Thursday, 30 June 2011

OSHA proposes new reporting requirements for constractors and suppliers

The Occupational Safety and Health Administration (OSHA)issued a proposed rule that would expand its injury and illness tracking and reporting requirements, says the Associated Builders & Contractors(ABC).

Under the proposal, companies would have to report to OSHA all work-related fatalities and in-patient hospitalizations within eight hours. Under the current regulations, only fatalities and in-patient hospitalizations of three or more employees must be reported in that timeframe. The new rule also would require all work-related amputations to be reported within 24 hours.

Businesses that perform construction are generally required to keep such records, but OSHA is seeking to add “building material and supplies dealers” to the establishments that must routinely keep such records.

OSHA is accepting comments on the proposed revisions until Sept. 20. The preamble to the proposed rule includes specific questions and issues about potential alternatives on which OSHA would like to gather information.

In addition, OSHA launched a website June 28 that is designed to help users determine whether injuries are work-related and recordable under OSHA’s recordkeeping rule. The website can be found on the OSHA Recordkeeping Advisor website.

For more information on the proposed rule, visit OSHA’s website, or its frequently asked questions page. For more information on how to submit comments, refer to the proposed rule. Read More

Wednesday, 29 June 2011

Carolinas AGC Construction Barometer drops 0.8%

The Carolinas AGC Construction Barometer™, reflecting first quarter 2011, shows very little change in the construction industry in both North Carolina and South Carolina. The aggregate Barometer score declined a modest 0.8 percent on slightly stronger business conditions observed across the first three months of 2011, offset by falling contractor expectations about future business conditions and rising wholesale prices.

The good news is construction volume increased throughout the Carolinas for the first three months of 2011, surpassing contractors’ expectations for the quarter and leading to a slight increase in labor demand. Given the substantial contraction in the construction labor market over the last few years, contractors reported difficulty in hiring skilled workers because so many have migrated to other industries. At the same time, contractors reported rising labor costs, particularly in the employee benefits area.

The slight uptick in reported business conditions also impacted financial market trends and demand for heavy construction equipment, with rising loan approvals, rising heavy equipment purchases, and greater spending for construction materials and basic inventory. On the Barometer’s quantitative side, first quarter 2011 turned out to be a bit better in almost every business category than contractors projected at year-end 2010.

Nevertheless first quarter’s business improvement isn’t carrying forward into the remaining months of 2011. In previous quarters, Barometer panelists had reported increased optimism for 2012 due to fewer contractors remaining in business and expectations of more work coming down the pipeline. However, panelists now believe that 2012’s business conditions may be a bit worse. They’re expecting modestly diminished business activity, a lower rate of equipment and inventory purchases, reduced hiring activity, and weaker demand for long-term credit toward the end of 2011 and into the early months of 2012.

Both North and South Carolina contractors reported stronger-than-anticipated first quarter business conditions, but the trend toward higher industry activity was stronger in North Carolina than in South Carolina. The stronger business growth has a downside, however, as North Carolina contractors reported significantly higher materials prices than South Carolina contractors. The source of rising business activity also differed between the two states: North Carolina reported stronger private-sector growth and relatively constant highway and utility construction activity; South Carolina reported weaker private-sector activity, but stronger highway and utility spending.

For the coming year, Barometer panelists in both states reported weakening demand for labor, and a rising concern for the quality and availability of skilled labor—a trend likely to continue into 2012. While diminished business activity is expected in 2012 in both states, the trend is significantly stronger in South Carolina. In the more populous urban regions of North Carolina, contractors expect better conditions in the near future, while the smaller, less urban areas of South Carolina expect a stronger slow-down.

Interest rates remain at historically low levels in both states, while contractors in North Carolina reported slightly stronger demand for both short- and long-term financing. In contrast, South Carolina contractors are seeing relatively constant demand for credit, but reported that commercial bankers are becoming less accommodating in granting new contractor borrowing requests. Read More.

Tuesday, 28 June 2011

Architectural Billing Index reflects decrease in construction spending

On the heels of a sizeable decrease in April, the Architecture Billings Index (ABI) slowed even further in May, The American Instutute of Architects (AIA) reports. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. AIA reported the May ABI score was 47.2, a slight decrease from a reading of 47.6 the previous month. This score reflects a continued decrease in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 52.6, down from a mark of 55.0 in April, its lowest level in almost a year and a half.

“Whatever positive momentum that there had been seen in late 2010 and earlier this year has disappeared,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The broader economy looks to be entering another soft spot, and certainly state budget constraints are adversely affecting the profession’s ability to work on institutional projects. But there is no denying that the prolonged credit freeze from lenders for financing commercial projects is the number one challenge to a recovery for the design and construction industry.”

Key May ABI highlights:

◦Regional averages: West (49.3), Northeast (47.6), South (47.5), Midwest (45.9)
◦Sector index breakdown: multi-family residential (53.6), mixed practice (49.1) commercial / industrial (46.5), institutional (44.9)
◦Project inquiries index: 52.6

About the AIA Architecture Billings Index

The Architecture Billings Index (ABI), produced by the AIA Economics & Market Research Group, is a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction spending activity.
Read More.

NC construction employment falls in 11 out of 12 metro areas

NC construction employment decreased in 11 out of 12 metropolitan areas in the state between May 2010 and May 2011, according to a new analysis of federal employment data released today by the Associated General Contractors of America. Association officials noted that the local employment data reflects the fact that overall construction employment has been unchanged for much of the past year. North Carolina lost a total of 5900 construction jobs (3%) during the the past year. Only the Burlington area construction employment remained the same.

“While construction employment has stopped plunging, any sign of a recovery remains spotty at best,” said Ken Simonson, the association’s chief economist. “The close to even split between areas adding and losing jobs is a reminder that for every market doing well, there is another market that is still hurting.”

Association officials cautioned that construction employment was unlikely to expand as long as economic growth remained relatively restrained. They said demand for new office buildings, retail facilities and lodging would remain depressed as long as current vacancy rates remain high. At the same time, demand for infrastructure and other publicly funded projects was declining for the first time in years amid the winding down of stimulus projects and budget cuts.

"Some in Washington never met a regulation they didn’t like and others never found a penny they didn’t want to pinch,” said the association’s chief executive officer Stephen E. Sandherr. “Together that makes for a bad way to boost employment and a great way to stifle the private sector and neglect critical economic infrastructure.”

View construction employment figures by metro area Here.

Friday, 24 June 2011

NC governor signs law requiring immigration checks

Businesses, cities and counties in North Carolina are going to have to start checking the immigration status of new hires reports the Winston-Salem Journal.

Gov. Beverly Perdue yesterday signed into law a bill directing employers to use the federal government's E-Verify system to prevent illegal immigrants from landing jobs. The legislation makes exceptions for companies that employ fewer than 25 people or which use seasonal workers.

Local governments will have to start checking in October. Large companies will have to start checking a year after that. Smaller companies will have to start checking in July 2013.

The legislation allows people to anonymously report suspicions that a company is employing an illegal worker.

North Carolina's state government and colleges have used the E-Verify system for five years. Read More.

Tuesday, 21 June 2011

Charlotte area begins slow climb to recovery

The Charlotte region will return to its pre-recession employment peak by mid-2014, years before beleaguered metros such as Cleveland, Detroit and Las Vegas, the Charlotte Observer reports.

But the area still faces a slow climb toward recovery, trailing cities from Raleigh to Dallas to Pittsburgh, according to the study from the IHS Global Insight research firm, prepared for the U.S. Conference of Mayors' annual meeting.

Mayor Anthony Foxx, who joined President Barack Obama, Vice President Joe Biden and a dozen mayors at the White House to discuss the economy, acknowledged the hurdles but said he's bullish about the Charlotte region.

"I would take the challenges we have in Charlotte over any city in the country," he said in an interview after the meeting. "The combined willpower we have to surmount our obstacles really makes us special."

The analysis of the nation's 363 metro areas found the economic recovery will continue this year, fueling job and wage growth.

But natural disasters, rising commodity costs and the still-struggling U.S. housing market mean the recovery will progress more slowly than after past recessions, the report said.

The study projects a pickup in the second half of the year, with the U.S. unemployment rate falling to about 8.6 percent by the end of 2011 from its current 9.1percent. But the national jobless rate won't fall below 8percent until 2013, and employment in the U.S. won't return to its peak until early 2014, the report said.

Wells Fargo & Co. economist Mark Vitner said he wouldn't be surprised if Charlotte's job market rebounds on pace with - or slightly before - the rest of the country, given its population growth and signs of a revival in the manufacturing sector.

But that rebound, both for Charlotte and the rest of the country, might take a year or so longer than the mayors conference report predicts, he said. "I think their forecast, overall, is a little aggressive," Vitner said.

The foundering residential construction field, for one thing, continues to stifle job growth. And U.S. companies are turning out as many goods and services as they did before the recession with 7million fewer workers, Vitner said.

"I don't see a lot of businesses that are just chomping at the bit to hire those folks back," he said. "We are going to need to find some new drivers of job growth."

Standing in a White House driveway with other big-city mayors, Foxx said the challenges facing the region include a "fear element" among large companies and wealthy investors, who still seem reluctant to spend money. He said he wants to see more government-private sector partnerships, such as community colleges working with private companies, and he wants to see more workforce development in both white-collar and blue-collar jobs.

Still, there are positive signs: In the first quarter, 268 companies said they were opening or expanding in Mecklenburg County, planning more than 2,300 jobs, Foxx said.

Recent government data show about 45,000 fewer people are employed in the Charlotte-Gastonia-Rock Hill metro area now than in December 2007, when the recession began. The area's unemployment rate surged to nearly 13 percent before falling to 10.3percent in April, still more than double the sub-5percent rates seen before the recession.

The mayors conference report expects that rate to fall to 10.1percent by the end of 2011. It will continue to fall steadily, though by the end of 2013, it's still forecast to be 8.7percent.

The report predicts a return to Charlotte's pre-recession employment peak - about 820,000 workers in early 2008 - by the second quarter of 2014, though the region's unemployment rate will still be about 8percent then, according to IHS Global Insight. That forecast ranks Charlotte somewhere in the middle of the nation's metro areas.

Some places, such as Austin, Texas, and Burlington, Vt., have already recovered, and others are expected to rebound several quarters before Charlotte. The report said more than half of the country's metro areas will return to their pre-recession employment peaks by the end of 2014.

Despite its struggles, Charlotte is performing better than some areas: Stockton, Calif., for instance, posted one of the highest jobless rates in April, 17.3 percent.

Forty-eight metro areas, including Detroit, North Carolina's Hickory region and others pummeled by manufacturing and real estate losses, aren't forecast to reach their pre-recession employment peaks this decade, the report found.

The Charlotte area fared better in other measures of economic health, too, the study found. The area's jobless rate has fallen faster than other metro areas over the past year. And the economy continues to grow: The region's economic output totaled $117.3billion in 2010, up 4percent from the year before and 5percent from 2007, before the recession began, the report found.

Metro regions' health is a critical component of the broader economic recovery, the report said. U.S. metro areas contributed nearly 90percent of the nation's economic output and jobs last year. "Close attention needs to be paid to the economic health of our nation's metro areas and the health of the nation as a whole," the report said. Read More.

Monday, 13 June 2011

Full recovery of Charlotte's construction industry could be years off

Construction, once one of the Charlotte region's most promising sectors, is now stifling the area's economic recovery, with jobs and wages down by more than a third since the pre-recession peak and little improvement in sight, say local economists.

Pockets of the sector are starting to rebound, but economists interviewed by the Charlotte Observer say a full recovery could take years - and that thousands of employees laid off when the real estate bubble burst will be forced to master new skills to earn a place in the post-recession workforce.

"If you're looking for sources of growth in the recovery, I don't think construction can be counted on to be a major contributor," said Rick Kaglic, an economist with the Federal Reserve in Charlotte. "It's going to be a drag on overall employment growth."

It's a dramatic decline for a sector that, in years past, offered steady jobs and lucrative pay for the workers who built sprawling homes, glittering office towers and other hallmarks of the boom. The availability of those jobs helped fuel the region's population surge over the last decade, drawing transplants who in turn created more demand for homes, offices and shopping centers.

Construction firms in the Charlotte area shed 36 percent of their workers from 2007 to 2010, by far the largest decline of any sector, new data from the U.S. Bureau of Labor Statistics and N.C. Employment Security Commission show. About 35,000 workers were employed in construction last year, the lowest level since 1995.

Those employees' paychecks - an important driver of the local economy - have taken a hit, too. Construction wages fell 36 percent, or $894 million, from 2007 to 2010. Those wages make up 5.3 percent of the region's total private-sector pay, down from 7.6 percent in 2007, the BLS data show.

Construction jobs from builders to electricians to flooring specialists have dried up largely because of the housing market's continued woes. Home sales have plummeted and foreclosures have surged since the market peaked in 2006 and 2007, leaving a glut of homes. Unemployment and lower wages persist throughout the economy, too, meaning there's little demand from buyers for new projects.

"That all suggests that it's going to be a very slow climb out of this recession in the housing market here in Charlotte and elsewhere," Kaglic said. "It's going to be several years before you start to see ... construction activity that even comes close to what we were seeing."

Local building-permit data suggest some new projects are in the pipeline. About 180 building permits for single-family homes and 40 commercial permits were issued in Mecklenburg County in April, up from recent months.

But those numbers remain below their pre-recession levels. Single-family building permits, for instance, are down 34 percent since April 2008.

Some parts of the sector appear to be gaining steam. On Thursday, the Bissell development company announced it will build two 10-story office buildings in Ballantyne, a $100 million investment and a sign of the company's confidence in the market. Charlotte is sure to see a boost in coming months, too, as it prepares to host the Democratic National Convention in September 2012.

Locally and around the country, building for energy, health care, education and other growing sectors has remained strong, said Brian Turmail of the industry trade group Associated General Contractors of America.

Private-sector demand is slowly improving, he said, but public-sector construction - which kept many construction companies afloat after the recession took hold - is beginning to wane as federal and state officials slash spending.

The unemployment rate for U.S. construction employees is 16.3 percent, down from 22 percent last year but still nearly double the overall unemployment rate of 9.1 percent. That number doesn't reflect discouraged workers who have dropped out of the search, employees who have accepted lower-paying or part-time work or people who switched to other fields with better prospects.

How the construction sector performs in coming months is critical to the overall economy, experts say, partly because of its ripple effects through other industries, such as furniture, and partly because a pickup in construction hiring would boost overall employment levels.

In a report earlier this month, UNC Charlotte economist John Connaughton cited a "sharp decline in the construction sector" as one reason the N.C. economy expanded just 1 percent in 2010.

He expects construction will be one of four sectors to experience another output decline this year, though he predicts employment in the sector will increase slightly, about 0.9 percent.

Charlotte-area construction companies say they're working harder these days to stay afloat and stand out. One key to companies' future success is specialization, said Bob West, business development manager at A.M. King Construction Co. The Charlotte company works primarily for the food industry, building manufacturing, distribution and cold-storage facilities across the country.

Business fell by as much as half in 2009, but A.M. King experienced its second-best year last year and is now on track for its best year, West said. The company has hired seven people in 2011, boosting its staff by 30 percent in the last six months, and plans to hire at least four more by the end of the year.

"Not a lot of people do what we do," West said. "We're food experts, so we're very specific in our target market."

Other companies are following suit, focusing on medical facilities, for instance. And job-seekers are beginning to target such firms: A.M. King gets 50 percent more resumes these days than before the recession, West said.

But the company is selective about the workers it hires, he said. It employs architects, engineers and construction managers, meaning a college degree and specific skills are critical.

Experts say there's a skills gap that could prevent many of the workers laid off during the recession from finding new jobs as the economy recovers, keeping the overall unemployment rate inflated for years to come.

Kaglic, the Fed economist, said goods-producing industries such as construction, manufacturing and mining have created fewer than 100,000 jobs in the U.S. over the last year. Service-providing industries, by comparison, created roughly 1.5 million.

"You've got guys out in the field who are swinging hammers or doing roofing or plumbing, and those skills aren't easily transferred into service-providing industries," Kaglic said. "It's of vital importance that these folks get some retraining so that their skills more closely match the jobs that are being created." Read More.

Friday, 10 June 2011

Five heathcare construction best practices

by Ricky Touchstone, Senior Project Manager, Frank L. Blum Construction Company

Renovating currently occupied hospitals and healthcare facilities can be challenging as construction activities may distrupt the optimal functioning of an organization. However, following the following five best practices can help hospitals and their contractors to minimize disruptions for patients, physicians and staff. Hospitals should be wary of contractors that do not follow these five practices.

1. Conduct a preliminary investigation/inspection of the site before construction or demolition begins. Prior to work beginning in any space, a preliminary investigation/inspection should be done by the construction team. The purpose of this investigation is to confirm the location of utilities and valves as drawn and to gain knowledge about the space and possible problems or issues. At this time, the contractor should work with the medical facility to acquire accurate asbestos, lead paint or other hazardous material reports related to the area. This process will allow early generation of any necessary Requests For Information (RFIs) or changes and will assist in maintaining schedule.

2. Develop an interim life safety plan that meets the needs of the facility. Prior to construction, an interim life safety plan should be drafted and submitted for approval to the facility. During any construction, the approved ILSP should be posted in a conspicuous place.

3. Understand the infection control/ risk assessment requirements and ensure they are met. Prior to construction, the contractor should request an infection control meeting with the facility as well as a thorough review of the risk assessment procedures.

4. Ensure that utility shutdowns and switchovers are properly planned and clearly communicated. Most renovation work requires a planned, temporary interruption in utility services (typically called a "shutdown"). When these are required, the contractor and/or its subcontractors will schedule the shutdown in accordance with the facility's procedures. The service that is being interrupted must be identified and the affected areas or people must be notified so that interim measures can be taken. Any utilities that are shut down must be locked/tagged out. The written plan must be clearly communicated to the hospital's facilities and engineering group as well as the department or staff being affected so that it is clearly understood what services are being disrupted, what equipment and/or services will be "down," and the anticipated time frame of the disruption.

5. Provide proper project closeout documentation. Upon completion of the project, the contractor should provide the facility with the proper project closeout documentation, including Record Drawings ("As-Builts"), owner in-service training and equipment submittals — as well as any required commissioning. The contractor's role is to ensure that the project is constructed in accordance with the design that has been reviewed by any inspecting agency, such as the Division of Health Service Regulation. Prior to site inspection by DHSR, the contractor and the project team should assemble the proper documentation (electronic and hard copies).
The proper documentation helps to ensure that the medical facility's project functions as required and that the end users receive the healthcare that they need.

Although there are hundreds of best practices that need to be put in place prior to constructing within an occupied medical facility, these are five that have been are part of every successful healthcare project. Read More.

Reprinted from Becker's Hospital Review.

Wednesday, 8 June 2011

Underground Facility Damage Prevention Act now law in SC

The American Subcontractors Association of the Carolinas (ASAC) reports the Underground Facility Damage Prevention Act (Senate Bill 705) has been signed into law by South Carolina Governor Haley. ASAC members worked diligently to achieve passage of this law. The group also supports similar legislation moving forward in North Carolina.

The Blogland of Earl Capps describes the key points of the long overdue reforms for underground utility safety in South Carolina:

•Mandatory one-call center membership: South Carolina will now require all utilities to be members of the 811 "Call Before You Dig" service, meaning one call is all construction companies and homeowners need to make to notify utilities. This will be phased in, allowing smaller utilities time to plan a transition. This means the number of states which do not mandate membership will be reduced to just five.

•Positive response: Utilities will be required to respond and coordinate responses with those who give noticed before digging. This reduces the number of states which do not require responses to those who call in to 17.

•Tolerance zones: The actual location of underground utilities must be no more than 24 inches from marks on the ground. This was reduced from 30 inches, requiring greater accuracy in marking, as well as caution by contractors. Now only two states allow 30 inches, while the remainder require either 18 or 24 inches.

•Modernization: Many new technologies and standards have been adopted since the law was originally enacted in 1978. Many smaller changes were made to integrate new standards, technologies and practices into state law.

•811/One-Call Center governance: The membership for board seats for the state's One Call Center was increased, with specified seats being selected for various stakeholder groups.

•Enforcement: Penalties for violations will now be divided between the Attorney General's office and the state's General Fund. This will help fund enforcement of the law, which had not seen a single action taken since it's original enactment. The Attorney General's office agreed to establish an enforcement mechanism if these changes were made.

Click Here for a link to the South Carolina law.

Tuesday, 7 June 2011

Construction industry faces a long recovery

Many economists downplayed May's disappointing jobs report, calling it a blip in a moderate recovery and blaming high gas prices and Japanese supply disruptions. But construction, a key sector that has lagged the overall job market, is likely to continue to do so even when job growth picks up again, reports USA Today.

Construction's malaise could hurt overall gains, even if the economy rapidly regains its pre-May pace of about 200,000 more jobs a month. Home building ripples through such industries as appliances and furniture.

"The construction industry will continue to experience double-digit unemployment rates for a long time," says Ken Simonson, chief economist for Associated General Contractors of America.

Construction firms added 2,000 jobs in May, while all U.S. payrolls grew by 54,000. Yet, while all employers added 1.8 million jobs since February 2010, construction lost 4,000. Its payrolls of 5.5 million are down 2.2 million since 2007.

Its 16.3% jobless rate is also down from 22% a year ago. That's because many discouraged workers stopped looking or switched to trucking or manufacturing, Simonson says.

The problem: Housing starts are anemic due to tight lending standards and foreclosures that swell inventories and depress prices, says economist David Crowe of the National Association of Home Builders.

Public construction that propped up the industry when commercial work disappeared in the recession is ending as the federal stimulus winds down and states slash budgets.
Hospital, university and utility projects are rebounding. Office and retail work should tick up in 2011, says Patrick Newport of IHS Global Insight. But the gains won't offset public cutbacks, Simonson says. He cut his estimate for 2011 industry job growth to 100,000 from 250,000. Read More.

Monday, 6 June 2011

Construction employment virtually unchanged in May

Construction employment was virtually unchanged in May as the industry added just 2,000 jobs for the month and the sector’s unemployment rate declined to 16.3 percent, according to an analysis of new federal employment data released by the Associated General Contractors of America. Association officials said that declines in public sector construction demand are offsetting slight increases in private sector demand, resulting in stagnant construction employment levels that are unlikely to change soon.

“At the current rate of growth, the construction industry will continue to experience double-digit unemployment rates for a long time,” said Ken Simonson, the association’s chief economist. “Simply put, there just isn’t enough demand for construction to fuel the kind of hiring needed to get industry employment back to where it was in 2007.”

The construction economist noted that the nonresidential construction sectors lost 6,200 jobs in May, while the residential sector added 8,200 jobs. Within the nonresidential sector, employment in heavy and civil engineering construction increased by 3,100 for the month as work on highway and other public works projects accelerated with the warmer weather. Meanwhile, employment declined in the nonresidential specialty trade contractors sector while the nonresidential building category added only 600 jobs.

Association officials said that construction employment is unlikely to change much one way or the other for the rest of the year. They noted that construction spending figures released earlier in the week indicated that federal, state and local governments are cutting investments in infrastructure and other construction projects. Those declines are largely being offset by slight increases in private sector demand for construction, especially in power construction.

“As long as Washington starves infrastructure instead of fixing entitlement spending, construction employment is likely to remain weak,” said Stephen E. Sandherr, the association’s chief executive officer. “We are never going to balance the budget by deferring maintenance and keeping employment levels low.” Read More.

Friday, 3 June 2011

NC economy still growing, but slowly

UNC Charlotte economist John Connaughton says North Carolina's economy will continue to improve, and employers will keep hiring, but the pace this year and next will remain sluggish.

In a Charlotte Observer report, Connaughton says he expects the N.C. economy to grow 2.7 percent this year, with much of the momentum occurring in the fourth quarter. Meanwhile, Connaughton predicts just five of the state's 10 nonagricultural sectors will add workers this year, for a net gain of 64,700 jobs, he said during his quarterly Babson Capital/UNCC economic forecast.

That's an increase of 1.7 percent over December's employment level, but not enough to make up for the massive losses seen during the recession.

"North Carolina lost over 320,000 jobs during 2008 and 2009, and it is likely to take four or five years to regain the lost jobs," Connaughton said. "Job growth will be the biggest problem for both the U.S. and North Carolina economies over the next several years."

This year's projected economic growth follows a weak 2010, when the N.C. economy expanded just 1 percent, less than the 1.3 percent growth the economist predicted a few months ago. Employers statewide added 5,600 net jobs, lifting the state's employment a scant 0.1 percent over its 2009 level, Connaughton said.

Only six of the state's nonagricultural sectors added jobs, and some fields, such as construction and finance, real estate and insurance, continued to struggle, he said.

Overall, the N.C. economy performed worse than the U.S., which posted solid - if modest - gains throughout the year.

"The reasons for this weak performance are fairly straightforward," Connaughton's report said. "The continuing uncertainty in the financial sector, with banks still struggling to be profitable, coupled with the sharp decline in the construction sector and the ongoing foreclosure problem has generated a drag on the state's economy."

Steadily rising gas prices have also stretched consumers, leading to scaled-back buying, he said.

But the outlook should begin to improve this year, with the state's economy expected to perform on par with the national economy for the first time during the recovery, Connaughton said. Gas prices are already improving, for instance, and the financial sector is under less stress, he said.

Seven of the state's 11 economic sectors are forecast to experience output increases in 2011, with the biggest gains predicted in wholesale trade, retail trade, services and mining.

Finance, insurance and real estate, one of the hardest-hit sectors in Charlotte and across the state, is expected to grow 1.5 percent.

Sectors such as wholesale trade, retail trade, services and finance are expected to add jobs this year, too, Connaughton said.

He expects the state's unemployment rate to fall to 9.4 percent by the end of the year, down slightly from its April figure, 9.7 percent. That's still above the current U.S. jobless rate of 8.8 percent.

Looking ahead, Connaughton forecasts the N.C. economy to increase 2.3 percent in 2012, more slowly than the expected rate this year. But employers are expected to hire more, adding 72,000 net jobs, he said. Read More.

Thursday, 2 June 2011

Construction spending inches up in April

Construction spending inched up for the second straight month in April, 0.4 percent – following downward revisions to the March spending figures – thanks to increases in private nonresidential and home-improvement spending, the Associated General Contractors of America reported in an analysis of new Census Bureau data. Association officials noted, however, that the gains were tempered by sluggish homebuilding and declining levels of public investment in construction.

“Overall economic conditions seem better than they have been for several years, which normally leads to well-rounded construction growth,” said Ken Simonson, the association’s chief economist. “But these figures may be deceptively positive, masking weakening public sector demand and still-weak demand for residential construction.”

Simonson noted that the April results were boosted by a modest half-percent rise in private nonresidential construction and a deceptively large 3.1 percent leap in private residential spending. However, the residential growth was attributable to a 7.6 percent jump in the ‘improvements’ category, a number the Census Bureau frequently revises down in later months, as it did in March. The economist cautioned that the figures from more reliable residential categories—new single- and multi-family construction—declined by 1.0 percent and 0.1 percent, respectively.

Simonson noted that private nonresidential spending also was uneven. The largest category, power construction, grew 3.2 percent, and there were increases of 4.7 percent for communication construction and 0.8 percent for private health care construction. But there were decreases of 1.3 percent in commercial construction (retail, warehouse and farm), 1.0 percent in manufacturing construction, and 3.2 percent in private office construction.

The economist said the steep drop in public construction, which fell for the seventh straight month in April—by 1.9 percent—and shrank to a four-year low, was cause for concern. “It appears that federal stimulus and military base realignment work are tapering off, while state and local budgets for infrastructure have been shrinking for some time,” he said. The four largest public categories, accounting for three-fourths of public construction spending, all declined in April: highway and street construction, -1.6 percent; educational, -2.7 percent; transportation facilities, -3.8 percent; and sewage and waste disposal, -2.5 percent.

Association officials said the mixed results show the importance of enacting long-term infrastructure funding bills for transportation, wastewater and drinking water, as well as having a tax and regulatory environment that encourages private investment in structures. “Economic recovery will remain sluggish and uneven unless construction and the sectors that depend on it share in growth,” said Stephen E. Sandherr, the association’s chief executive officer. Read More.

Wednesday, 1 June 2011

Resale home prices fell again in March

by Alex Carrick
Reed Construction Data Chief Economist

News on existing home prices in the U.S. was disappointing again in March, according to the S&P Case-Shiller report. The 10-city composite index was -0.6% month to month and -2.9% year over year. The comparable numbers for the 20-city composite index were -0.8% and -3.6%.

In 19 of the 20 major cities covered in the report, existing home prices were down on a year-over-year basis. The only city with an increase in year-over-year resale prices was Washington, D.C., at +4.3%. Washington was also one of only two cities with a month-to-month price increase (+1.1%) in March. Seattle was the other (+0.1%). In February, Detroit had been the only city with a month-to-month rise in existing home prices, +0.8%, but in March there was a drop again, -2.0%.

The overall index level of U.S. existing home prices now stands lower than at any time since the onset of the recession in early 2008. The previous low point occurred in early 2009. From mid-2009 through mid-2010, demand and prices showed some recovery aided by a sizable first-time home-purchase tax credit.

Upon its expiry, the market deteriorated again. Millions of U.S. homes have been seized in foreclosure proceedings over the past couple of years and the rate of home ownership has fallen to its lowest level on record, according to the Census Bureau.

Twelve of the cities in S&P Case-Shiller’s 20-city composite index have fallen to new lows since the start of the recession – Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland and Tampa.

Nation-wide, U.S. existing home prices have fallen back to their mid-2002 levels. They are down by more than one third versus their peak in early 2006.

The situation with respect to U.S. home prices isn’t doing anything positive for consumer confidence either. The Conference Board’s widely-quoted measure of confidence dropped to an index value of 60.8 in May from 66.0 in April. The index has a base value of 100.0 set in 1985.

The highest level the Conference Board’s reading has reached since the end of the recession in the overall economy was 70.4 in February of this year. To put matters in perspective, however, U.S. consumer confidence sank to a low of only 25.3 in February 2009.

Besides falling home prices, U.S. householders have quite a number of issues to worry about. Labor markets aren’t improving as quickly as one would wish. Gasoline is priced at nearly US $4.00 per gallon and that’s taking a big bite out of everyone’s wallets. And the primary option to home ownership is becoming more expensive as well.

There is one demographic for which labor markets are on the upswing, the hiring of younger people with high-tech skills. These individuals are also accounting for some of the increase in rental apartment/condo-unit demand. Rental unit rates are presently increasing somewhere between 2.5% and 5.0% per year nationally.

Nearly-full rental condo/apartment complexes are becoming more common and prices are also increasing for such amenities as parking. By way of contrast, the U.S. core inflation rate (which omits energy and food) was +1.3% in April. The all-items year-over-year change was +3.2%.

A rapid increase in rental rates is one of the items economists worry about when considering whether or not too-rapid inflation is becoming embedded. The spare capacity on the rental side of the housing market – caused by demand from young people and augmented by those forced out of home ownership - is much smaller than on the owner-occupied side. Read More.