Construction Spending Growth Forecast
In 2019, the total annualized value of construction work in the US was approximately $1.3 trillion and the industry employed nearly 6 million workers in 2018. Construction employment fell from a peak of 9.8 million in July 2007 to 6.7 million in April 2012. As of August 2019, there were 8.4 million construction workers in the US, with about 23% of them being self-employed. Since bottoming out in 2011, construction spending has increased 64%, with residential construction spending rising 42%.
US construction expenditures will grow 4.3% annually in nominal terms through 2023, according to a report recently released by Freedonia Focus Reports. They predict contractors will gain from continued household formation and gains in consumers’ incomes, as wells as growing business, nonprofit and government investment. Residential building construction is projected to remain the largest segment, but the fastest growth rate is forecast to be nonbuilding construction, which is expected to rise 4.9% yearly to 2023. Spending in the South and West is expected to slightly outpace the Midwest and Northeast due to faster population and GDP growth.
Construction starts were down 5% during the first eight months of 2019 compared to the same period in 2018, according to Dodge Data & Analytics. The decline was due to a drop in both residential and non-residential building; non-building construction rose 3% over the same period. Dodge reports that residential construction is 8% lower compared to the same period in 2018, with affordability and lack of supply of starter homes hampering the purchasing side, although residential activity picked up during the fourth quarter. Flattening vacancy rates have caused rental developers to hit the brakes, especially in larger metropolitan areas. Non-residential work declined 7% overall, but commercial building starts rose 3%, due to a rise in office, warehouse and parking lot construction. IHSMarkit says that softwood lumber will drop 10.4% for 2019 but predicts a 3.3% increase in 2020 followed by two consecutive years of 1.9% increases. Steel prices are expected to drop 1.2% next year. Cement prices are expected to rise 2.8% in 2020 and 2021 and 3.1% in 2022.
We are in the last phases of a growth cycle, according to the latest ENR Construction Industry Confidence Survey. Of the 239 executives from large construction and design firms who responded, 12% believe the market will begin declining in the next three to six months. However, 37% believe the contraction will not start for 12 to 18 months.
The Amazon Supply Chain Effect
What supply chain experts term “The Amazon Effect” is reshaping standards and determining customer expectations for shipping and fulfilment, according to a recent article in Sourcing Journal. A recent survey from consultants AlixPartners finds that the maximum acceptable time to wait for a package is now four days, down from 5.5 days just six years ago. Amazon’s recent move to one-day shipping for Prime customers will ramp up expectations even more. The Amazon effect is also impacting business channels, with customers expecting faster turnaround for samples, fabric choices and shipping in general. Companies at all stages of the supply chain are being pushed to develop new strategies that balance the desire for speed with the realities of business and maintain quality and ethical standards. Many suppliers are becoming drop shippers as they partner with their customers to try and keep up with expectations.
Happy Birthday Internet
The first digital transmission between two computers was October 29, 1969 and occurred when a UCLA computer science professor and a graduate student sent the first digital transmission from their computer to another one at the Stanford Research Institute. The system crashed after receiving the first two letters of the message, but it was still the actual beginning of the internet.
Internet Sector Contributes $2.1 Trillion to US Economy
The internet sector accounted for about 10% of the nation’s GDP in 2018, according to Reuters, as reported by Trend News Agency, up from 6.9% in 2017. The internet sector is responsible for about 6 million direct jobs with average compensation of $132,223 compared to $68,506 in the total US economy. Manufacturing contributed about $2.3 trillion to GDP.
Robots or No Robots?
Walmart and Target are taking different approaches to adding robots to their stores. The direction these two retail giants take will help shape the future of automation in retail. Both companies are testing robots in their warehouses.
Walmart is planning to add robots to do repetitive manual tasks. They will be adding self-driving robots that scrub floors to 1,860 of their more than 4,700 US stores by February 2020. They will also add robots that scan shelf inventory to 350 stores and robots that automatically scan boxes as they come off delivery trucks and sort them by department onto conveyor belts to 1,700 stores. Walmart says adding robots will help them increase worker productivity, reduce the amount of time people spend on manual tasks and redirect efforts to sales and other customer service roles.
Target, with 1,850 US stores, says they will not bring in the type of robots Walmart is deploying. CEO Brian Cornell says they believe that even in today’s environment, the human touch still really matters. Carl Benedikt Frey, a fellow at Oxford and author of The Technology Trap: Capital, Labor and Power in the Age of Automation, says that it makes less economic sense for Target to invest in robots than it makes for Walmart, because Target has 360,000 US workers compared to Walmart, the country’s largest private employer, with 1.5 million US associates, and smaller stores, with more than 80% of Target stores under 170,000 square feet.
Industry analysts note that there are more than 15 million retail workers in America today, and lower-skilled jobs such as cashiers and clerks are among those most vulnerable to technology advances. Reportedly between 6 million and 7.5 million existing retail jobs could be handed over to robots.
Active Shooter Training for Retailers
Target is expanding their active-shooter training for hundreds of thousands of employees across the US, according to Business Insider. The training was initially conducted among select leaders and security workers at Target stores but was expanded to include all stores, distribution centers and headquarters employees in August. The decision to expand training was reportedly made just days after a mass shooting in an El Paso, Texas Walmart. Walmart offers active shooter training during orientation and on a quarterly basis thereafter for more than one million employees.
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