from Mark Smith, Advocate, California Builders Alliance

 

Initial jobless claims surge to highest point since Oct.

Initial filings for unemployment benefits rose to 286,000 for the week ended Jan. 15, exceeding the Dow Jones estimate of 225,000, according to the Labor Department. "Omicron has put a wrench in where we stand on the labor market front, but with hiring challenges, employers are likely trying to hold onto their workforce, so this could be a short-term surge in jobless claims," said Mike Loewengart, E-Trade's managing director of investment strategy. Full Story: CNBC  

Fed says it aims to raise interest rates in March

The Federal Reserve has announced it will begin steadily raising interest rates at a March meeting to curb inflation and has authorized a final round of asset purchases, putting the program on track to end by March. "This is going to be a year in which we move steadily away from the very highly accommodative monetary policy that we put in place to deal with the economic effects of the pandemic," Chair Jerome Powell says. Full Story: The Wall Street Journal  The New York Times  Reuters  BNN Bloomberg (Canada)  

Goldman expects 5 interest-rate increases in 2022

Economists at Goldman Sachs think the Federal Reserve will be more aggressive about raising interest rates than previously expected and have forecast five 25-basis-point increases in 2022, up from a previous projection of four. "The evidence that wage growth is running above levels consistent with the Fed's inflation target has strengthened, and we have revised up our inflation path," the economists say. Full Story: Bloomberg  

Federal guide explains access to infrastructure funding

A new resource from the Biden administration covers more than 375 federal infrastructure spending programs and provides a road map for funding offered under the bipartisan infrastructure law. The 465-page book details programs under various categories for states and other entities and guides them on how to access to the funds available in each case. Full Story: Route Fifty   Sector watch: Infrastructure outlook dependent on IIJA

Editor's note: This article is the last in a series looking at five of the country's hottest construction verticals. Click here for the entire series.

Industry sources expect renewed commitment from the federal and state governments on infrastructure, sparking optimism for the industry overall in 2022. But that optimism hinges on what Washington, D.C., can deliver. "I think there's a lot of hope about the amount of infrastructure work that obviously needs to be done and can be financed," said Peter Dyga, president and CEO of Associated Builders and Contractors Florida East Coast Chapter. "But unfortunately, politics often screw that up. So, I think that's the unknown going into 2022… Probably the first quarter or the next few months will certainly tell about which direction we're headed." The majority of money from the $1.2 trillion infrastructure act will be distributed to states, which are charged with deciding which projects to fund and executing them. Other sums will be disbursed through federal grants for specific projects. The first major infusion of funding in 2022 is heading to states, tribes and U.S. territories, the Biden administration announced on Dec. 2. The EPA will distribute $7.4 billion to remediate ailing water infrastructure and lead pipes. Highway bridges will be the next type of infrastructure to receive major funding from the IIJA. The Bridge Formula Program will allocate $26.5 billion to help repair, replace and construct approximately 15,000 highway bridges over five years, according to a Federal Highway Administration press release. About $825 million will also be available for tribal transportation facilities. Just last week, the U.S. Army Corps of Engineers announced it had received $17.1 billion from the legislation for new and existing civil works projects across the country, according to a USACE press release.  

FMI report: Windfall in store for materials industry

Federal infrastructure funding will fuel the construction materials sector through 2026, but a challenging labor market and inflation could hamper growth, according to FMI Capital Advisors. FMI also expects material producers to see strong buyer appetite for mergers and acquisitions this year. Full Story: Concrete Products  

Spending uptick expected for nonresidential construction

Spending on nonresidential construction will pick up by 5.4% this year and improve on that figure in 2023, according to the American Institute of Architects' Consensus Construction Forecast panel. Nonresidential construction spending experienced a 5% decline in 2021, but this year, the only nonresidential sectors expected to see a spending decrease are hotels, religious facilities and public safety structures. Full Story: Building Design + Construction (free registration)    

Construction spending ekes out 0.2% gain in Dec.

A falloff in spending on public projects offset an increase in the private sector to leave US construction spending in December lower than predicted, but up 9% year over year, the Commerce Department reported. Spending ended the month up 0.2% after a 0.6% gain November, with the overall year ending at 8.2% higher than 2020. Full Story: Reuters  

OSHA pulls temporary vaccine rule, says permanent mandate is in the works

The U.S. Department of Labor will withdraw its emergency temporary standard requiring COVID-19 vaccination or testing for workers at large employers but continue to pursue a permanent standard to that effect, according to a Federal Register notice scheduled to publish Wednesday. The agency also on Tuesday asked the 6th U.S. Circuit Court of Appeals to dismiss judicial challenges to the emergency standard as moot. As of tomorrow, the ETS will no longer be in effect, it said, "and petitioners will no longer be subject — or face any risk of being subject — to the challenged requirements from which they sought relief." The agency was careful to note, however, that its withdrawal does not affect OSHA's plan to make such a requirement permanent.  

Mayors advised to select infrastructure coordinators

The White House is asking mayors to select a liaison to coordinate with the federal government to ensure proper distribution of funds under the bipartisan infrastructure law. The White House recently issued a similar request to governors. Full Story: Spectrum News   

 

Civil contractors upbeat on 2022, wary of labor market

Seventy-two percent of civil contractors believe it will be hard to find qualified workers this year, up sharply from the 58% who expected labor shortages a year earlier, according to Dodge Construction Network's Civil Quarterly. However, 73% of contractors surveyed said they're optimistic about finding projects in 2022. Full Story: For Construction Pros  

Sector watch: Billions of dollars set to boost US port projects in 2022

Editor's note: This article is the third in a series looking at five of the country's hottest construction verticals. Click here for the entire series.

Ports from coast to coast are eyeing improvement projects to help alleviate supply chain issues that have plagued businesses since the start of the COVID-19 pandemic.

The focus on port projects in the recently enacted Infrastructure Investment and Jobs Act is part of an overall push from the Biden administration to help alleviate the clogged supply chain in the U.S.

"That bill is going to help improve ports that get our supply chains moving and speeding up deliveries and addressing shortages," said John Fumero, a shareholder at Nason Yeager, a Florida-based law firm that represents the Port of Palm Beach, Florida. "[It's] going to be providing significant funding for ports to undertake these projects to expand capacity."

But there's even more money for the sector beyond the $17 billion round of federal funding earmarked for seaports in the Infrastructure Investment and Jobs Act. Transportation Secretary Pete Buttigieg announced in December $241 million in grants via the United States Maritime Administration Port Infrastructure Development Program (PIDP). That money will go toward 25 projects in 19 states to bolster U.S. ports.  

Dodge: Commercial, multifamily starts rebound in 2021

US commercial and multifamily construction starts rebounded last year from a fitful 2020 with a 16% jump in value nationwide and an 18% gain in the top 20 metropolitan areas, according to Dodge Construction Network. However, commercial and multifamily starts in the top 20 metro areas were down 5% from their 2019 value. Full Story: Dodge Data & Analytics   

Report: Construction workers receive $28B a year in public assistance

Thirty-nine percent of families of construction workers in the U.S. are enrolled in at least one public safety net program such as Medicaid, according to a new report by the UC Berkeley Labor Center released this month. By comparison, 31% of workers across all industries have a family member enrolled in public assistance, Berkeley found. This adds up to $28 billion of public assistance for construction workers, which is roughly 10% of the amount spent for all working families.  Construction, generally seen as a reliable path to a stable, well-paying job, has become less reliable as a career, according to the study's authors, who attributed part of the dependence on public programs to a decrease in unionization among construction workers.  

Rents will skyrocket in these 10 markets this year

Over the past year, the apartment industry has experienced one of the strongest runs anyone can remember. After the multifamily industry struggled because many residents were unable to pay rent due to COVID-19 in 2020, the market stormed back in 2021, with 673,000 units rented for the year, according to Richardson, Texas-based data analytics and property management software provider RealPage. That beat the previous high in units rented in 2000 by 66%. "The recovery was the quickest I've ever seen," said Steve Hallsey, executive vice president of operations for Atlanta-based Wood Residential Service, who has been in the apartment industry for almost 40 years. "I've never seen demand as strong as it is right now." RealPage tracks 300 markets across the country, many of which have ultra-low vacancy rates. Out of those 300, only six have vacancy rates above 6%, while the national apartment market hit an all-time occupancy level of 97.5% in November. 

 

Strong Southeast performance

In particular, markets in the Southeast have exploded during the pandemic, with rents rising more than 20% from November 2020 to November 2021 in cities like:

• West Palm Beach, Florida 

• Orlando 

• Fort Lauderdale, Florida

• Jacksonville

• Atlanta

• Raleigh/Durham, North Carolina 

• Miami

That growth should continue in 2022. In its recently released Multifamily 2022 Outlook, Freddie Mac lists "high-growth Sun Belt markets and lower-priced alternatives to gateway markets."

Markets with highest expected rent growth in 2022

City	Rent Growth
Phoenix	7.6%
Las Vegas	7.0%
Tampa	6.9%
Tucson	6.5%
Albuquerque	6.2%
Atlanta	5.9%
Sacramento	5.8%
Riverside	5.7%
West Palm Beach	5.5%
Ft. Lauderdale	5.2%

SOURCE: Reis, RealPage, Freddie Mac

Even with rental increases in these Sun Belt cities, industry executives argue that they still represent relative values compared to coastal cities (even with declines in those markets).  

 

Compensation costs up 1.0% Sep 2021 to Dec 2021 and up 4.0% over the year ending Dec 2021 

Compensation costs increased 1.0 percent for civilian workers, seasonally adjusted, from September 2021 to December 2021. Over the year, total compensation rose 4.0 percent, wages and salaries rose 4.5 percent, and benefit costs rose 2.8 percent. 

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December jobless rates down in 42 states; payroll jobs up in 17 states 

In December, unemployment rates were lower in 42 states and the District of Columbia and stable in 8 states. Nonfarm payroll employment increased in 17 states and was essentially unchanged in 33 states and the District. 

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Big gains predicted in lab construction

The next few years will likely bring a boom in life sciences laboratory construction and rebuilding, especially in areas with a concentration of such facilities, industry observers say. The pandemic is a major factor driving the priority to build labs quickly, says Raj Vora, a life sciences core market leader at DPR Construction. Full Story: Construction Dive    

The Dotted Line: COVID-19 force majeure clauses are losing their punch

This feature is a part of "The Dotted Line" series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.

Two years in, we've all got pandemic fatigue. Turns out, the go-to language of "force majeure" due to COVID-19 in construction contracts may be getting a bit tired as well.  Owners are increasingly pushing back against clauses that cite COVID-19 as an excusable delay, construction attorneys say.  Paired with a decision by the Government Accountability Office (GAO) that a bid was properly rejected for including a COVID-19 clause, it means the "force" of using force majeure for COVID-19 claims is on the wane.   

 

Industries seek a say on new overtime rules

Industry groups are calling for public hearings and input as the Labor Department prepares to update its overtime regulations, which may make more workers eligible for time-and-a-half pay. Stakeholders have been consulted in the past on such changes. Full Story: Bloomberg Law 

 

Canal repair project underway in central Calif.

The first phase of construction has begun on a $187 million project to restore capacity along a total of 33 miles of central California's Friant-Kern Canal. The initial work focuses on a 10-mile section affected by the removal of groundwater. Full Story: Sierra Sun Times (Mariposa, Calif.)  

L.A. Metro clears $8.5B L.A.-Artesia line

A proposed $8.5 billion light-rail line running 19.3 miles between Artesia, Calif., and downtown Los Angeles has won the approval of the L.A. Metro Board. The project will come in two phases, with construction of the first to begin next year. Full Story: San Gabriel Valley Tribune (Monrovia, Calif.)  

L.A.-Las Vegas rail line prepares to advance

Brightline West is aiming for regulatory approval by the end of this year to bring trains to Rancho Cucamonga, Calif., linking with Los Angeles. The line will form a section of Brightline's planned route from Los Angeles to Las Vegas, a project the company hopes to complete in 3½ years. Full Story: Railway Age  

$4B redo of LaGuardia Terminal B finished

LaGuardia Airport's new Terminal B has been open for a while, but the $4 billion renovation is now officially complete. The six-year project, the largest public-private partnership in US aviation, includes the terminal's Central Hall as well as 35 gates, a garage, skybridge and amenities. Full Story: CNN Bloomberg    

Caltrain electrification project marks milestone

Balfour Beatty's construction of more than 3,000 foundations for Caltrain's new overhead catenary system has officially been completed. The project overcame several complications, including a variety of unknown underground conditions along its right of way, as part of a 51-mile electrification project stretching from San Francisco to San Jose. Full Story: Railway Age    

How a Calif. roadway was rebuilt after fire damage

Eight miles of the 13-mile-long Jesus Maria Road in California's Calaveras County were among 85 miles of road in the county damaged by the massive Butte Fire in 2015. Christopher Abel describes the extensive restoration project, which involved full-depth reclamation with cement and a cape seal requiring 25 days of work. Full Story: Roads & Bridges 

 

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Mark Smith 
Advocate 
California Builders Alliance

5370 Elvas Avenue ǀ Sacramento, CA 95819
Cell: 916.335.5072
Email: mark.smith@calbuilders.org 

Email: mark@smithpolicygroup.com