The state of the construction industry amid all the chaos around us is remarkably stable, according to several national organizations. From reports from our members, things are holding up pretty well in southern California.

That refreshing news is due in no small measure to one word—”essential”—a designation for contractors, that in one level or another, is used in all 50 states. The term has different meanings in different jurisdictions, with some categories more essential than others, but most of us can practice our trade.

The most recent reports come from various sources, including a leading construction accounting firm Marcum LLP’s Construction Services group. Dodge Data Analytics and the Associated Builders and Contractors (ABC).

The Marcum Commercial Construction Index for the second quarter of 2020 reports that the industry is holding relatively well in the face of the COVID-19-driven recession. Construction employment has rebounded since plummeting in March and April, and the industry’s national unemployment rate stands at 8.9 percent, below the 10.2 percent rate observed across all sectors. 

“The data indicate that construction has recovered faster than any other major economic segment. Over the three months ending in July, the industry recovered 59 percent of the jobs lost in March and April,” wrote Anirban Basu, Marcum’s chief construction economist

Basu credits public sector strength and the backlogs contractors had at the onset of the recession for construction’s relative stability but warns that there may be trouble in the coming months. 

“Due to the sudden supply shock to the U.S. economy and massive dislocations sustained during the second quarter, many contractors report both project postponements and cancellations in unusual numbers.” 

Not surprisingly, since the ABC report is also a work product of the industrious Mr. Basu, the numbers are remarkably similar. At the same time, ABC added a second magic word for construction reporting—”backlog.”

ABC’s Construction Backlog Indicator rebounded to 8.0 months in August, an increase of 0.2 months from July’s reading, according to an ABC member survey conducted Aug. 20- Sept. 1. The August backlog is just a half-month lower than in August 2019.

Dodge Chief Economist Richard Branch said total construction starts rose 19 percent in August to a seasonally adjusted annual rate of $793.3 billion. Gains in all three major building sectors included: nonbuilding construction (infrastructure) jumped 40 percent over the month; nonresidential building starts rose 16 percent, and residential building climbed 12 percent. 

We now can look forward to the New Year with optimism, just as soon as the elections are over!

 

By Brendan Slagle, ECA President Email: [email protected]