down 22%, on average, the affect that has on 2020 is reduced spending by -22% x 20% = – 4.4%. But the affect it has on 2021 is -22% x 50% = -11%.

Construction Spending FORECAST 2020 vs Pre-Pandemic Forecast

This change in forecast incorporates reduced new construction starts for 2020 but also includes the impact from delays and shutdowns.

  • Nonres Bldgs down 5.4% for 2020 vs pre-pandemic forecast
  • NonBldg down 0.3%
  • Residential down 6.5%
  • TOTAL down 4.5% vs pre-pandemic forecast

Construction Spending FORECAST 2021 vs Pre-Pandemic Forecast

Nearly all this change due to a reduction in new construction starts in 2020. Notice, it is nonresidential buildings that are impacted the most, down 10% from the pre-pandemic forecast.

  • Nonres Bld down 9.9% for 2021 vs pre-pandemic forecast
  • NonBldg down 6.4%
  • Residential UP 5.8%
  • TOTAL down 2.5% vs pre-pandemic forecast

Future impact on backlog from delays/cancellations and reduced starts

Starting Backlog is the Estimate-to-Complete (ETC) value of all projects under contract at the beginning of a period. Projects in starting backlog could have started last month or last year or several years ago. Many projects in backlog extend out several years in the schedule to support future spending, so backlog growth in not an indicator that tracks year over year with spending. Current backlog at the start of 2020 would still contribute some spending for the next 6 years until all the projects in backlog are completed.

The last time starting backlog decreased was 2011. Starting backlog will fall 10% in 2021 and 2% in 2022. Except for residential work, about 80% of annual spending comes from starting backlog.

Some of the projects delayed or canceled started before Jan. 2020. When one of those projects is delayed, the portion of the project delayed gets removed from 2020 backlog, but then gets added to future backlog. When one of those projects is canceled, the portion of the project not yet put-in-place gets removed from 2020 and future backlog. Not only does that reduced future backlog but also that retroactively reduces the backlog that was on record at the start of 2020. Therefore, 2020 backlog is reduced by delays and cancellations and future backlog is increased by delays, but reduced by cancellations and a loss of new construction starts.

The following is the difference between what was forecast for backlog pre-pandemic and currently projected backlog based on delays, cancellations and reduced starts.

Backlog projected for the start of 2020:

  • Total Construction down 3.6% vs pre-pandemic forecast
  • Nonresidential buildings down 8.3%
  • Non-building infrastructure up 0.5%
  • Residential backlog down 2.2%, new starts down 5.4%

Although two thirds of Residential spending comes from new starts within the year, 2020 backlog is down 2.2%. 2020 new starts are down 5.4%.

The biggest changes to 2020 backlog are Manufacturing, Commercial/Retail and Amusement/Recreation, all down 10% to 15%.

Backlog projected for the start of 2021:

  • Total Construction down 9.8% vs pre-pandemic forecast
  • Nonresidential buildings down 15.1%
  • Non-building infrastructure down 9.4%
  • Residential backlog up 3.6%, starts up 8.4%

For 2021, Power and Environmental Public Works are down 20% and 10% respectively, but Nonresidential Buildings shows most of the losses. Lodging -40%, Amusement -28%, Manufacturing -26%, and Office and Commercial both down about 15%.

  

Spending Forecast 2020 – 2021

Now that we have highlighted the change in the forecast compared to the pre-pandemic forecast, let’s look at the current spending forecast for 2020 and 2021.

Spend Recession 2020 Summary 8-14-20

See Pandemic #11 – June Construction Spending Update  for coverage of midyear spending year-to-date through June.

Spend Sector monthly 2015-2022 8-11-20

For 2020, the biggest declines are Manufacturing, Lodging and Amusement/Recreation, all down -8% to -10%. Commercial/Retail ends up +3.9% (this market is 60% Warehouse). Office and Educational are down -3% and -1%. Nonresidential buildings takes the brunt of declines in both 2020 and 2021.

In 2021, every nonresidential building market is down from 2020, some markets down 10% to 20%. Educational, Healthcare and Office are all down 3% to 5%. Non-building infrastructure Power market is down -11%, but Highway and Transportation are up +10% to 20%.

Spend YTD 2020 plus Markets 2020 2021 8-14-20

Almost every market has a weaker spending outlook in 2021 than in 2020, because of lower starts in 2020. Starts lead to spending, but on a curve, a good average for nonresidential buildings is 20:50:30 over three years. 20% of the total of all starts in 2020 gets spent in 2020 (yr1) and that represents also about 20% of all spending. 50% of the total value of 2020 starts gets spent in the following year, 2021. So, 50% of spending in 2021 is generated from 2020 starts. If starts are down 20% and 50% of spending comes from those starts, spending will be down 20% x 50% of the work.

Although starts are forecast down 15% to 20% in 2020 and UP 5% to 15% in 2021, the drop in starts in 2020 has the greatest impact on reducing spending in 2021. By June of 2021, spending is down 10% from Feb 2020 and volume is down 14%.

Before we can look at the effect on jobs, we need to adjust spending for inflation. The plot above “Spending by Sector” is current dollars. Here that plot is adjusted for inflation and is presented in constant $. Constant $ show volume. Notice residential remains in a narrow range after adjusting for inflation. No sector shows improvement in volume through Jan. 2023.

Spend Sector Constant2019 monthly 2015-2022 8-16-20

By far the greatest decline in volume is in the nonresidential buildings sector. Volume declines follow in line with spending declines. The greatest losses in 2020 are Amusement/Recreation, Lodging and Manufacturing. In 2021, every major nonresidential building market drops in volume.

Why 400,000 construction jobs are not coming back

Reduced starts in 2020 has a major impact on jobs later in 2020 and all of 2021 into 2022. For nonresidential buildings, the greatest impact to spending and jobs occurs from 2021 into 2022 when many of those lost starts would have been reaching peak spending.

Jobs data show construction added 20,000 more jobs in July. After losing almost 1,100,000 jobs in March and April (out of a prior total 7,600,000), we regained 450,000 jobs in May and 160,000 in June. That leaves construction down 440,000 jobs from the February high point.

Jobs are down 6% from Feb to July, but construction spending is down 7% through June and volume (spending adjusted for inflation) is down 9%.

Although we may get slight jobs growth in the next few months, there is little to no volume growth to support it. Spending is currently down 7% from the Feb high and volume is down 9%. More spending declines are minimal through Q1 2021. Due to the large declines in new construction starts, we will begin to see additional spending and volume declines by spring 2021. Most of the decline will be in nonresidential buildings.

This annual plot back to 1999 shows construction spending vs construction volume. Volume is spending minus inflation.  Notice, volume never recovered to peak 2005. Also notice, recent volume began to decline in 2018.

Spend current vs constant thru 2021 8-11-20

The long-term view of jobs vs volume shows an important point. With few exceptions jobs and volume grow equally. Setting a baseline to zero in 1990, there was a spread in 1992 that was nearly equalized by 1998. Jobs and volume growth remained near equal until 2004. Leading into 2006, spending increased by the most in 30 years. Jobs, which seem to lag slightly, grew 15% from 2004 thru 2006. But inflation posted the highest rate in 30 years. While jobs grew to meet spending growth, almost all the spending growth was inflation. By 2006, jobs growth exceeded construction volume by more than 15%.

Jobs vs Volume 1991-2022 2006 deficit 8-14-20

As I said, with few exceptions, jobs and volume grow equally. If we modify history to reset the baseline to 2006 by increasing volume, the plot now shows that all years from 2006 to 2017 remained consistent in jobs growth vs volume growth. So, with exception of 1992 and 2004-2005, all years from 1990 to 2017 had consistent growth in jobs and volume.

Leading into 2017, spending once again reached a rate of near record growth, second only to 2004-2005. Again, jobs, which seem to lag slightly, grew to meet spending growth. But inflation posted the highest rate since 2006. Once again, jobs grew rapidly, but almost all the spending growth was inflation. By 2019, for the second time, jobs growth exceeded construction volume by almost 15%.

Jobs vs Volume 1991-2022 2006 deficit reset 8-14-20

Jobs are supported by growth in construction volume, spending minus inflation. We will not see construction volume return to Feb 2020 level at any time in the next three years. This time next year, volume will be 5% lower than today, 14% below the Feb 2020 level.

We are currently down 440,000 construction jobs from the Feb high. We may regain 40,000 to 50,000 more jobs before the end of the year. But the declining work volume due to a reduction in new starts in 2020 is indicating by this time next year, not only is there no volume to regain 400,000 lost jobs, but we may lose another 200,000 jobs and be down 600,000 jobs below the Feb 2020 high.

The following plot is the same jobs and volume data as above, only plotted monthly rather than annually. Much of the fear decline of jobs in April has been corrected, but jobs are still down 440,000 from the February high. And yet, the plot shows jobs in excess of construction volume by about 12%.

Jobs vs Volume 2015-Jul 2021 dashed 8-14-20

Volume is set to decline at least for the next two years. There will be no volume growth to support jobs growth and long-term jobs growth already exceeds volume growth by 12%. This is not an environment that supports jobs growth.

Pandemic #11 – June Construction Spending Update

Construction Spending thru June year-to-date is still UP 5% over Jan-Jun 2019.

Here’s the Census Release of June Construction Spending census.gov/construction/c

Q2 2020 spending is down 4.8% from Q1 2020. Prior to the Pandemic impact, Q2 was predicted to be up 1% over Q1. So, then the drop is -5.8% from the initial forecast.

Comparing 2020 spending to 2019 shows a different story. Q1 2020 is up 9.5% vs Q1 2019. Q2 2020 is up 1.2% vs Q2 2019.

The monthly rate of spending, seasonally adjusted (saar), has declined every month since the Feb peak. For 3 months Jan, Feb, Mar, the saar of spending stayed within 0.25% of the peak. Now in June, the saar is down -6%. Most of the decline was in April, -3.5%. May dropped <2% mo/mo, and June declined <1%.

Residential year-to-date (ytd) spending is up almost 8% over 2019 (80% of that is renovations). In fact, SF+MF is up ytd only 2.8%, while renovations, which went from 33% of the market last year to 36% of the market now, is up 18% ytd. Residential has more downside due to reduction in new starts before resuming growth next year. While the 2nd half of 2019 increased at an average rate of 1%/month, The 2nd half of 2020 will decline by an average 0.5%/month. Residential spending for 2020 is forecast to finish flat to down 1%.

Non-building Infrastructure sector ytd is up 7% over Jan-Jun 2019. Biggest mover is the Power market up 17% ytd. Every market but Conservation is up ytd. Non-building spending is forecast to close out 2020 up 6% over 2019 with strength in Power and Highway.

Nonresidential Buildings spending ytd is level with 2019. Big movers up are Comm/Rtl up 6.7% and Public Safety up 42%.

The construction sector did not experience a massive loss of spending from project shutdowns in Q2. Q2 was down 5%-6% from the pre-pandemic forecast. Jun is down only 0.7% from May with half of all markets posting monthly gains.

AIA Consensus Forecast Nonresidential Bldgs Construction Spending to decline 8.1% for 2020. Is there even a path to get there? In the 1st 6mo ytd is up 0.25%. What would nonres bldgs need to post yoy in the 2nd half to end the year down 8.1%? Spending would need to post declines every month (yoy) for the next 6mo at a rate of -16.7%/month. However, the worst decline in Q2 was only -3.2%. It’s not likely at all that Nonres Bldgs spending will fall to that extent.

Here’s an example of the path it would take to get to the AIA Consensus Forecast for Commercial/Retail. The AIA 2020 Forecast is down 7.7%. But year-to-date Comm/Rtl is up 6.7%, a spread of 14.4%. (I’ll remind you again, it’s almost all warehouses). To drop 14.4%, from 6.7% in the 1st 6 months, to end down -7.7% at year end, the monthly rate in the 2nd half would need to be -28.8% each month. That’s not very likely.

For the next 6 months my yoy forecast for Nonres Bldgs spending is up 0.4%.

The BIG question here is, How much of the decline in Q2 was delays and how much was canceled permanently? There is no good report available that defines the total value of work stoppages and work cancellations.

Q2 spending was down 5%-6% from the pre-pandemic forecast. If all of that was work canceled, and therefore we keep those monthly yoy declines of 5%-6% for the rest of the year, then we could see 2020 spending for Nonres Bldgs finish down 2.5% to 3%. But it is not even suspected that all of the Q2 decline was work canceled. Expect most of that was work delayed. Therefore, 2nd half should perform better than Q2 and the forecast for Nonres Bldgs for 2020 is flat to up 1%.

The forecast now has 6 months of actual spending and 6 months remaining of forecast based on new construction starts and backlog. Cash flow forecast from backlog is reduced by delays and cancellations. This forecast projects about 20% for delays and about 2% for cancellations. Also new starts are forecast to drop about 10% in 2020.

The Starts cash flow model has predicted the spending pretty well. The forecast side shows residential has not yet hit bottom, but will grow after Q3 into 2021, while nonresidential buildings falls for the next 12 months.

Starts CF 2015-2022 8-11-20

Currently, the outlook for total construction spending in 2020 is up 1% to 2%. Prior to March the forecast was 6%, so the forecast, although still up 1-2%, has fallen about 5%.

Both Residential and Nonresidential Buildings are forecast within +/- 1% of 2019. Non-building Infrastructure is forecast up 6%-7%.

Currently, inflation in 2020 is expected to range about 3%-4%. If total construction spending grows only 1%-2%, real growth in volume (spending after inflation) is falling. For 2020 and 2021, volume is down. That will not support jobs growth.

Jobs vs Volume 2015-Jul 2021 8-4-20

Mid-August this forecast will be updated with input from Dodge midyear construction starts. See Pandemic #12 for Jobs & Starts Update

Pandemic #10 – June New Construction Starts

Construction Starts gain 5% in May, 6% in June. But let’s put that in perspective. Starts year-to-date through June are down 14% compared to same 6mo 2019. Starts in Q2 2020 are down 22% compared to Q1 2020.

Non-building construction starts rose 27% in June driven by 108% gain in utility/gas plants, 63% increase in miscellaneous non-building construction and 38% rise in environmental public works projects >> Dodge June 2020 Report New Construction Starts

Non-building infrastructure construction starts for the 1st half 2020 were down 14% even though June starts were up huge. But that is almost entirely due to Utilities/Power Plants, 40% of the total of non-building markets, down 40%.

Highway and Bridge represents almost 40% of non-building markets and starts are up 8% for the 1st half 2020 compared to same period 2019.

Public works, almost 20% of non-building markets, posted starts for 1st half 2020 down 20%.

Commercial (Comm/Rtl, Lodging, Offc) and Multifamily (Dodge multifamily includes Asst Liv Fac, Dorms, MF Housing, Housing Reno) construction starts are down 22% in 1st half 2020. This group represents 20% of total of all construction markets.

Institutional building construction starts (Educ, Hlthcr, Amuse/Rec) are down 15% in the 1st six months of 2020 compared to same period 2019.

Manufacturing starts are down 38% ytd 2020 compared to same period 2019.

Single family residential starts are down only 1% in 1st half 2020 from same period 2019. That market alone represents 20% of all construction.

Expect 2020 spending declines in Amuse/Rec, Lodging, Offc, Mnfg. Expect increases in CommRtl (it’s all in warehouses, stores are down), and most non-building markets.

Even with new construction starts down 10%-15%, cash flow patterns are still indicating nonresidential construction spending will be up in 2020. Greatest strength is in non-building work. A reduction in 2020 new construction starts will show the greatest impact in 2021.

 

Coming in August:

Aug 3 – Construction Spending Report for June, will include revisions to April and May, both expected to be revised down.

Aug 7 – July jobs report for the period June 14 through July 18.

Aug – Revised Construction Outlook to include Data through June spending, July jobs and June new construction starts.

 

Pandemic Impact #8 – Construction Outlook 6-1 April data

For up-to-date Outlook 

See Pandemic #13 – Midyear Construction Outlook published 8-14-20

See Pandemic #12 – Jobs & Starts Updated Aug 8 and 

Pandemic #11 – June data Construction Spending Update Aug 3 and 

Pandemic #10 – June New Construction Starts July 30 

 

Analysis of a Recession Scenario 2020-2022

based on 6-1-2020 data

This analysis relies on the first available hard data reports to forecast the impact of a construction recession scenario caused by the current Covid-19 pandemic. This scenario does not assume a catastrophic failure of the U.S. economy, but does assume a large decline in construction activity in 2020 and 2021. Data always gets revised in the following months.

This analysis generates spending cash flows from current and assumed reduced new construction starts to then determine how new starts and spending may affect future construction activity.

6-1-20 What We Know Today

The revised construction spending report for March, released June 1st, showed no decline in spending from February. Census revised March construction spending from the initial report of up 1% to, still remarkably, level with February. https://census.gov/construction/c30/pdf/release.pdf

This was the estimated growth before the pandemic. Shutdowns began March 15th. This report seems to indicate construction was totally unaffected in March! This is hard to grasp. Just the shutdowns in Boston and San Francisco starting Mar 15. affected 300,000 jobs and would calculate to have erased over $2 billion in work from March total spending. By one estimate, we had already lost 300,000 to 400,000 construction jobs by Mar.31st. How spending could have increased is baffling.

The first hard jobs data reflecting Coronavirus impacts on the construction industry was the jobs report released in the first week in May which covers jobs from mid-March through mid-Apr. From March 15th to April 12th, construction lost 975,000 jobs, 13% of the workforce. Construction unemployment, which was below 5%, as low as 3.2%, is now at 16.6%. https://bls.gov/web/empsit/ceseeb1a.htm . I expect to see downward revisions to March spending. In addition to a 13% drop in the number of jobs, hours worked also dropped 3%, so the total worker manpower and hours worked output dropped 16%.

Ten states account for 80% of the 975,000 construction jobs lost between March 15th and April 12th. CA, FL, MA, MI, NJ, NY, OH, PA, TX & WA. Eight of those states are in top ten states for total number of construction jobs, MA and WA are not. https://www.agc.org/news/2020/05/22/construction-employment-shrinks-49-states-and-dc-april-new-association-survey-finds?

The next jobs report due out June 5th covers the period from April 13th through May 17th. Expect more downward movement in the jobs numbers. I expect most construction jobs were lost early and are included in the April report, so next report June 5th we may see only 400,000 more construction jobs losses for the period April 13 through May 17. (This report will be edited to reflect the June 5th jobs data.)

The loss of 975,000 jobs in a single month (if all jobs were lost for a full 30 days) at a rate of 60,000 jobs needed to put-in-place $1 billion in construction in one month, equates to a loss of $16 billion in spending between March 15th to April 12th.

In one of the most baffling reports I’ve seen, Census posted April Construction Spending down only 3%. It is beyond explanation that construction spending for March was flat and April declined only 3% from March, while we’ve lost 16% of worker output.

Jobs vs Volume 2001-2020 monthly 6-2-20

The change from March to April Construction Spending versus Construction Jobs varies by the most in 30 years. This is highly suspect! Jobs (and hours) are down 16% but spending is down only 3%, for a variance of 13%. The largest variances on record back to Jan 1991, most of which occurred in 2005-2006, are: in 360 months, jobs and spending growth varied by >4% only 10 times, >5% only twice. The 20 yr average 0.1%.

Variances like what the data show for this month have never occurred. A more likely explanation is there is an anomaly in the data. Either construction did not lose 975,000 jobs in a month or spending in April dropped a lot more than 3%. I suspect the later.

6-8-20 Another way of looking at the jobs data is this simple metric. The total number of construction jobs divided by the amount in $billions of work put-in-place each month = Jobs/$billion PIP. This value sometimes spikes or dips by 3% or 4%, but usually changes month to month by less than 1%. You can easily see the April construction jobs/spending data changed by what normally would take several years. The change in April spending data does not agree with the change in jobs data. It’s one thing to see a spike like this when jobs are increasing in excess of work put-in-place. But it is much more suspect to see jobs decline without a decline in work put-in-place. Who’s putting the work in place?

Here’s what that April variance would mean. If construction jobs+hours drop by 16% but spending drops by only 3%, then productivity as measured by amount of work put in place per job increased by 13%, IN A MONTH, DURING A PANDEMIC.

If there is essentially no change in productivity, but due to restrictions and higher overhead, costs go up, then you must accept construction inflation just increased by 13% in one month. But there is no data yet showing unusual labor or material cost increases.

Or, if some portion of this discrepancy is due to a change in productivity and some part due to rapid inflation, the 13% variance is somehow split between these two issues.

6-5-20 The May Construction Jobs report issued today for the period April 13 through May 17 shows an increase of 464,000 jobs (and hours worked). I missed that estimate. So did everybody else. Jobs and hours worked output is now down net 13% for March and April. Spending is down only 3%. I still expect April spending to be revised down.

6-5-20 The May jobs data today is indicating an initial month (April) of stop work down 975,000 jobs (16%) is now down only 10%, net 600,000 jobs as of mid-May. That’s equates to a two-month average of jobs and hours worked down by 13%.  My forecast was based on about 25% of work stopped for two months. If jobs is a better indication, the lesser extent of work stopped means the adjusted forecast will post higher spending in 2020 and will move less spending into 2021. The next important data date is July 1, when the May construction spending is released. With that May report every year, Census revises all previous months data back 5 years. We’ll see if April data gets revised down.   

6-9-20 “In total, the construction sector recorded almost 1.3 million layoffs during March and April.” NAHB  https://wordpress.com/read/blogs/68887359/posts/28427

6-5-20 There is a scenario in which jobs decline with little to no reduction in volume. But, it accepts that there was a very large number of nonproductive jobs in the workforce. I’d been writing about the increasing disparity for the last few years between volume growth and jobs growth Expect Construction Jobs Growth to Slow in 2020.  Since 2017 jobs have been increasing but volume of work has been decreasing or level. It’s possible a large portion of the jobs losses in April are resetting this balance with little to no impact on volume output. These would be jobs that would probably not come back.

6-5-20 For Mar-Apr, 975,000 jobs were lost for a single month (if all jobs were lost for a full 30 days). For Apr-May, we regained 464,000 jobs. Net jobs loss for two months is about 600,000 jobs. April spending was down only 3% or $40 billion seasonally adjusted annual rate (SAAR) . At a rate of 60,000 jobs needed to put-in-place $1 billion in construction in one month, this equates to a loss of $10 billion in not seasonally adjusted (NSA) spending PER MONTH for both April and May. That would be a decline in the SAAR of spending of $120 billion. March posted no decline. April posted a $40 billion decline and we will get May spending on July 1st. The spending data remains suspect.

The pre-pandemic construction seasonally adjusted annual rate (SAAR) spending forecast was for a rate of $1,395 billion from March through July. Assuming no unusual changes in jobs, productivity or inflation, the spending can be calculated from the number of jobs available to perform work. For pandemic impact based on job losses, we should see March SAAR spending at $1,350 billion. April construction spending should drop to under $1,200 billion from a high of $1,386 billion in February. I expect to see March spending get revised downward. I expect April spending to be revised down 6% to 10%. For these reasons, my forecast is not using the reported April spending data.

Pandemic Impact on Construction

This was the baseline forecast pre-pandemic. It shows considerable strength in Nonresidential Buildings and Non-building Infrastructure starts and spending. There is weakness in residential.

This plot shows actual spending through January 2020 and forecast spending for 2020 through 2022 based on the predicted cash flow from existing starts and projected starts pre-pandemic.

PRE-RECESSION SCENARIO FORECAST SPENDING

Spend Sector 2015-2021 monthly 3-5-20

Backlog leading into 2020 was up 30% in the last 4 years, at all-time high. Although spending was forecast up only 4%/yr. the next two years, spending is at an all-time high. 80% of all nonresidential spending in any given year is from backlog. If new starts drop by 10%, that has only a 1.5% to 2% impact on total spending in the first year. The following year spending would be down 4% to 5%. Residential spending is far more dependent on new starts than backlog. Only about 30% of residential spending comes from backlog and 70% from new starts. If residential new starts drop 10% that impacts total spending by 7% in that year.

Residential construction starts peaked in 2018. Starts in 2019 are level yoy, but have been flat or in moderate decline since mid-2018. Spending was forecast up 5% in 2020 but down 1% in 2021.

Nonresidential Buildings starting backlog increased 10%/year for the 4 years 2017-2020. Starts have moved sideways or in slight decline since mid-2018. 2019 starts are down 9% from 2018. Spending was forecast up 3% in 2020 and 2021.

Infrastructure starting backlog, by far the most robust, has increased 15%/year for the 3 years 2018-2020. Spending was forecast up 6% in 2020 and up 8% in 2021.

Recession Scenario

Regardless what may lead to a construction recession, in this case a global pandemic, it is the current high amount of work in backlog that will work hard to mute its effect.

When a recession occurs, new construction starts would be substantially reduced. Although some projects will be canceled or delayed mid-schedule, most projects already in construction would move on to completion.

Construction projects will most likely experience delays. Potential product shortages, delivery delays and shutdowns will drive up costs and extend project schedules.

Projects in planning may be canceled due to drop in demand, decline in capital or slowdown in economy. Retail stores may cancel expansion, educational facilities may delay starting new construction, transportation facilities may postpone later phases of long planned growth.

This recession scenario does not assume a catastrophic failure of the economy.

This pandemic recession forecast is based on the following:

  • April spending is forecast and not carried as reported due to reasons cited.
  • New Construction Starts in 2020 canceled, Residential -15%, Nonresidential Buildings -8%, Non-building Infrastructure -11%, Total Construction starts canceled -11%.
  • Work in backlog that has been delayed, minimum 2 month delay, restart build up over a period of 8 months; Residential -30%, Nonresidential Buildings -28%, Non-building Infrastructure -22%, Total Construction delays -25%.
  • Work in backlog that has been canceled, Residential -3%, Nonresidential Buildings -3.4%, Non-building Infrastructure -2.2%, Total Construction backlog canceled -2.8%.

This plot shows the resulting change in spending. Only the estimated spending to the right of the dateline changes.

RECESSION SCENARIO FORECAST SPENDING

Spend Sector Recession 2015-2022 6-3-20

 

6-20-20  Data on most recent Construction Starts

Dodge Construction Starts average for Apr+May 2020 compared to Avg Jan-Feb-Mar 2020 Nonresidential Bldgs 66%, Nonbldg Infra 96%, Residential 73%.

Dodge Construction Starts average for Apr+May 2020 compared to Avg Apr+May 2019 Nonresidential Bldgs 82%, Nonbldg Infra 85%, Residential 97%.

So, while Nonresidential buildings starts were down 34% in Apr+May compared to Q1 2020, that’s down 18% compared to the same months 2019. Residential Apr+May starts are down 27% compared to the avg in Q1 2020, but that’s down only 3% compared to Apr+May 2019.

Nonbuilding Infrastructure starts in Apr+May are down only 4% from Q1 average, but Q1 is already 15% lower than last year.

What impact does that have on the year? if Nonres Bldgs starts are down 34% for 2 months, that reduces starts by 6% (34 x 2/12) for the year (from the prior trend). if Residential starts are down 27% for 2 months, that reduces starts 4.5% (27 x 2/12) for the year. Most of the impact in nonresidential occurs from 12 to 24 months out. Most of the residential impact occurs in the first 12 months.

After the resumption of work that had been halted, which for various reasons cited will take several months, and which is not all expected to return to a full level of pre-pandemic spending, a pull-back in new construction starts will hold spending nearly flat from Q3 2020 through Q2 2021. During that time nonresidential work will reach a post-pandemic peak but residential work will hit a post-pandemic low. Non-building Infrastructure work is not affected nearly as much and still shows spending growth leading into 2022-2023.

Construction Spending Forecast 2020 – Residential -2%, Nonresidential Buildings -4%, Non-building Infrastructure <-1%, Total Construction Spending 2020 -2.3%.

Residential construction spending would drop 11% from $566 billion to $506 billion in 2020 and then drop 18% from $550 billion to $453 billion in 2021. Residential is far more dependent on new starts within the year for spending than on backlog.

Nonresidential Buildings spending drops 8% in 2020 from $469 billion to $434 billion and then drops 2% from $475 billion to $468 billion in 2021.

Non-building Infrastructure spending drops 5% in 2020 from $348 billion to $330 billion and then drops <1% from $378 billion to $376 billion in 2021.

By 2022, nonresidential buildings and infrastructure are back within 1% to 2% of baseline pre-pandemic spending. However, residential spending is set back $100 billion, back to the level of 2016.

About 300,000 of the jobs lost do not return. While about 75% of the initial jobs lost have returned by the end of 2020, we then slowly lose jobs for the next two years.

Spend Recession 2020 Summary 6-2-20

Total all spending would drop from the current 2020 forecast of $1.380 trillion to $1.270 trillion. In 2021 and 2022, instead of baseline spending of $1.400 trillion, spending would drop to near $1.300 trillion, back to the level of 2018. The losses in the Great Recession, a total drop of almost $400 billion, set construction spending growth back 12 years.

The difference with shutdown vs a reduction in new starts is that work shut down is delayed. It will reduce total spending in that month in 2020 but will simply shift all remaining months and the end of the projects, which could occur in 2020, 2021 or later. If 50% of all U.S. construction shut down for two months, it would delay $100 billion worth of work, most of it from 2020 into 2021.

7-3-20  updated spending data    on 7-1 Census released spending data for May and revised all monthly data back two years. 2018 and 2019 spending was revised up by 2% and 4%. But more important, the data for Mar-Apr-May 2020 shows that shut down delays were far less than anticipated. More than 90% of all work continued unabated through April and may. The result is fewer reductions in spending in 2020 and less delayed work pushed out into 2021. This shifts the balance of work to now show slight growth in 2020 and only a minor increase in 2021. SEE PANDEMIC #9

 Inflation

When we see spending increasing at less than the rate of inflation, the real work volume is declining. With typical construction inflation between 3% and 5% annually, a spending drop of -2.8% in 2020 may reflect a work volume decline of 6% to 8%. Spending growth of 2% when inflation is 3% is really a decline in volume of work by 1%. The extent of volume declines would impact the jobs situation.

Historically jobs declines of the same magnitude do not follow immediately after volume of work declines, therefore after the initial delayed job losses return to work, we would not expect to see much reduction in workforce in 2020.

What this will do to the construction inflation rate is hard to predict. Typically, when work volume decreases, the bidding environment gets more competitive and prices go down. However, if materials shortages develop, that would cause prices to increase.

There have been reports that scrap steel shortages may result in a steel cost increase and numerous imported products are not available or in short supply. Some firms that manufacture goods used in construction were closed temporarily, so their production was disrupted.

Steel Statistics and Steel Cost Increase Affect on Construction?   2/3rds of all steel manufactured in the U.S. is EAF steel made from scrap steel. Almost 100% of steel used in construction is EAF steel. The Pandemic is causing scrap steel shortages.

U.S. Steel production through May is down 13% compared to the same period 2019. Steel imports are down 20%. The U.S. imports about 30% of all the steel it uses. 40% of all steel used in the U.S. is used for construction. So through May, total steel available in the U.S. is 13% + (20% x 30%) = 19% less than 2019.

Add to these issues the fact that many projects under construction may have been halted for a period of time and many more may have experienced disruption. The delays may add several weeks to perhaps a month or two to the overall schedule and management cost goes up. I think in this case the materials availability issues and schedule delays will outweigh any decline in work available for bid.

Only twice in 50 years have we experienced construction DEflation, 2009 and 2010. That was at a time when business volume was down 33% and jobs were down 30%. I expect inflation to range between 4% and 5% for 2020 and 2021, lower for residential work.

You can visit Ed Zarenski’s website,

Construction Analytics – Economics Behind the Headlines

at https://edzarenski.com/

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