The Blog

The construction industry had 248,000 job openings on the last day of July, according to an Associated Builders and Contractors analysis of data from the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey. JOLTS defines a job opening as any unfilled position for which an employer is actively recruiting. Industry job openings decreased by 51,000 last month and are down by 103,000 from the same time last year.

“Construction job openings plunged for the second straight month in July,” said ABC Chief Economist Anirban Basu. “Much of this decline is likely due to the residential sector. More housing units were completed in June than in any month dating back to 2007, and the number of housing units under construction has fallen about 8% since the start of the year.

“That’s not to suggest that the nonresidential segment has not also seen a decline in its demand for labor,” said Basu. “The share of construction jobs that are currently unfilled has fallen to the lowest level since early 2018, and a portion of that contraction is due to weakness in certain segments like commercial and lodging. Despite the dearth of openings, contractors continue to lay off workers at a historically slow pace, and fewer than 1 in 7 contractors expect their staffing levels to decline over the next six months, according to ABC’s Construction Confidence Index.”

National nonresidential construction spending decreased 0.2% in July, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.21 trillion.

Spending was down on a monthly basis in 11 of the 16 nonresidential subcategories. Private nonresidential spending decreased 0.4%, while public nonresidential construction spending was up 0.2% in July.

“Nonresidential construction spending declined for the second consecutive month in July but remains just 0.4% below the all-time high established in May,” said ABC Chief Economist Anirban Basu.

“While Hurricane Beryl, which interrupted construction activity along the Gulf Coast in early July, contributed to the month’s weak construction spending data, the cumulative effect of high interest rates likely bears more blame,” said Basu. “This is particularly true for nonresidential spending in the private sector, which fell 0.4% for the month and is up just 4.5% over the past year.

“Less than half of contractors expect their sales to increase over the next six months, according to ABC’s Construction Confidence Index, a clear indication that the industry is eagerly awaiting lower interest rates,” said Basu. “Fortunately, it’s all but certain that the Federal Reserve will begin lowering rates at its September meeting. The remaining question is whether it will be a 25- or 50-basis point cut.”

By Joe Camilo, Tocco Building Systems

These are exciting times for ABC MA’s training affiliate, the Gould Construction Institute (GCI).  And with finding and retaining qualified workers continuing to be the biggest issue in our industry, that translates to exciting times for member companies.

With the start of school on September 3^rd, a new era began for GCI with the opening of our first bricks and mortar facility in Billerica.  The new facility means more training options for ABC companies, including daytime training.  GCI Chair Drew Patalano of Medford Wellington Service Company (in whose building the new facility is located) myself and GCI daytime electrical teacher Dave Frongillo recently led a webinar on the new facility and what it means for our members.  You can listen to a recording of the webinar here. 

We have also launched a fundraising campaign to help defray the new facility’s construction costs that offers great opportunities for members to be recognized for their support of GCI. 

“Gould will train over 1,000 students this year,” said ABC MA Board member and Fundraising Committee Co-chair Jim Abbott of Claro Advisors.  “We’re offering sponsorship opportunities ranging from buying a brick to sponsoring a room or the new facility’s front lobby.”

For the Gould Construction Institute and its new facility to benefit our members to the greatest degree possible, we need your input.  I hope you’ll take a moment to learn more about GCI and how it can support your workforce development needs.

Construction input prices increased 0.4% in July compared to the previous month, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics Producer Price Index data. Nonresidential construction input prices also increased 0.4% for the month.

Overall construction input prices are 1.1% higher than a year ago, while nonresidential construction input prices are 0.8% higher. Prices increased in all three energy subcategories last month. Natural gas prices were up by 13.3%, while unprocessed energy materials and crude petroleum prices rose 6.2% and 5.5%, respectively.

“Construction input prices increased in July, ending a streak of two consecutive monthly declines,” said ABC Chief Economist Anirban Basu. “Despite the monthly uptick, which was largely driven by higher petroleum and natural gas prices, input prices are up just 1.1% year over year. The lack of materials price escalation over the past 12 months is a welcome development for contractors, just 34% of whom expect their profit margins to expand over the next six months, according to ABC’s Construction Confidence Index. Ongoing input price moderation, along with the prospect of lower interest rates by the end of the third quarter, should bolster contractor sentiment in the coming months.”

Associated Builders and Contractors reports that its Construction Backlog Indicator held steady at 8.4 months in July, according to an ABC member survey conducted July 22 to Aug. 6. The reading is down 0.9 months from July 2023.

View the full Construction Backlog Indicator and Construction Confidence Index data series.

Only the largest contractors, those with greater than $100 million in annual revenues, have longer backlog than one year ago. On a monthly basis, the decline in backlog was driven by declines among the smallest contractors, those with less than $50 million in annual revenue.

ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels fell in July. All three readings remain above the threshold of 50, indicating expectations for growth over the next six months.

“Contractor confidence regarding profit margins now stands at the lowest level since November 2022, which comes as little surprise," said ABC Chief Economist Anirban Basu. “There are now strong indications that elevated interest rates have finally taken their toll on a number of privately financed construction segments as well as the broader economy.

“While inflation has moderated in recent months, construction materials prices remain almost 40% above pre-pandemic levels,” said Basu. “With construction spending down for the past two months, the industry eagerly awaits lower interest rates. Given recent economic turmoil, the Federal Reserve will begin cutting rates at its September meeting.”  

National nonresidential construction spending declined 0.2% in June, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.21 trillion. Nonresidential construction has expanded 5.3% from a year ago.

Spending was down on a monthly basis in 7 of 16 nonresidential subcategories. Private nonresidential spending fell 0.1%, while public nonresidential construction spending was down 0.4% in June.

“A new trend in nonresidential construction is emerging, and it’s not a good thing,” said ABC Chief Economist Anirban Basu. “Despite a bevy of megaprojects in certain parts of the nation, overall nonresidential construction spending appears to have entered a period of stagnation. The flattening of momentum has been apparent for the better part of a year, but the impact of higher interest rates, tighter credit conditions and a softening economy is increasingly apparent in the most recent data, which indicate that aggregate nonresidential construction spending is in decline.

“Despite a recent loss in spending growth momentum, many contractors remain upbeat, according to ABC’s Construction Confidence Index, anticipating growth in revenues and payrolls over the next six months,” said Basu. “But with interest rates staying higher for longer, it appears that many projects are being put on hold, limiting construction starts, suppressing backlog and perhaps eventually eroding current contractor confidence.”

The construction industry added 25,000 jobs on net in July, according to an Associated Builders and Contractors analysis of U.S. Bureau of Labor Statistics data. On a year-over-year basis, industry employment has expanded by 239,000 jobs, an increase of 3%. 

Nonresidential construction employment increased by 16,200 positions on net, with growth in all three subcategories. Nonresidential specialty trade contractors added the most jobs, increasing by 11,300 positions. Heavy and civil engineering and nonresidential building added 2,900 and 2,000 jobs, respectively.

The construction unemployment rate rose to 3.9% in July. Unemployment across all industries rose from 4.1% in June to 4.3% last month.

“It appears that America is headed into recession,” said ABC Chief Economist Anirban Basu. “While it is true that many economists have been suggesting this for more than two years, the recent slowing in economic activity feels different. Unemployment is climbing rapidly. Consumer spending growth has become more sluggish. U.S. equity markets are generating large losses, an indication that America is caught in a growth scare and that there is a growing consensus that the Federal Reserve has waited too long to begin reducing interest rates.

“Given that macroeconomic backdrop, it may seem peculiar that the U.S. construction industry managed to add 25,000 jobs in July,” said Basu. “How can one suggest that the U.S. economy is heading into recession when contractors are still eagerly hiring workers? In this regard, history is instructive. Nonresidential construction industry performance has tended to lag the performance of the overall economy by 12 to 18 months. According to ABC’s Construction Confidence Index, contractors collectively remain upbeat regarding their prospects for the next six months. But if the economy continues to weaken, and it appears poised to do precisely that, contractor confidence will begin to ebb. Indeed, the June construction spending data released on Aug. 1 indicate that many construction segments are already in slowdown mode.

“An exception to this is construction related to manufacturing,” said Basu. “The fastest segment of growth in construction spending has been in building construction, which encompasses massive investments in chip-making facilities and other industrial projects. Much of that is fueled in part by federal subsidies. But many construction segments do not benefit from federal subsidies, and those are the sectors that stand to experience the most erosion in performance as the economy softens and elevated borrowing costs linger.”

By Joe Camilo, Tocco Building Systems

Massachusetts taxpayers dodged a bullet when the state Senate didn’t take up legislation passed by the House in the waning moments of the legislative session that would have made it easier for municipalities and state agencies to use union-only project labor agreements (PLAs) on construction projects.  Supporters of a level playing field in public construction projects must now remain vigilant, as PLA advocates may raise the issue again in informal session, which will continue through the November elections, and in which a single opposing vote can stop legislation from passing.

The fact that reducing competition increases prices is Economics 101.  At a time when the commonwealth struggles with a housing affordability crisis caused by insufficient supply, it doesn’t make much sense to further increase construction costs by preventing the 82 percent of the construction workforce that chooses not to affiliate with a union from participating in public projects.

Massachusetts’ Supreme Judicial Court has ruled that PLAs violate state bidding laws unless strict conditions are met, and a Hampden County Superior Court recently affirmed that ruling when it struck down a PLA on the construction of a $325 million water treatment plant.  Judge Michael Callan wrote that “the PLA poses such a significant disadvantage to open shops as to render a competitive bid impossible…. the PLA excludes open shops from bidding, as it essentially requires bidders to execute an agreement to use union laborers on the Project.”

After the PLA was struck down, a single winning subcontractor bid from ABC MA member Wayne J. Griffin Electric saved $15.5 million over the next lowest union bid on the project.

The Boston Globe followed up that ruling by writing in an editorial that PLAs are bad public policy and unfairly limit competition while driving up project costs.  “There really is no strong policy argument for imposing a PLA… Such agreements usually drive-up costs for the taxpayer… Further, it is unfair to the many Massachusetts construction workers who are not union members. It means that those workers are paying taxes to help fund projects that PLAs would exclude them from working on.”

PLA’s also run counter to efforts to ensure that public projects are built by a diverse workforce.  The then-head of the National Black Chamber of Congress testified at a congressional hearing that 98 percent of Black and Hispanic construction companies are non-union, and that a PLA “greatly limits the opportunities for Black and Hispanic firms whenever they are used.  The possibility of Black and Hispanic labor is greatly suppressed also.”      

Closer to home, the Black Economic Council of Massachusetts (BECMA), wrote in a 2021 letter to the state Senate that “We are deeply concerned about the historical exclusionary effect that PLAs have had on Black, Latinx, Asian, Indigenous, immigrant women and LGBT workers and construction firms. (PLA) prohibits construction firms owned by Black people and other people of color – which are overwhelmingly open shop enterprises – from using their own workforce that they have hired, trained, developed, and retained, and that are drawn largely from communities of color.”

The failure of last-minute PLA legislation is an important victory for Massachusetts taxpayers, but politics is fickle.  Please let your state representatives and senators know that project labor agreements discriminate against more than 80 percent of the state’s construction workforce and needlessly increase costs.  Urge them to oppose any legislation PLA supporters may seek to revive in informal session.

 

Medford Wellington Service Company is symbolic of a construction industry that has been radically transformed.  This family company with more than half a century of history behind it is now the business continuity company that offers commercial services and construction expertise to clients across New England.

The company has expanded its presence in western Massachusetts with the acquisition of Rich Strong Air Conditioning in Hatfield and can now serve clients from southern Connecticut to Portland, Maine and across to New Hampshire with over 130 employees.

Medford Wellington’s reach isn’t just geographic.  It lives up to its one-stop shopping goal by offering refrigeration, electrical, plumbing, sheet metal and HVAC services.

“If it’s 90 degrees at your restaurant and the air conditioning breaks down, we’re the people you call,” said CEO Michael LaCrosse, who’s taken over long-time leader and ABC Legend John Annarelli, Jr.  “Maybe the bathroom isn’t working.  We can handle that, too.”

The company even has a mobile refrigerated storage trailer into which clients can move their products.

“If the refrigeration goes down at a restaurant, we can back up the trailer to their kitchen door, load their product in it, and employees can use it as an auxiliary refrigerator without risk of spoilage” La Crosse said.

Medford Wellington is dealing with the same skills gap that affects so much of the construction industry.  LaCrosse doesn’t expect it to end anytime soon, so the company is always seeking to diversify its workforce, reaching out to younger people, women, and others who have not traditionally been part of the industry.

But Medford Wellington has taken its efforts much farther.  The Gould Construction Institute, ABC MA’s education partner, will open its first brick and mortar facility this fall in the company’s Billerica building.  To augment Gould’s offerings, Medford Wellington has been offering its own programs, which include both day and night-time training, for over 15 years.

But they don’t stop there.  Medford Wellington also offers career road mapping for its employees.

“One of our plumbers is now learning HVAC,” La Crosse said.  “There are a variety of career paths here, depending on what an employee likes and is good at.”

As construction workers get older, many seek roles that are easier on their bodies.  At Medford Wellington, they can continue their careers in areas such as quoting, sales, safety or dispatching.  And all these family-supporting careers are accessible without the burden of college debt.

Going forward, the company plans to continue growing and seeking to partner with companies like Rich Strong.  Change is the only constant in the construction industry, and Medford Wellington is well positioned to adapt and continue to thrive.

By Joe Camilo, Tocco Building Systems

Unfortunately, politics is often as much a part of what we do as actual building.  And as all of us know, it’s not easy being an open-shop contractor in Massachusetts.

This reality has certainly been on display of late.  The Boston Globe published an editorial entitled “Project labor agreements are bad policy” on May 28, not long after Hampden County Superior Curt Judge Michael Callan prohibited a proposed PLA on a Springfield water treatment project from going forward.  There was as eerie and uncomfortable unease when construction unions didn’t respond to the editorial.

Now we know why.  The unions took to the State House and succeeded in getting the House to amend at least two bills by adding language that bypasses limits set by Massachusetts’ Supreme Judicial Court and gives municipalities and public agencies expanded authority to use union-only PLAs on public construction projects.

We have been working the Senate, House and the media to change the PLA language, and our government team was able to secure some qualifying language in the House, which is better than the blanket authorization the unions wanted.  Our work has also produced a strong anti-PLA editorial in the Springfield Republican, the newspaper’s second editorial on the topic this year.

During debate over the amended bills, it was disheartening to hear state representatives claiming that PLAs are needed to ensure that construction workers on public projects are paid fairly and treated well.  Of course, public construction projects are already covered by state and federal prevailing wage laws that guarantee union-scale wages for all workers, regardless of labor affiliation.  And open-shop companies are also subject to state certification and local prequalification requirements that apply to all contractors.

In its editorial, the Globe argued that “There really is no strong policy argument for imposing a PLA…”  They mean “that those workers are paying taxes to help fund projects that PLAs would exclude them from working on.”

Our challenge is to keep debunking myths and drive home the point that excluding the 81.8 percent of Massachusetts construction workers who choose not to join a union is unfair, reduces competition and drives up costs.  You can count on the fact that we will continue to do exactly that.