The Pit and the Pendulum - AGC · 2015. 5. 28. · By: Anirban Basu. Sage Policy Group, Inc. May 27. th, 2015. The Pit and the Pendulum. On Behalf of. Viewpoint

By: Anirban BasuSage Policy Group, Inc.

May 27th, 2015

The Pit and the Pendulum

On Behalf of

Viewpoint

Dawn of the Dead

Jobs 0.3%

Incomes 4.7%

Profits 61.0%

Housing -6.8%

Stocks 33.5%

-70%

-50%

-30%

-10%

10%

30%

50%

70%

2008 2009 2010 2011 2012 2013 2014

Perc

ent c

hang

e si

nce

end

of 2

007

What Lies Beneath

Source: BEA, BLS, S&P Case-Shiller, Yahoo! Finance

*Through June 2014

Average Hourly Earnings: Construction WorkersMarch 2007 – April 2015

Source: Bureau of Labor Statistics

$10.5

$11.0

$11.5

$12.0

Mar

-07

Jul-

07N

ov-0

7M

ar-0

8Ju

l-08

Nov

-08

Mar

-09

Jul-

09N

ov-0

9M

ar-1

0Ju

l-10

Nov

-10

Mar

-11

Jul-

11N

ov-1

1M

ar-1

2Ju

l-12

Nov

-12

Mar

-13

Jul-

13N

ov-1

3M

ar-1

4Ju

l-14

Nov

-14

Mar

-15

Apr. 2015:$11.6

*1982-1984 Dollars, S.A.

Change in Equipment and Material Technology versus Changes in Labor Productivity, 1977-2004

Source: Construction Industry Institute

Technology Characteristic Change in Labor Productivity

Equipment Technology characteristic No Change in Characteristic Change in Characteristic % Difference

Energy 3.6% 39.8% 36.2%

Control 14.9% 46.6% 31.7%

Functional Range 13.5% 51.8% 38.3%

Informational Processing 21.0% 56.4% 35.4%

Material Technology Characteristic No Change in Characteristic Change in Characteristic % Difference

Modularization 8.1% 24.2% 16.1%

Reduction in Unit Weight 10.4% 48.6% 38.2%

Installation Flexibility 8.7% 23.1% 14.4%

Invasion of the Body Snatchers

-1,000

-800

-600

-400

-200

0

200

400

600Ja

n-02

May

-02

Sep-

02Ja

n-03

May

-03

Sep-

03Ja

n-04

May

-04

Sep-

04Ja

n-05

May

-05

Sep-

05Ja

n-06

May

-06

Sep-

06Ja

n-07

May

-07

Sep-

07Ja

n-08

May

-08

Sep-

08Ja

n-09

May

-09

Sep-

09Ja

n-10

May

-10

Sep-

10Ja

n-11

May

-11

Sep-

11Ja

n-12

May

-12

Sep-

12Ja

n-13

May

-13

Sep-

13Ja

n-14

May

-14

Sep-

14Ja

n-15

Thou

sand

s

Source: U.S. Bureau of Labor Statistics

April 2015: +223K

Net Change in U.S. Jobs, BLSJanuary 2002 through April 2015

National Nonfarm Employmentby Industry SectorApril 2014 v. April 2015

-21

55

64

66

151

180

280

434

555

564

654

-200 0 200 400 600 800

Mining and Logging

Information

Government

Other Services

Financial Activities

Manufacturing

Construction

Leisure and Hospitality

Trade, Transportation, and Utilities

Education and Health Services

Professional and Business Services

Thousands, SA

All told 2,982K Jobs gained


April 2015:+45K

-200

-150

-100

-50

0

50

100

Apr

-00

Aug

-00

Dec

-00

Apr

-01

Aug

-01

Dec

-01

Apr

-02

Aug

-02

Dec

-02

Apr

-03

Aug

-03

Dec

-03

Apr

-04

Aug

-04

Dec

-04

Apr

-05

Aug

-05

Dec

-05

Apr

-06

Aug

-06

Dec

-06

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

Dec

-11

Apr

-12

Aug

-12

Dec

-12

Apr

-13

Aug

-13

Dec

-13

Apr

-14

Aug

-14

Dec

-14

Apr

-15

Mon

thly

Net

Ch

ange

(th

ousa

nds

)National Construction Employment Monthly Net ChangeApril 2000 through April 2015


Industry Sector 15-Apr 15-Mar 14-Apr 1-net 12-net 12-%Construction 6,383.0 6,338.0 6,103.0 45.0 280.0 4.6

Residential Building 693.6 690.8 652.4 2.8 41.2 6.3Nonresidential Building 711.4 719.2 694.8 -7.8 16.6 2.4Heavy & Civil Engineering Construction 944.7 936.3 911.6 8.4 33.1 3.6Specialty Trade Contractors 4,033.0 3,992.0 3,844.5 41.0 188.5 4.9

State-by-state Growth in Construction JobsApril 2014 v. April 2015


*Construction, Mining, and Logging are included in one industry.

STATEYear-over-year Ch.

(‘000)STATE

Year-over-year Ch.

(‘000)STATE

Year-over-year Ch.

(‘000)CALIFORNIA 42.6 IDAHO 4.4 ALASKA 0.8FLORIDA 32.2 TENNESSEE* 4.1 MONTANA 0.7TEXAS 25.3 NEW YORK 3.7 CONNECTICUT 0.6WASHINGTON 18.7 KANSAS 3.6 NEW HAMPSHIRE 0.4MICHIGAN 14.8 ARKANSAS 3.3 DELAWARE* 0.4ILLINOIS 14.1 NORTH DAKOTA 3.3 DISTRICT OF COLUMBIA* 0.4NEW JERSEY 13.9 MARYLAND* 3.2 HAWAII* 0.1NORTH CAROLINA 13.9 GEORGIA 3.1 INDIANA 0.0COLORADO 13.8 LOUISIANA 3.0 OREGON 0.0PENNSYLVANIA 13.0 OKLAHOMA 2.7 VERMONT 0.0WISCONSIN 8.2 ALABAMA 2.4 MAINE -0.2VIRGINIA 6.8 MASSACHUSETTS 2.1 NEW MEXICO -0.7UTAH 6.0 KENTUCKY 1.7 RHODE ISLAND -0.8SOUTH CAROLINA 5.8 SOUTH DAKOTA* 1.6 NEBRASKA* -1.1NEVADA 5.7 ARIZONA 1.5 OHIO -3.0IOWA 5.6 MISSOURI 1.4 MISSISSIPPI -3.2MINNESOTA 5.1 WYOMING 1.0 WEST VIRGINIA -4.4

U.S. Year-over-year Percent Change: 2.2%

Employment Growth, U.S. States (SA) April 2014 v. April 2015 Percent Change

RANK STATE % RANK STATE % RANK STATE %1 UTAH 4.0 18 INDIANA 2.0 33 NEW YORK 1.22 FLORIDA 3.6 19 MASSACHUSETTS 1.9 36 ILLINOIS 1.12 WASHINGTON 3.6 20 KENTUCKY 1.8 36 MAINE 1.14 NEVADA 3.4 20 NEW MEXICO 1.8 36 NEBRASKA 1.14 OREGON 3.4 20 WISCONSIN 1.8 36 OKLAHOMA 1.16 IDAHO 3.1 23 TENNESSEE 1.7 36 PENNSYLVANIA 1.17 GEORGIA 3.0 24 DELAWARE 1.6 41 NEW HAMPSHIRE 0.98 CALIFORNIA 2.9 24 MINNESOTA 1.6 41 RHODE ISLAND 0.98 SOUTH CAROLINA 2.9 24 SOUTH DAKOTA 1.6 43 ALASKA 0.810 COLORADO 2.6 27 MARYLAND 1.5 43 KANSAS 0.810 NORTH CAROLINA 2.6 28 ALABAMA 1.4 43 MISSISSIPPI 0.810 NORTH DAKOTA 2.6 28 CONNECTICUT 1.4 43 VIRGINIA 0.813 TEXAS 2.5 28 OHIO 1.4 43 WYOMING 0.814 MICHIGAN 2.4 31 DISTRICT OF COLUMBIA 1.3 48 LOUISIANA 0.715 ARIZONA 2.3 31 IOWA 1.3 48 MISSOURI 0.715 VERMONT 2.3 33 HAWAII 1.2 48 MONTANA 0.717 ARKANSAS 2.1 33 NEW JERSEY 1.2 51 WEST VIRGINIA -0.7


Nightmare on Elm Street

Source: The American Institute of Architects

Architecture Billings IndexJanuary 2008 through April 2015

30

35

40

45

50

55

60

Jan-

08M

ar-0

8M

ay-0

8Ju

l-08

Sep-

08N

ov-0

8Ja

n-09

Mar

-09

May

-09

Jul-

09Se

p-09

Nov

-09

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep-

10N

ov-1

0Ja

n-11

Mar

-11

May

-11

Jul-

11Se

p-11

Nov

-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-

13Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep-

14N

ov-1

4Ja

n-15

Mar

-15

April 2015: 48.8

Nonresidential Construction Put-in-PlaceDecember 2006 through March 2015

0

100

200

300

400

500

600

700

800D

ec-0

6

Mar

-07

Jun-

07

Sep-

07

Dec

-07

Mar

-08

Jun-

08

Sep-

08

Dec

-08

Mar

-09

Jun-

09

Sep-

09

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

Sep-

11

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Mar

-15

SAA

R ($

bill

ions

)

Public

Private

Source: U.S. Census Bureau

Dec. 08: $697.4 billionMarch. 15: $611.8 billion

-12.3%

National Nonresidential Construction Spending by SubsectorMarch 2014 v. March 2015

-17.6-15.7

-9.1-8.5

-5.3-3.0

-0.22.3

9.212.312.8

19.619.8

22.023.8

50.3

-25 -15 -5 5 15 25 35 45 55

ReligiousPower

Public safetyCommunication

Highway and streetEducationalHealth care

Water supplyTransportation

Conservation and developmentCommercial

Sewage and waste disposalOffice

LodgingAmusement and recreation

Manufacturing

12-month % ChangeSource: U.S. Census Bureau

Top U.S. Nonresidential Permanent Modular Construction MarketsAnnual Value Put in Place, 2013*

Source: Modular Building Institute 2014 Permanent Modular Construction Annual Report

*Building categories that align with industry key markets are: lodging, office, commercial, healthcare, educational and religious. These categories totaled $231.3 billion for 2013, according to the U.S. Census Bureau. The permanent modular construction market in the U.S. is roughly $3.0 billion and therefore is 1.3 percent of construction put in place in these markets.

Market $ Billion 2012 v. 2013 (%)

Lodging 16.7 31.0%

Office 41.3 6.0%

Commercial 54.7 19.7%

Healthcare 40.3 -1.9%

Education 75.1 -8.2%

Religious 3.2 -7.2%

Total 231.3 3.5%

Percent of Project Work Currently Accomplished Using Prefabricated Assemblies

Source: FMI’s Prefabrication and Modularization in Construction 2013 Survey Results

26% 26%

19%

13%

16%

0%

5%

10%

15%

20%

25%

30%

1% to 5% 6% to 10% 11% to 20% 21% to 25% >25%

Inputs to Construction PPIApril 2001 – April 2015

-10%

-5%

0%

5%

10%

15%

Apr

-01

Aug

-01

Dec

-01

Apr

-02

Aug

-02

Dec

-02

Apr

-03

Aug

-03

Dec

-03

Apr

-04

Aug

-04

Dec

-04

Apr

-05

Aug

-05

Dec

-05

Apr

-06

Aug

-06

Dec

-06

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

Dec

-11

Apr

-12

Aug

-12

Dec

-12

Apr

-13

Aug

-13

Dec

-13

Apr

-14

Aug

-14

Dec

-14

Apr

-15

12-m

onth

Per

cen

t Ch

ange


Construction Materials PPI12-month % Change as of April 2015


-70% -60% -50% -40% -30% -20% -10% 0% 10%

Crude petroleum

Natural gas

Crude energy materials

Iron and steel

Steel mill products

Softwood lumber

Nonferrous wire and cable

Prepared asphalt and tar roofing & siding products

Fabricated structural Metal Products

Plumbing fixtures and Fittings

Concrete products

-50.4%

-47.9%

-42.2%

-14.5%

-8.7%

-4.7%

-2.8%

-1.9%

0.8%

1.5%

5.1%

Index of Construction Labor ProductivityBased on Various Deflators, 1964-2012

Source: Paul Teicholz, Professor Emeritus, Department of Civil and Environmental Engineering, Stanford University

Source: Paul Teicholz (Stanford University) using data from U.S. Department of Labor and U.S. Bureau of Economic Analysis, published by AECbytes, March 2013

Construction ProductivityValue Added per Employee (2005 dollars), 1998-2011

Source: Chart created by Matt Stevens (Stevens Construction Institute) using data from U.S. Department of Labor and U.S. Bureau of Economic Analysis, published by the National Society of Professional Engineers, June 2014.

U.S. Construction Productivity Value of Construction Put in Place per Employee 1993-2013

Average Hourly Earnings, Select IndustriesJanuary 2005 through April 2015

Source: Bureau of Labor Statistics

$19.00

$21.00

$23.00

$25.00

$27.00

$29.00

Mar

-06

Aug

-06

Jan-

07

Jun-

07

Nov

-07

Apr

-08

Sep-

08

Feb-

09

Jul-

09

Dec

-09

May

-10

Oct

-10

Mar

-11

Aug

-11

Jan-

12

Jun-

12

Nov

-12

Apr

-13

Sep-

13

Feb-

14

Jul-

14

Dec

-14

Mining and Logging Construction

Nonresidential Profit Margins Subpar

Source: SageWorks

• In 2013, nonresidential construction firms averaged 2.52% net profit margin, up from 2.15% in 2012

• The average for all industries is above 6%• The top industry, Accounting, Tax

Preparation, Bookkeeping, and Payroll Services, had a profit margin of 19.8%

Source: IT Key Metrics Data 2014, Gartner Benchmark Analytics

IT Spending as a Percent of Revenue, By Industry

1.0%1.1%1.3%1.3%1.5%1.7%1.9%2.5%2.6%2.8%3.2%3.2%3.8%4.2%4.2%4.7%5.0%6.3%6.7%3.3%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

Construction, Materials, & Natural ResourcesEnergy

ChemicalsFood & Beverage Processing

Retail & WholesaleIndustrial Manufacturing

Consumer ProductsIndustrial Electronics & Electrical Equipment

TransportationUtilities

InsurancePharmaceuticals, Life Sciences & Medical Products

TelecommunicationsProfessional ServicesHealthcare Providers

EducationMedia & Entertainment

Banking & Financial ServicesSoftware Publishing & Internet Services

Cross-Industry Average

Source: JBKnowledge, 2014 Construction Technology Report

Limits to Adoption*

*Percentages do not round to 100 (respondents could select multiple responses)

Other Responses Time to investigate and approve Data security concerns Data integration and compatibility with existing systems Lacking proof of ROI

0% 10% 20% 30% 40% 50% 60%

OtherNA-We try everything

Employee HesitanceManagement Hesitance

Learning CurveMaturity of Tech

Lack of Support StaffBudget

% of Respondents Citing Reason

“What prevents your company from adopting new technology most often”?

Psycho

-22.0%

-3.5%

-1.3%

1.2%

1.5%

2.1%

4.1%

4.2%

4.5%

5.3%

6.3%

6.4%

8.5%

-30% -25% -20% -15% -10% -5% 0% 5% 10% 15%

Gasoline Stations

Electronics & Appliance Stores

General Merchandise Stores

Clothing & Clothing Accessories Stores

Furniture & Home Furn. Stores

Food & Beverage Stores

Building Material & Garden Supplies Dealers

Miscellaneous Store Retailers

Motor Vehicle & Parts Dealers

Health & Personal Care Stores

Internet, etc. Retailers

Sporting Goods, Hobby, Book & Music Stores

Food Services & Drinking Places

12-month % change

Sales Growth by Type of Business April 2014 v. April 2015*

Source: U.S. Census Bureau

*April 2015 advanced estimate

Conference Board Leading Economic Indicators IndexAugust 2007 through April 2015

Source: Conference Board

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%A

ug-0

7

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

Dec

-11

Apr

-12

Aug

-12

Dec

-12

Apr

-13

Aug

-13

Dec

-13

Apr

-14

Aug

-14

Dec

-14

Apr

-15

One

-mon

th P

erce

nt C

hang

e

April 2015 = 122.3 where 2010 = 100

Tell-Tale Heart

• Economy gained momentum over the course of last year;

• Tailwinds included booming stock market, lower gasoline prices, stabilizing global economy, and consumer expenditures on interest rate sensitive durable goods like autos;

• Unlikely to attain 3 percent GDP growth this year – sorry – just too few economic drivers in place;

• Private construction leads the way – many publicly financed segments continue to falter;

• Construction productivity gains have been tiny relative to many other industries; and

• This creates conditions consistent with the notion that there will be big winners and big losers going forward –expect market concentrations to rise in the future.

Thank You Follow us on Twitter @SagePolicyGroup You can always reach me at

[email protected] Please look for updates of information at

www.sagepolicy.com.Also, if you need us in a hurry, we are at

410.522.7243 (410.522.SAGE) Please contact us when you require

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mailto:[email protected]://www.sagepolicy.com/

Slide Number 1Dawn of the DeadSlide Number 3Slide Number 4Change in Equipment and Material Technology versus Changes in Labor Productivity, 1977-2004Invasion of the Body SnatchersSlide Number 7National Nonfarm Employment�by Industry Sector�April 2014 v. April 2015National Construction Employment �Monthly Net Change�April 2000 through April 2015State-by-state Growth in Construction Jobs�April 2014 v. April 2015Employment Growth, U.S. States (SA) �April 2014 v. April 2015 Percent ChangeNightmare on Elm StreetArchitecture Billings Index�January 2008 through April 2015Nonresidential Construction Put-in-Place�December 2006 through March 2015National Nonresidential Construction Spending by Subsector �March 2014 v. March 2015Slide Number 16Slide Number 17Inputs to Construction PPI�April 2001 – April 2015Slide Number 19Slide Number 20Slide Number 21Slide Number 22Average Hourly Earnings, Select Industries�January 2005 through April 2015Nonresidential Profit Margins SubparSlide Number 25Slide Number 26PsychoSlide Number 28Conference Board Leading Economic Indicators Index�August 2007 through April 2015Tell-Tale HeartThank You

Documents

The Pit and the Pendulum - AGC · 2015. 5. 28. · By: Anirban Basu. Sage Policy Group, Inc. May 27. th, 2015. The Pit and the Pendulum. On Behalf of. Viewpoint