[VIDEO] Construction Momentum Expected to Persist Despite Headwinds

Momentum expected to continue for several more quarters but contractors should remain vigilant; plus more construction industry news in the Feb. 7, 2019, edition of Construction News Tracker

Construction News Tracker is presented by Caterpillar and produced by ForConstructionPros.com.

Construction momentum will persist for several more quarters, but contractors should remain vigilant as longer term inflationary measures build. That from noted industry economist Anirban Basu for Construction Executives. Basu notes the brilliance of the nation's economic performance but points out the hardening of issues around tariffs and immigration policy. Basu notes the strength of the nation's labor market as there have been 11 job openings for every 10 unemployed Americans. Mr. Basu says that as of now there are few signs indicating any type of recession even considering some market volatility. Similarly, the Associated Builders and Contractors Backlog Indicator claims the amount of work under contract as yet incomplete is on the rise.

Caterpillar's latest earnings report caused the Dow to skid recently, as the major equipment manufacturer came in under economists' projected numbers. Cat reported earnings of $2.55 per share, well below economists projections of $2.99 per share. The company blamed the weakness on steel tariffs cutting into profits. The company reported a record 2018 with full year sales and revenue up 20% at $54.7 billion and said it expects 2019 profit to increase.

The American Institute of Architects reports that billings growth, though softer in December, remained firm for the 15th consecutive month. The monthly score for December was 50.4 compared with November's reading of 54.7. AIA Chief Economist Kermit Baker says it's not surprising to see a slowdown in the progress of current projects given the on-going tariff situation, unstable business conditions and the partial government shutdown. AIA regional averages remained fairly steady.

Despite the government shutdown, job growth in January was surprisingly robust adding 304,000 jobs to payrolls. The Bureau of Labor Statistics reports that the nation's unemployment rate nudged up to 4% from its 3.9% rate in December. Were it not for a continued labor shortage it's likely that construction employment numbers would have been higher in December. AGC in analyzing Labor Department statistics says 273 out of 358 metro areas gained workers in the year up to December 2018. The job gains came amid high demand for construction projects but were constrained by the lack of skilled workers. The Houston metro area led the nation with the most construction jobs followed by Dallas, Phoenix and Orlando.

For those who live in mild climate regions of the nation, its little wonder if you fail to consider just how expensive winter can be. Take, for example, in Pennsylvania PennDOT has budgeted $228 million for winter highway operations. That includes de-icing and clearing snow from roadways and other areas under their jurisdiction. New York state sought to hire 470 maintenance staff for its winter equipment needs as the DOT is responsible for pre-treating, plowing and removing ice and snow from 34,000 miles of roadway and has nearly 4,000 pieces of winter related equipment. Virginia, as well, has a big winter budget $205 million to handle 11,000 pieces of snow removal equipment with a workforce of over 2,500 dispensing 700,000 tons of sand and salt and 2.1 million gallons of calcium chloride used in treating ice. It all adds up quickly.

Talk about renigging on a major deal. Foxconn is reportedly going to scale back its $3 billion deal to build display panels in Wisconsin. In a Reuters interview company officials claim they have no market for such a factory and will likely scale back the plan to hire 13,000 and construct a campus south of Milwaukee. The state committed $4 billion in tax credits. Foxconn said it is no longer financially feasible to construct such a massive complex.

Portland Cement Chief Economist Ed Sullivan addressed the recent World of Concrete and said while main street appears to be ok it's the public construction sector we all need to be worried over. Sullivan told the concrete show gathering the nation's road and bridge market is in dire need of attention and advised caution regarding any national infrastructure bill coming out of the Trump Administration. Sullivan said the need for money for other federal programs will far outweigh that of infrastructure and "It’ll be a smaller knight riding in on a donkey".

In closing, men stumble over pebbles, never over mountains.

This is Construction News Tracker looking over the industry that makes the world a better place, presented by Caterpillar and produced by ForConstructionPros.com.

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