Market Trends February 2023
Construction Hiring in 2022
Construction hiring picked up in December as the sector added 28,000 new jobs, driven by a 17,000 increase in hiring by specialty trade contractors. In 2022 construction companies added an average of 19,000 jobs a month. While spending on residential construction slowed when housing starts and new home sales dropped, nonesidential construction spending has risen. In November, nonresidential construction spending rose 0.9% from October, driven by increases in conservation and development projects and manufacturing and religious sites, according to the Commerce Department. With home purchases rising again and mortgage rates dropping, analysts expect the construction sector to continue to add jobs.
One Million Women Initiative
The US wants to add one million women to the skilled trades over the next decade. More than 3,300 women attended the Tradeswomen Build Nations conference in Las Vegas in October, making it the world’s largest-ever gathering of women construction workers. Attendees heard federal, labor and management officials say now is the time to boost women’s current 11% industry representation. Demand is high, skilled workers are in short supply and people are retiring in record numbers. US Commerce Secretary Gina Raimondo announced the Million Women in Construction initiative to a cheering and packed house. She said investing in the success of women is necessary in order to make the US competitive. Raimondo vowed to leverage federal infrastructure spending to increase opportunities and noted that her agency leads the deployment of $100 billion in funding from the CHIPS and Science Act and from the Infrastructure Investment and Jobs Act. Women make up just 2% to 3% of some trades. Some powerful unions including the United Association, the plumbers’ and pipefitters’ union, were there to show support and announce new benefits, such as maternity leave.
Technology Now the Norm in Construction Sector
Dodge Data and Analytics recently released Connected Construction: The Owner’s Perspective, a report that looks at how design and construction firms in the public and private sectors are relying on technology for their own internal workflows, sharing construction data internally between different teams and departments that need access. Nearly 70% of these firms require their contractors to use digital documentation and practices on their projects. Most organizations surveyed were trying to limit the number of software programs they use to five or fewer and use programs that integrate functionality within themselves.
Technology is now being used more often in the field from the very beginning of the project. The use of digital cameras, drones, laser scanners and other tools allows engineers and project managers to keep track of what’s going on and measure productivity in real time.
Once the construction phase is underway owners use digital workflow processes to manage invoices and approvals, change orders, field inspections and reports and other aspects. Larger firms are implementing digital activities at a higher rate than smaller firms, but all firms are seeking to incorporate digital tools that help them save time and money and be more competitive.
Remodeling Index Declines
The NAHB/Westlake Royal Remodeling Market Index (RMI) dropped 17 points to 66 in the fourth quarter compared to fourth quarter 2021. The survey asks remodelers to rate five components of the remodeling market as “good,” “fair” or “poor.” Each question is measured on a scale from 0 to 100, where an index number above 50 indicates that a higher share view conditions as good than poor.
The overall RMI is calculated by averaging the Current Conditions Index and the Future Indicators Index. Any number over 50 indicates that more remodelers view remodeling market conditions as good than poor. The Current Conditions Index is an average of three components: the current market for large remodeling projects, moderately sized projects and small projects. The Future Indicators Index is an average of two components: the current rate at which leads and inquiries are coming in and the current backlog of remodeling projects.
The Current Conditions Index fell 14 points to 75 compared the fourth quarter of 2021. All three components declined as well: the component measuring large remodeling projects ($50,000 or more) fell 14 points to 71, the component measuring moderately sized remodeling projects (at least $20,000 but less than $50,000) dropped 13 points to 77 and the component measuring small remodeling projects (under $20,000) declined 14 points to 77.
The Future Indicators Index fell 19 points to 58 compared to the fourth quarter of 2021. The component measuring the current rate at which leads and inquiries are coming in dropped 22 points to 52 and the component measuring the backlog of remodeling jobs decreased by 17 points to 63. NAHB says that even though the index declined sharply it is encouraging to note that it remains in positive territory.
To track quarterly trends, the redesigned RMI survey asks remodelers to compare market conditions to three months earlier, using a “better,” “about the same,” “worse” scale. Twenty-nine percent of remodelers said the market had gotten worse in the fourth quarter of 2022, compared to only 9% who said it had improved.
Will Robots Replace People in Warehouses?
Amazon unveiled its new ‘Sparrow’ sorting robot that could soon replace some human workers in its warehouses. The robot is designed to identify and sort specific products along Amazon’s fulfillment lines, a task that previously could only be done by humans. Amazon debuted Sparrow during their Delivering the Future conference near Boston. While workers fear the ultimate goal is to replace them with employees that can work around the clock, never get tired, don’t make mistakes and will never ask for a raise, Amazon says Sparrow is designed to work with employees, not replace them. However, in a patent filed by the company in 2020, Amazon said Sparrow is designed to replace human workers who “pick items from inventory, place items in totes, remove items from totes, place items into bins, remove items from bins, place items into boxes for shipping.”
The robot arm is currently active in one warehouse in Texas for testing, but Amazon plans to roll it nationwide as soon as next year. Using AI, computer vision, and a suction-cup "hand," the robot is capable of handling around 65% of the products sold on Amazon's website before they are packaged. The robot arm is currently in testing at one warehouse in Texas.
Tech Company Layoffs Mount
Amazon, Alphabet, Microsoft, Meta and Apple nearly doubled their total workforce over the past three years. But now everyone but Apple is laying off people, with about 70,000 employees let go thus far. The wave of tens of thousands of layoffs at big tech companies is, to a large extent, the result of a miscalculating how long the boom brought on by the pandemic would last and how much of consumers’ pandemic-induced behavior would persist after people went back to work and resumed normal activities.
Why the sudden reversal? Revenues are not growing at the rate they anticipated, costs have risen and profits have fallen. The battle to hire engineers, technicians and programmers in Silicon Valley had also caused salaries to skyrocket. For those who are losing their jobs, the problem is that now, all the companies seem to be laying people off at the same time, making it more difficult to find an opening in the sector. Reportedly, the five tech giants went from having 926,000 employees in 2017 to more than two million in 2022.
CEOs Weigh in on Challenges Ahead
CEOs in both the United States and globally say slow growth and a recession are their #1 external worry of 2023, according to a recent survey from The Conference Board. The survey also found that most executives don’t think stronger economic growth will return anytime soon: 51% of CEOs worldwide and 60% of those in the US expect 2023 to be a year of anemic growth, with economies beginning to pick up late this year through mid-2024. Despite CEOs bracing for weaker growth and recessions, labor shortages and talent retention rank among the biggest challenges of executives worldwide, underscoring how the current downturn differs from those in the past. US CEOs as well as CEOs globally ranked the war in Ukraine low on their list of concerns at 22nd and 15th, respectively. The survey reflects the views of nearly 700 CEOs and more than 450 other C-suite executives. Respondents were primarily from North America, Latin America, Asia, and Europe.
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