By Joshua Restauri | Surety Underwriting Consultant
So far in 2024, the construction industry has remained resilient with $247.8 billion in new nonresidential construction starts through September 30, 2024. While private nonresidential building construction is down from record levels of spending, public construction has increased to a record high of $35 billion in monthly starts.
Heavy Engineering (Civil) is up the most in construction starts year over year. The leaders within this sector are Electric Power Infrastructure (+73%), Airports (+61%), and Water/Sewage (+23%). This strong growth has driven the largest gap in public and private construction spend in nearly 20 years. The few private subsectors that have seen growth are Special and Vocational schools (+52%) and Amusement (+38%). With the amount of public money expected to maintain, this gap might only continue to widen.
The largest underperforming subsectors have been Military (-54%), Manufacturing (-39%), Warehouse (-26%), Hotel/Motel (-22%), and Transportation Terminals (-19%). Most of these sectors fall into the Industrial Construction category which is shown below. Even though they are leading the charge in their reduction, they are returning to their long-term trend line.
August’s total construction hiring added a historically strong 34,000 to the construction labor force. The month’s gains represented the second strongest reading in the last 12 months, beat only by March’s 37,000 gain. Unsurprisingly, Heavy Engineering (Civil) added 14,000 of these jobs. Residential construction added the second most with 5,000. These jobs are not evenly spread around the country. The chart below shows how construction employment has changed by state from June 2023 to June 2024. 35 states saw an increase, 1 remained unchanged and 14 states saw a decrease.
Construction has struggled in recent years to find enough people to fill the open jobs that exist. This has driven wages up for the industry and has made it an increasingly attractive sector to work in. For the last 10 years construction wages have grown faster than inflation.
Finally, construction costs remain volatile but contractor’s have started to recoup some of their losses driven by these increases. Sadly, some of that has been undone in recent months. The chart below shows the relationship between bid prices and the cost of the underlying input costs. The red chart areas signify times that construction costs rise faster than bid prices. The white areas represent bid prices remaining elevated with falling construction costs.
Joshua Restauri is a Surety Underwriting Consultant in Seubert’s Surety Bonding Division. Josh joined Seubert in 2022 with over 6 years of professional experience. In this role, Restauri will be responsible for developing and managing service plans and creating long-term relationships with clients and carriers.
Contact Joshua to see how you could minimize risk.
814.657.2077 | [email protected] | LinkedIn
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