ACHRNEWS

Census Bureau Report: Construction Market Spikes

August 14, 2006
"Construction spending rebounded in June after a tiny drop in May and a small increase in April," said Ken Simonson, chief economist for the Associated General Contractors of America (AGC). Simonson was commenting on an Aug. 1 report from the Census Bureau that showed the value of construction put in place rose at a seasonally adjusted annual rate of 0.3 percent in June, following a drop of less than 0.1 percent in May, and a gain of 0.2 percent in April.

"In all three months, private residential construction dropped sharply, while private nonresidential and public construction spending increased," Simonson observed. "In June, these categories rose 2.7 and 0.8 percent respectively. I expect those trends to continue: falling residential spending, very strong private nonresidential, and somewhat positive public spending."

According to the AGC, manufacturing spending on the nonresidential side surged 8 percent for the month of June and 24 percent for the first half of 2006 as compared to January-June 2005.

Multiretail, which includes shopping centers and malls, added 1.1 percent in June and 52 percent year-to-date. Hotels and resorts jumped 8.7 percent for the month and 39 percent year-to-date. June's transportation facilities were up 1 percent and up 28 percent overall year-to-date. Power plants had a 4.1 percent spurt and 13 percent in the first half. Hospital construction continued to soar, up 1.7 percent for the month. It is so far experiencing a 29 percent increase for the first half of 2006.

On the other side of the coin, new private single-family construction dropped 2.1 percent. Private multi-family construction was up 0.1 percent and the renovations and additions category climbed 1.6 percent for the month, however, it is down 7 percent year-to-date.

"I expect to see more of the same for the rest of the year," Simonson predicted. "As builders work through current backlogs of sold but not-yet-built houses, they will curb new construction sharply. Condo work may tail off even more steeply but rental projects will take up some of the slack. Public construction should be helped initially by higher state budgets in the fiscal year that began in July for most states, but higher materials costs will limit the number of contracts that state and local governments can award."

MORE THAN NUMBERS

As construction trends shift, the industry watches not only the building numbers, but also the workforce. Many trades suffer from the inability to find sufficient qualified help, especially in places so profoundly impacted by Hurricanes Katrina and Rita. In response, the Business Roundtable, Washington, is spearheading the Gulf Coast Workforce Development Initiative. With members such as ABB Inc., Honeywell International Inc., CSX Corp., DuPont, and Johnson Controls Inc., Business Roundtable has committed funding and taken a leadership role in the coordination of training to assist in recruiting workers.

"The Gulf Coast region is a key component of a strong national economy, and Business Roundtable CEO's remain committed to helping this area regain its vitality," said Charles Holliday Jr., chairman and CEO of DuPont.

Combining forces with the government and other entities, Business Roundtable is launching a new campaign within the Gulf Coast Workforce Development Initiative. Project Gulf Rebuild: Education, Advancement, and Training (I'M GREAT) will begin with a pilot project both in Baton Rouge, La., and Jackson, Miss.

"The regional demand for construction labor significantly exceeded supply before the hurricanes," according to Business Roundtable. "This shortfall has grown even more because of the need for workers in the recovery effort. Thousands of additional construction workers will be required to continue the rebuilding effort in the Gulf Coast."

The program consists of free, four-week training courses that will provide an overview of the construction trade and give participants the skills necessary to start a career in construction, according to Business Roundtable. Classes are taught by construction-certified instructors, and safety training is included, satisfying the Occupational Safety and Health Administration's construction industry training program requirements. To be eligible for the program, applicants must be legal U.S. residents, pass a basic literacy assessment, and pass a drug test if required by the state. Upon successful completion of the course, participants will be qualified to work in basic entry-level construction jobs.

I'M GREAT is aiming for 20,000 new construction craft workers for the Gulf Coast region by the end of 2009 and will continue to add additional training courses in various construction specialties as the program progresses. The program will not only continue to expand its course offerings, but it will also expand its locations as it meets with success.

"The need for craft training to provide a trained workforce in the Gulf area has never been greater than it is today," said Don Whyte, president of the National Center for Construction Education and Research. "We want to help rebuild our communities and rebuild the lives of the Gulf Coast residents."

The initiative is beginning an advertising campaign to reach out to residents across the Gulf Coast. There will be a Website, special toll free numbers, and special events to communicate this opportunity. Billboards will also be launched during the campaign encouraging residents to call or go online and find out more about I'M GREAT.

"This project is gaining momentum thanks to a wide and expanding network of participating organizations, and we're already seeing interest from the regions' contractors," said Holliday.

The World Meteorological Organization may have retired the names Katrina and Rita from the official storm names list, but Business Roundtable and its partners don't show signs of retiring anytime soon.

Contact Ken Simonson at simonsonk@agc.org for more information on construction trends. For more information, go to www.imgreat.org or www.businessroundtable.org.

Publication date: 08/14/2006