Spring Ahead, Fall Back?

The return to standard time at the beginning of November brings this old mnemonic to mind. It also seems to apply, in another sense, to the latest construction spending data. McGraw-Hill Construction reported on November 20 that nonresidential building in October sprang ahead 19 percent at a seasonally adjusted annual rate, "with stronger rates of contracting being reported for many structure types following a weak September." (Seasonal adjustment takes into account normal differences among months due to weather and holidays. Annual rate means monthly figures are multiplied by 12 to allow comparison to full years.) "Nonbuilding construction...increased 16 percent in October." Similarly, Reed Construction Data reported on November 12, "Heavy/engineering starts increased 17 percent from September, more than the usual seasonal rise," although nonresidential building starts were "2 percent higher than in September 2009. The change from the previous month was about a 3 percent drop after seasonal adjustment." In other words, both firms detected a large rise in civil works or nonbuilding projects, but they diverge as to nonresidential building starts. Differences in coverage and, perhaps, classification of certain projects may account for the differing magnitude and even direction of the monthly reports. But the underlying question is whether construction has finally hit bottom. Sadly, that seems very unlikely. Contractors around the country continue to report shrinking order books and fierce bidding for public projects. While a large share of stimulus money for highway projects has been obligated, and an increasing percentage is turning into actual work on the ground, very few contractors report winning other stimulus jobs. The employment figures bear this out. Nonresidential construction employment fell just as fast in October as in the past several months. Only one state-North Dakota-added construction jobs in the past 12 months. Expect nonresidential construction to fall back through most of 2010. Even the return of Daylight Savings Time next March will not help the industry spring ahead.