Each quarter, the Atlanta Fed conducts a poll of Southeast business contacts engaged in commercial construction in an effort to keep a close eye on construction activity. The latest results revealed that the positive momentum noted in the previous quarter was sustained through the first quarter of 2014.
The majority of commercial construction business contacts indicated that the pace of nonresidential construction activity (measured by square feet) and the pace of multifamily construction (measured by number of units) had increased from year-earlier levels (see the charts).
Associated Builders and Contractors Inc., a national construction industry trade organization, conducts a survey of its own called the Construction Backlog Indicator, or CBI. The survey measures the amount of work that will be performed by commercial and industrial contractors in the months ahead. While CBI data are only available through the fourth quarter of 2013, it seems to be telling a similar story to the one our contacts are telling: that the pipeline of construction activity is building up.
The number of respondents reporting that the amount of available credit met or exceeded demand increased from earlier reports (see the chart). Sixty percent of contacts in the first quarter of 2014 indicated that credit was sufficient to meet demand, compared with 58 percent the previous quarter and only 31 percent one year earlier.
Most contacts indicated that they plan to increase hiring during the next quarter (see the chart). Seventy-nine percent of contacts in the first quarter of 2014 reported that they were planning to undertake modest to significant hiring, compared with 58 percent the previous quarter and 64 percent one year earlier.
Compared with one year earlier, more contacts (nearly three out of four) indicated that they were having a difficult time filling positions (see the chart).
This result is also consistent with reports from national trade organizations. In an April 4 press release, the Associated General Contractors of America warned that “the pool of available workers is declining rapidly, raising the prospects for significant labor shortages if demand continues to expand.”
Summarizing the information
The key first quarter 2014 findings show that commercial construction activity was increasing, the level of backlog was growing, that the amount of available credit met or exceeded demand, and that firms plan to hire additional employees during the next quarter. While it was a fairly positive report on the whole, the one finding that could prove problematic was that contacts were having a difficult time filling positions.
Note: First quarter 2014 poll results were collected April 7–16, 2014, and are based on responses from 20 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast. If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.
By Jessica Dill, senior economic research analyst in the Atlanta Fed's research department