2017 Economic Outlook

Construction appears to be on the rise

There seems to be a growing air of optimism in the construction sector. A joint press release from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development showed increases in Building Permits, Housing Starts, and Housing Completions over the previous year. Privately-owned housing starts in October 2016 were 23.3% above October 2015, and came in 25.5% above the revised September estimate for the month. In the same report, the Midwest region showed 15.9% year-over-year growth for permits issued for privately-owned housing units; it also showed 24.4% year-over-year growth in housing starts. Industry analysts also see gains in construction as a whole, including residential, commercial, institutional, manufacturing plants, and public works. Dodge Data & Analytics forecasts a 5% rise in 2017 for total U.S. construction starts in their 2017 Dodge Construction Outlook. That is on the back of gains of 11% in 2015 and 1% in 2016.
The rise in projects is also supported by improving employment numbers from the construction sector. A report released at the end of October by Associated Builders and Contractors showed a year-over-year improvement in construction unemployment rates in 32 states. Similarly the Bureau of Labor and Statistics showed the not seasonally adjusted (NSA) construction unemployment rate 0.3% lower than the previous year at 5.2%, its lowest point since 2000 when it was at 4.6%. In the States that Freeman serves in the Midwest and South regions of the country the numbers are less impressive. For Oklahoma, Kansas, and Nebraska the year-over-year unemployment is unchanged. Louisiana and Missouri showed a small decline and Arkansas showed a small increase in unemployment rate. The regional difference is likely linked to the slowing of the oil and gas industry.
A little over two years ago, we saw the start of the downturn of the oil industry which some experts are now saying could be coming to an end as rig counts and employment begin to show gains. The U.S. rig count at the beginning of October 2016 stood at around 524 according to Baker Hughes. This compares favorably to the 400 or so rigs active in May 2015.
In conclusion it appears the recovery is real and the indicators point to a continuation of the trend. For the oil producing states the recovery will of course be linked to the oil and gas industry which has yet to fully stabilize but also shows signs of a tentative recovery.

U.S. Census Bureau News. “Joint Release U.S. Department of Housing and Urban Development,” November 17, 2016. CB16-185
Associated Builders and Contractors, Inc.. “State-by-State Construction Economics,” October 31, 2016
Dodge Data & Analytics. “Dodge Momentum Index Moves Higher in October,” November 7, 2016
Zurita, S. “Texas Economist Sees Oil Industry Leveling Out,” Synergen Consulting, October 12, 2016

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