CV19 Changes Construction Practices
As states gradually reopen, contractors are being challenged to operate in ways that prevent the spread of the virus and to accept a slower pace of work as the “new normal,” according to Engineering News Record (ENR). Companies are struggling to find enough personal protective equipment (PPE), ensure their workers are not sick, limit contact and compete for workers against stimulus-boosted unemployment wages. Some states are limiting crew sizes according to the square feet of the project, causing some large projects to split workforces into day and night shifts. There is also still a lot of hesitation to bring people back into an office environment.
US GDP will decline 5.9% on an annualized basis in 2020 but will increase 3.6% in 2021, according to the National Association for Business Economics’ (NABE) latest survey. Panelists expect the hit to GDP to be the greatest in the second quarter, forecasting a 33.5% annualized quarter-over-quarter decline. About 87% believe the greatest threat to the economy would be a second wave of the coronavirus this year. About 89% agree that GDP will not return to pre-CV19 levels until the second half of 2021. About 84% expect there will be a reduction in US dependence on global supply chains.
Apprentice Programs Struggling
CV19 restrictions are forcing many apprenticeship and training programs to shut down or be severely limited. Programs are turning to online resources, on-the-job training and socially distanced classes to continue workforce development. Apprenticeship enrollment was at an all-time high in many states prior to the shutdown in March. Programs are trying to figure out how to reduce class sizes and allow for social distancing. Reportedly some programs are looking to jobsites for hands-on training. Schools are working at figuring out how to certify students as ready to work in chosen fields; online training is just not good enough to guarantee real world performance. Colleges are expecting class size limits to produce a decline in enrollment and longer waiting lists.
Home Building Trends to Low-Density Areas
Housing demand will continue to increase in medium-and low-density communities, according to NAHB’s most recent Home Building Geography Index (HBGI). The HBGI is a quarterly measurement of building conditions across the country and uses county-level information about single- and multifamily permits to gauge housing construction growth in various urban and rural regions.
NAHB Chief Economist Robert Dietz says that construction growth expanded over the last year more quickly in low population density areas than in high-density regions. Dietz says the telecommuting trend accelerated by CV19 is only one of the contributing factors. Even before the pandemic, home construction was increasing at a higher rate in lower-density areas.
First quarter 2020 HBGI findings show:
Single-family construction expanded across all seven economic geographies, posting the strongest growth (9.1%) in outlying suburbs (exurbs) of small metro areas, as measured on a one-year moving average.
All economic geographies reported net growth over the past year for single-family and multifamily construction, a reminder of the momentum home building possessed before the current recession.
The first quarter HBGI also featured a new economic geography class based on local employment in the education and health services sector (EHS). Given the public health crisis associated with COVID-19, this sector is of critical importance. The HBGI designates EHS-focused regional markets as the top quartile of counties based on this employment share (25.7% or above of total employment). These counties also make up 23.2% of the U.S. population.
The analysis found that 12.4% of single-family construction and 18.4% of multifamily construction occurs in EHS markets. Multifamily construction has outpaced single-family construction in these markets over the past year, expanding at nearly twice the growth rate of the rest of the construction in EHS markets over the past year. Single-family construction is growing in EHS markets, but the rate is slower than in the rest of the nation.
J.D. Power Retailer Satisfaction Survey
Ace Hardware took the top spot for the 13th time in 14 years on J.D. Power’s 2020 US Home Improvement Retailer Satisfaction Study. With a score of 844, Ace outranked Menards (841), Lowe’s (838), True Value (832) and The Home Depot (827). The industry average was 834. According to the survey, the single factor with the greatest influence on the retail experience beyond inventory, prices or location is friendly, knowledgeable service with a smile, provided in two minutes or less. If customers have to wait five minutes, satisfaction scores tumble. The survey also revealed that online shoppers visit more brick and mortar retailers and also spend more money.
Customers who shop and/or research online before making a purchase spend an average of $500 more per year on home improvement than those who do not research online. These shoppers are also often more price sensitive and more likely to buy during a promotion or sale.
Additional J.D. Power research conducted in early April showed that 49% of US consumers say they are considering a home improvement project within the next three months. Of those, 61% say they plan to do the project themselves. The top projects on the wish list include painting (15%), lawn and landscape projects (14%) and starting a garden (12%).
Ecommerce Trends Change Retail
Ecommerce sales will grow 18% this year, according to the latest forecast from eMarketer, which previously forecast 13% growth. Retail sales overall are expected to drop 10.5% to $4.894 trillion. eMarketer says both outcomes are due to the impact of CV19, and that it may take years for the retail sector to recover. Retail sales dropped 8.2% in 2009 during the Great Recession. Experts say some ecommerce behaviors have vaulted into the future thanks to pandemic demand. These include online grocery shopping and buy online, pick up in store. The latest Adobe data shows ecommerce sales grew 77.8% year over year in May to $82.5 billion.
AI Tech Enforces Social Distancing
Amazon launched an AI-based tracking system to enforce social distancing in offices and warehouses in order to reduce any risk of anyone contracting CV19. The system, called Distance Assistant, uses camera footage in Amazon’s building to help identify high-traffic areas. Monitors highlight workers keeping a safe distance in green circles, while workers who are too close together are highlighted in red circles.
Amazon is also testing a wearable device that lights up and makes an audio alert when workers are too close to each other at a warehouse outside Seattle. According to news reports, the device consists of a clear plastic sleeve and a clip that has an LED light and audio system embedded in it.
Amazon says they intend to make their new software freely available to other businesses. The pandemic has sickened more than 1,100 Amazon employees and killed at least nine.
Amazon has been hiring for roles like social distancing ambassadors and guardians. Several firms told Reuters that AI camera-based software will be crucial to staying open as it will allow them to show not only workers and customers but also insurers and regulators that they are monitoring and enforcing safe practices. Privacy activists have raised concerns about increasingly detailed tracking of people.
Global GDP Forecasts
The International Monetary Fund (IMF) has sharply lowered its forecast for global growth this year due to the economic damage being inflicted by CV19. IMF predicts that the global economy will shrink 4.9% this year, up from a predicted 3.0% drop issued in April. Other estimates are up as well from April. The US economy is now expected to drop 8.0% this year compared to the 5.9% drop estimated in April. GDP for Canada, whose largest trading partner is the US, is now expected to drop 8.4% compared to the 6.2% decline previously projected. The IMF noted that the pandemic was disproportionately hurting low-income households. The IMF expects growth to resume in 2021, with the global economy growing a downwardly revised 5.4%, the US economy growing a downwardly revised 4.5% and the Canadian economy growing an upwardly revised 4.9%.
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