The Great Recession was tough. Really tough. Some producers, large and small, did not make it through, and others were crippled for years as the lack of free cash flows stifled expansion, or even just the capital expenditures needed for maintenance and replacements. But my, how that has changed.
In the last couple of weeks, there has been a raft of positive data, so I’m departing from my usual narrative to share economic news and data that all point to an economy that is gaining steam:
Inflation-adjusted gross domestic product, the value of all goods and services produced. net of imports, increased 3.0% at a seasonally adjusted annual rate in the third quarter 2017, following a 3.1% rise in the second quarter. This reflects a huge increase over the less-than-2% growth of just last year.
Personal consumption expenditures rose 1% in September. The strong gains were mainly due to higher spending on new vehicles and household utilities. While new car sales take a breather, annual output is still at an all-time high at more than 17 million units.
Personal income climbed 0.4% in September, largely driven by strong gains in wages and salaries. Disposable personal income is 1.3% higher than a year ago.
Most states and the District of Columbia had year-over-year increases in nonfarm payroll employment in September. Only Wyoming and Kansas declined, falling by 3,100 and 5,100 respectively. During the previous 12 months, the largest job gains occurred in California, which added 280,300 jobs; Texas, (256,100); and New York (93,100). This is a blistering pace of job growth in America’s hottest job markets.
In September, forty-two states had jobless rate decreases, seven states and the District of Columbia had an increase, while New York had no change. Yhis is against a backdrop of huge layoffs in Texas and Florida when major hurricane damage crippled employment in those states.
The Bureau of Labor Statistics recently updated its 10-year projections of output, labor force and employment growth, covering 2016-26. Real GDP is projected to grow 2.0% annually over the decade, about 1.5 times the rate of 2006-16, when GDP grew 1.4% annually. Construction output should grow 2.7% annually, offsetting the 1.3% annual decline that occurred during 2006-16.
Construction employment should increase substantially, adding 864,700 jobs or 1.2% per year during the decade. This increase almost makes up for the 980,200 jobs, or -1.4% per year, that were lost during 2006-16. Occupational groups in which employment is projected to grow markedly faster than the average for all occupations, at 7.4%, include construction and extraction occupations, where growth is projected at 11.1%.
Construction managers should have the most new jobs. Several other construction occupations are among the jobs requiring a high school diploma that are projected to have the most new jobs: carpenters at 87,000; first-line supervisors of construction and extraction workers at 76,300; and plumbers, pipefitters and steamfitters at 75,800.
Reports from all 12 Federal Reserve districts indicated that economic activity increased in September through early October, with the pace of growth split between “modest and moderate.”
The value of new construction starts in September soared 14% from the previous month to a seasonally adjusted annual rate of $814.8 billion, according to Dodge Data & Analytics. The nonresidential building sector in September was at a $368.8 billion annual rate, a blistering 37% gain compared to August. The Dodge Index of New Construction Starts jumped to 172 (the year 2000 equals 100), up from 151 in August, and the highest level so far in 2017.
Our industry seems to be coming off of a robust construction season these past several months. While our firm is projecting that 355 million cubic yards of ready mix will be produced in 2017, we are still more than 100 million yards below our 2005-06 peak. If all of the news above continues, it points to an exceptionally strong econom. Then watch volumes grow toward a full recovery to the pre-recession highs.
I know I speak for most of us when I say, “I can’t wait!”