The Next Forecast Challenge « Construction Analytics

The next big challenge in construction forecasting is to determine, Will Nonres Bldgs spending increase without an equal increase in nonres bldgs jobs? If so, by how much?

At the onset of the Pandemic, nonres bldgs jobs dropped 16%. Jobs have since recovered to down only 1% vs Feb 2020. Spending (bottomed in Sep 2021) fell 17%, but is now up 15% over Feb 2020.

But the key to this comparison is inflation, which, when subtracted from spending gives real volume growth. Inflation adds only to spending, it adds nothing to volume of work.

Nonres Bldgs inflation was 2.4% in 2020, 8.2% in 2021 and 11.9% in 2022. Total Nonres Bldgs inflation from Feb 2020 to Mar 2023 is 26%.

Since the onset of the Pandemic, Nonres Bldgs spending is up 15% but after inflation volume is down 8%. During that time jobs are down 1%. That’s now over three years that jobs exceed volume of work. Let’s look at more recent data.

In the last 12 months, Mar’22 to Mar’23, nonres bldgs jobs are up 3.5%. Nonres Bldgs spending is up 21%, but after ~7% inflation, volume of nonres bldgs workload is up 14%. So, we have a 3.5% increase in jobs to accomodate a 14% increase in volume.

The last year has shown a huge increase in the volume of nonres bldgs work, without an equal increase in jobs. This shows the excess nonres bldgs jobs for the past three years is now absorbing greater workload, (a 3.5% increase in jobs to accomodate a 14% increase in volume), without a cry of jobs shortages.

What’s the real magnitude of this difference in percent growth, a 10.5% increase in volume over jobs. Well that 10.5% increase in volume is $50 billion worth of construction put-in-place. Not delayed, not canceled, put-in-place. With no equal increase in jobs. So the existing jobs put this work in place. $50 billion in one year would normally require 250,000 jobs to put-in-place. Or by using overtime and working the existing workforce longer hours to get it done, the entire nonres bldgs workforce of 3.5 million would need to work 10 hour days 5 days a week to put that much extra work in place. Well, BLS reports hours worked changed by less than 1 hour/week.So, it wasn’t accomplished with added jobs and it wasn’t accomplished with overtime.

Some regular readers here could probably point back to a half dozen articles over the last few years in which I describe nonres bldgs volume levels had dropped but jobs had not. I mentioned before that existing jobs could and probably would absorb some of the growth. That could occur if there were a need to backfill volume to support the existing workforce.

The forecast for Nonresidential Buildings spending in 2023 is +20%. After 6% inflation, volume is forecast +14%. Jobs will not increase by 14%. Jobs have never increased more than 5% and normal is 3.5%. A 14% increase is equivalent to 500,000 jobs, just to support the growth in nonres bldgs. 500,000 jobs is double the normal annual rate of growth for all construction jobs. Nonres Bldgs is is only 33% of all construction

So the questions for the forecaster are these, 1) do we break the mold for construction jobs growth and add half a million jobs, and exceed all known indicators on construction jobs growth?, 2) Will volume vs jobs grow similar to the previous year, volume up 14% and jobs up 3.5%?, or 3) Does nonres bldgs volume growth slow down to a rate of growth more in-line with jobs growth?

I’m heavily leaning to #2, volume will exceed jobs growth. Some of the added work in the near future will be absorbed by the current workforce. Also I do think I’m partly leaning towards #3, volume growth will slow to less than currently predicted, although not nearly to the low level of historical jobs growth. I don’t expect jobs growth to exceed historical maximum of 5% annually, 175,000 nonres bldgs jobs. I do expect to reduce the forecast spending and extended out to a further date.

Next Post

How Much 24d Per Gallon To Use: 2023 Guide

Sun May 21 , 2023
In general, you should use 2.5 oz or 5 tablespoons of 2,4-D per gallon of water. It should be enough to treat 400 square feet of grass. However, you should always check the product label and mixing instructions since different manufacturers produce different levels of potency. Are you looking for […]
How Much 24d Per Gallon To Use: 2023 Guide

You May Like