Nonfarm payroll employment fell by 216,000 and the unemployment rate climbed to 9.7% in August, seasonally adjusted (9.6%, not seasonally adjusted), the Bureau of Labor Statistics (BLS) reported on Friday. The job drop overall was the smallest in a year, but construction employment fell 65,000, close to the average for the past three months. That decline accounted for 30% of the overall job loss, even though construction is only 5% of total payroll employment. Over the past year, construction shed 1,084,000 jobs (15% of its August 2008 total), nearly one-fifth of all jobs lost. For the fourth straight month, the 1.1% decline in nonresidential employment (nonresidential building, specialty trade contractors and heavy and civil engineering construction) exceeded the 0.9% drop in residential employment (residential building and specialty trades). The unemployment rate for construction workers was 16.5%, double the 8.2% rate of a year earlier and higher than any other industry. (Industry unemployment rates are not seasonally adjusted.) Architectural and engineering services employment, a harbinger of demand for nonresidential construction, dropped by 5,000, seasonally adjusted, half the monthly average over the past 12 months. Average hourly earnings in construction rose 3 cents to $22.66 in August, seasonally adjusted, a 12-month gain of 2.9%, compared to 2.6% for all private production or nonsupervisory employees.
“Employers expect a slight decrease in the rate of hiring when compared to Quarter 3 2009,” Manpower Inc. reported today in summarizing a quarterly survey of 28,000 employers. “The fourth quarter net employment outlook for the U.S. is considerably weaker than one year ago at this time.” Overall, 14% of employers expect to decrease total employment in the fourth quarter, vs. 12% who expect an increase, for a net employment outlook of -2%. The net reading was +2% in the third quarter and 9% in the fourth quarter of 2008. Employers in construction had the most negative outlook of 13 sectors, with 20% expecting to decrease total employment and only 10% expecting to increase total employment in the fourth quarter. In the third quarter, the industry had a slightly positive (+2%) net employment outlook. Regionally, the net outlook for construction ranged from -8% in the Northeast and South to -11% in the Midwest to -15% in the West.
“Even as the economy may be starting to recover, banks across the country are confronting a worsening outlook for their construction loans, an area that boomed for much of the decade,” the New York Times reported on Friday. “Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble…It is in commercial real estate construction—be it stores or office buildings—that the pain seems likely to rise. At the end of June, $291 billion in such loans was outstanding, down only a few billion from the peak reached earlier this year. ‘On the commercial side,’ said Matthew Anderson, a partner in Foresight Analytics, a research firm based in Oakland, California, ‘I think we are fairly early in the down cycle.’ Foresight estimates that 10.4% of commercial construction loans are troubled, but expects that to increase as the year goes on….Foresight estimates the biggest problems are in loans for condominium construction, with 38% of all construction loans troubled. Mr. Anderson says even that might be an understatement….Foresight’s estimates of the proportion of problem construction loans in the 20 largest metropolitan areas has one surprise: the one with the largest proportion of troubled loans is Seattle, where the recession has started to pinch. But it is also notable that just one of the 20 areas has less than 10% of construction loans in trouble. A year earlier, most of them were below that level.”
A related problem is the soaring delinquency rate on commercial mortgage-backed securities, which rose to 3.14% in July, “more than six times its level a year earlier,” the Wall Street Journal reported on August 31, citing credit-rating firm Realpoint LLC. “Mounting foreclosures in the CMBS sector would likely depress values even further as property is dumped on the market….The commercial-real-estate market could yet be salvaged by an improving economy and bailout programs coming out of Washington. [But] it is unlikely commercial real estate will benfit much from an early stage of an economic recovery. What landlords need is occupancy and rents to rise, and that means employers have to start hiring consumers need to shop more. So far, there are few signs this is happening.”
“Uncertainty about future oil prices has put a freeze on many new energy-related construction projects” worldwide, the Journal reported today. “But deals that have managed to go forward are incurring dramatically lower costs, thanks to decreased demand for construction and engineering contractors, as well as such materials as cement bags and gas-carrying pipes….The Organization of Petroleum Exporting Countries…says member countries have put 35 exploration and production projects on the back burner and cut investment plans by $50 billion over the next five years….Meanwhile, the consulting firm IHS CERA figures that the costs to build new oil and gas facilities in general fell 8.5% over the first six months of 2009….Though squeezed by their clients, the contractors themselves can also take advantage of falling prices for raw materials and construction subcontracts, which together account for more than a quarter of the budget of an oil-and-gas infrastructure project….The cost-saving opportunity opened for some projects by the recession may not stay open for long, however….According to a July report by credit research agency Moody’s, European steel prices—a key component of pipe-intensive projects”—have rebounded 25%, following a 60% drop earlier.
what does it all mean? it means that commercial construction is a long way from rebounding back to anything approaching 'normal' levels. it also means material prices might be creeping back up again. both of which are decidedly not a good trend for us architects...
Are we in something similar like the Japans "lost decade"??? I believe it will take at least 10 years to get to the level of 3-4 years ago when I though the market was very good for our industry. Or it can just stay like this, and this would be the new 'normal'.
While it is useful to focus on the state of the financial markets, IMHO the financial markets can be a distraction for us.
I think it's more important for architects to focus on the demand for new facilities. If there's one thing I've learned over the years, if developers have a legitimate customer for their product or if corporations have a legitimate profit-based need for a new facility, they'll find a way to get it financed.
good projects will always make sense...and by good, i mean those that offer a financial return.
as odd as it sounds right now, one of the biggest problems facing the wealthy is that they are running out of places to put their money & things to invest in. interest rates are abysmal, stocks are volatile and even swiss bank accounts are now being raided by us gov. although real estate (in the general sense) is down, unlike other markets it is not completely commodified...that is, exceptions can be found/created (think of the old adage, location, location, location)
jk, i came into grad school knowing what crappy pay architects make and what crappy job circumstances were out there. It's frustrating, sure but just like 90/91' things can blow over and good times will be back around.
Take a look around you and think about all the building and all the development/re-development that needs to happen. Architecture is needed and will be even more in need down the stretch.
I would not recommend a career in architecture to anyone. This is going to be a very long and dark recovery. If you like or can do any other kind of work then you should do that.
This is the fourth recession that I have been through while working in the architectural profession. I would say that the recession of the 90's and early 00's were cake walks compared to this one. This recession, real estate market and job market feels much more like the recession of the 80's. I know from past recessions that the job market lags the technical end of the recession, which is where we may be now.
No one can predict the future, but we can look to the past to see how the ebbs and flows of economy/job market have played out. Things feel better now than they did 6 months ago and I have confidence that things will feel even better in another 6 months. While the job market is not functioning normally, it has improved ever so slightly in the number and quality of jobs available.
This is the only time that I have ever been unemployed. Part of me can't wait to get back to work and part of me dreads going back to work because of the stress of working in our profession.
I don't think that buildings will be utilized beyond obsolescence. I think that once things pick up a bit we will experience a phase of building remodels, additions and energy efficient retrofits that will extend the life cycle of buildings. After things get back to normal, we will then experience tear downs for new structures. I don't think that real estate will appreciate to the ridiculous prices of a few years ago for quite a long time.
We go through these economic cycles about every ten years or so. We will recover and rebuild and then start the cycle all over again.
and the only work i can get is a rest. TI by a Chinese national under the table that i don't even get payed for yet doing all the disciplines that i am not used to as well as all the city comment pickups
<<I don't think that buildings will be utilized beyond obsolescence. I think that once things pick up a bit we will experience a phase of building remodels, additions and energy efficient retrofits that will extend the life cycle of buildings. After things get back to normal, we will then experience tear downs for new structures. I don't think that real estate will appreciate to the ridiculous prices of a few years ago for quite a long time.
We go through these economic cycles about every ten years or so. We will recover and rebuild and then start the cycle all over again.>>
I agree. depending on location, building stock, and building redundancy, we may be talking about 10 to 20 years for buildings to deteriorate enough to be obsolescent and be torn down / redeveloped.
Regardless what the demand for "new" buildings may be I think the business of rehabbing old structures for energy efficiency will be a big business in our future.
If things like the Cap and Trade bill get passed energy is going to be much more expensive. I think in the future building owners in N. America will act much more like their European counterparts and pay very close attention to the cost of running a building.
There are millions of commerical/industrial buildings out there that were built to maximize square footage while little was done to limit operating costs. If owners choose not to build new they're will have to do something to limit their costs on the existing building stock.
Since this downturn hit I've done several "down and dirty" jobs where clients were switching out mechanicals, doing new lighting systems, etc. Not glamorous but it's work and at the end of the day it does fit well with the LEED AP title I'm proud to have.
With a score of 41.7, the AIA’s Architecture Billings Index (ABI) for August was little changed from July. Business conditions at architecture firms remain weak, with the share of firms reporting declining billings still higher than the share of firms that saw billings increase in August. Since the ABI rebounded from all-time low scores earlier this year to scores regularly in the low 40s, it has stalled and not moved any higher.
Conditions at firms are better now than they were last winter, but a recovery is not yet imminent. Inquiries, on the other hand, remain relatively strong, with a score over 50 in August for the sixth month in a row. However, architecture firms continue to report that clients are shopping projects around, meaning that firms are seeing many inquiries but few are translating into actual billable work.
Scores rose in all regions of the country in August with the exception of the West. The other three regions are reporting some of the highest scores in a year, reflecting a degree of emerging optimism. On the other hand, it looks to be a tougher recovery for firms located in the West. The West was the first region to report scores below 50 when the recession began, and conditions continue to weaken there even as other regions begin to improve. Any score below 50 indicates a downturn from the previous month.
Firms with a commercial/industrial specialization have been reporting increasingly higher scores since mid-spring, as have firms with a residential specialization. Fewer firms in both sectors report declining billings now than last winter, when their all-time lowest scores were recorded. Business conditions remain weakest at firms with an institutional specialization, with little recovery anticipated in the near future.
lovely. the good new lining for me is that the commercial sector is picking up a little again. that will be essential if we want to see a broader recovery within the profession.
The only building owner's who don't pay attention to how much it costs to run a building are those who have no skin in the game. Besides, any owner worth a lick will not be paying for any energy expenses. The tenants typically pay for those and their costs are a direct reflection on the price of their goods which you and I end up paying for in the end. So you can get rid of your fantasies that the building owner will pick up the tab for something as stupid as cap and tax.
i'm not sure i'd say anything 'for the record', but the stalled things are starting to go around here, more calls are coming in than were before, and more of it is private work. (public work didn't really go away as much.)
not that everything is coming up roses and i don't claim to know that things aren't going to tank further. the only thing i'm sure about is that none of us know anything about what's going to happen over the next year. wild ass guesses.
might as well be an optimist. the more of us that take that role, the more we push the public opinion numbers to the positive. :)
Sep 28, 09 7:25 pm ·
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straight from the horse's mouth
ken simonsen's latest report for the agc:
Nonfarm payroll employment fell by 216,000 and the unemployment rate climbed to 9.7% in August, seasonally adjusted (9.6%, not seasonally adjusted), the Bureau of Labor Statistics (BLS) reported on Friday. The job drop overall was the smallest in a year, but construction employment fell 65,000, close to the average for the past three months. That decline accounted for 30% of the overall job loss, even though construction is only 5% of total payroll employment. Over the past year, construction shed 1,084,000 jobs (15% of its August 2008 total), nearly one-fifth of all jobs lost. For the fourth straight month, the 1.1% decline in nonresidential employment (nonresidential building, specialty trade contractors and heavy and civil engineering construction) exceeded the 0.9% drop in residential employment (residential building and specialty trades). The unemployment rate for construction workers was 16.5%, double the 8.2% rate of a year earlier and higher than any other industry. (Industry unemployment rates are not seasonally adjusted.) Architectural and engineering services employment, a harbinger of demand for nonresidential construction, dropped by 5,000, seasonally adjusted, half the monthly average over the past 12 months. Average hourly earnings in construction rose 3 cents to $22.66 in August, seasonally adjusted, a 12-month gain of 2.9%, compared to 2.6% for all private production or nonsupervisory employees.
“Employers expect a slight decrease in the rate of hiring when compared to Quarter 3 2009,” Manpower Inc. reported today in summarizing a quarterly survey of 28,000 employers. “The fourth quarter net employment outlook for the U.S. is considerably weaker than one year ago at this time.” Overall, 14% of employers expect to decrease total employment in the fourth quarter, vs. 12% who expect an increase, for a net employment outlook of -2%. The net reading was +2% in the third quarter and 9% in the fourth quarter of 2008. Employers in construction had the most negative outlook of 13 sectors, with 20% expecting to decrease total employment and only 10% expecting to increase total employment in the fourth quarter. In the third quarter, the industry had a slightly positive (+2%) net employment outlook. Regionally, the net outlook for construction ranged from -8% in the Northeast and South to -11% in the Midwest to -15% in the West.
“Even as the economy may be starting to recover, banks across the country are confronting a worsening outlook for their construction loans, an area that boomed for much of the decade,” the New York Times reported on Friday. “Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble…It is in commercial real estate construction—be it stores or office buildings—that the pain seems likely to rise. At the end of June, $291 billion in such loans was outstanding, down only a few billion from the peak reached earlier this year. ‘On the commercial side,’ said Matthew Anderson, a partner in Foresight Analytics, a research firm based in Oakland, California, ‘I think we are fairly early in the down cycle.’ Foresight estimates that 10.4% of commercial construction loans are troubled, but expects that to increase as the year goes on….Foresight estimates the biggest problems are in loans for condominium construction, with 38% of all construction loans troubled. Mr. Anderson says even that might be an understatement….Foresight’s estimates of the proportion of problem construction loans in the 20 largest metropolitan areas has one surprise: the one with the largest proportion of troubled loans is Seattle, where the recession has started to pinch. But it is also notable that just one of the 20 areas has less than 10% of construction loans in trouble. A year earlier, most of them were below that level.”
A related problem is the soaring delinquency rate on commercial mortgage-backed securities, which rose to 3.14% in July, “more than six times its level a year earlier,” the Wall Street Journal reported on August 31, citing credit-rating firm Realpoint LLC. “Mounting foreclosures in the CMBS sector would likely depress values even further as property is dumped on the market….The commercial-real-estate market could yet be salvaged by an improving economy and bailout programs coming out of Washington. [But] it is unlikely commercial real estate will benfit much from an early stage of an economic recovery. What landlords need is occupancy and rents to rise, and that means employers have to start hiring consumers need to shop more. So far, there are few signs this is happening.”
“Uncertainty about future oil prices has put a freeze on many new energy-related construction projects” worldwide, the Journal reported today. “But deals that have managed to go forward are incurring dramatically lower costs, thanks to decreased demand for construction and engineering contractors, as well as such materials as cement bags and gas-carrying pipes….The Organization of Petroleum Exporting Countries…says member countries have put 35 exploration and production projects on the back burner and cut investment plans by $50 billion over the next five years….Meanwhile, the consulting firm IHS CERA figures that the costs to build new oil and gas facilities in general fell 8.5% over the first six months of 2009….Though squeezed by their clients, the contractors themselves can also take advantage of falling prices for raw materials and construction subcontracts, which together account for more than a quarter of the budget of an oil-and-gas infrastructure project….The cost-saving opportunity opened for some projects by the recession may not stay open for long, however….According to a July report by credit research agency Moody’s, European steel prices—a key component of pipe-intensive projects”—have rebounded 25%, following a 60% drop earlier.
what does it all mean? it means that commercial construction is a long way from rebounding back to anything approaching 'normal' levels. it also means material prices might be creeping back up again. both of which are decidedly not a good trend for us architects...
Are we in something similar like the Japans "lost decade"??? I believe it will take at least 10 years to get to the level of 3-4 years ago when I though the market was very good for our industry. Or it can just stay like this, and this would be the new 'normal'.
While it is useful to focus on the state of the financial markets, IMHO the financial markets can be a distraction for us.
I think it's more important for architects to focus on the demand for new facilities. If there's one thing I've learned over the years, if developers have a legitimate customer for their product or if corporations have a legitimate profit-based need for a new facility, they'll find a way to get it financed.
good projects will always make sense...and by good, i mean those that offer a financial return.
as odd as it sounds right now, one of the biggest problems facing the wealthy is that they are running out of places to put their money & things to invest in. interest rates are abysmal, stocks are volatile and even swiss bank accounts are now being raided by us gov. although real estate (in the general sense) is down, unlike other markets it is not completely commodified...that is, exceptions can be found/created (think of the old adage, location, location, location)
it's stuff like this that really makes me hesitate about entering grad school for my MArch.
Can someone reassure me? =(
yeah - I've been practicing for 35 years - I'd like some reassurance too !
jk, i came into grad school knowing what crappy pay architects make and what crappy job circumstances were out there. It's frustrating, sure but just like 90/91' things can blow over and good times will be back around.
Take a look around you and think about all the building and all the development/re-development that needs to happen. Architecture is needed and will be even more in need down the stretch.
I would not recommend a career in architecture to anyone. This is going to be a very long and dark recovery. If you like or can do any other kind of work then you should do that.
Thanks for the pick-me-up, nwalker27! -.-
i wonder how many buildings will be used like the space shuttle: used way beyond obsolesce b/c it is too costly to do anything else.
This is the fourth recession that I have been through while working in the architectural profession. I would say that the recession of the 90's and early 00's were cake walks compared to this one. This recession, real estate market and job market feels much more like the recession of the 80's. I know from past recessions that the job market lags the technical end of the recession, which is where we may be now.
No one can predict the future, but we can look to the past to see how the ebbs and flows of economy/job market have played out. Things feel better now than they did 6 months ago and I have confidence that things will feel even better in another 6 months. While the job market is not functioning normally, it has improved ever so slightly in the number and quality of jobs available.
This is the only time that I have ever been unemployed. Part of me can't wait to get back to work and part of me dreads going back to work because of the stress of working in our profession.
I don't think that buildings will be utilized beyond obsolescence. I think that once things pick up a bit we will experience a phase of building remodels, additions and energy efficient retrofits that will extend the life cycle of buildings. After things get back to normal, we will then experience tear downs for new structures. I don't think that real estate will appreciate to the ridiculous prices of a few years ago for quite a long time.
We go through these economic cycles about every ten years or so. We will recover and rebuild and then start the cycle all over again.
and the only work i can get is a rest. TI by a Chinese national under the table that i don't even get payed for yet doing all the disciplines that i am not used to as well as all the city comment pickups
<<I don't think that buildings will be utilized beyond obsolescence. I think that once things pick up a bit we will experience a phase of building remodels, additions and energy efficient retrofits that will extend the life cycle of buildings. After things get back to normal, we will then experience tear downs for new structures. I don't think that real estate will appreciate to the ridiculous prices of a few years ago for quite a long time.
We go through these economic cycles about every ten years or so. We will recover and rebuild and then start the cycle all over again.>>
I agree. depending on location, building stock, and building redundancy, we may be talking about 10 to 20 years for buildings to deteriorate enough to be obsolescent and be torn down / redeveloped.
Regardless what the demand for "new" buildings may be I think the business of rehabbing old structures for energy efficiency will be a big business in our future.
If things like the Cap and Trade bill get passed energy is going to be much more expensive. I think in the future building owners in N. America will act much more like their European counterparts and pay very close attention to the cost of running a building.
There are millions of commerical/industrial buildings out there that were built to maximize square footage while little was done to limit operating costs. If owners choose not to build new they're will have to do something to limit their costs on the existing building stock.
Since this downturn hit I've done several "down and dirty" jobs where clients were switching out mechanicals, doing new lighting systems, etc. Not glamorous but it's work and at the end of the day it does fit well with the LEED AP title I'm proud to have.
more good news from the aia's kermit baker...
With a score of 41.7, the AIA’s Architecture Billings Index (ABI) for August was little changed from July. Business conditions at architecture firms remain weak, with the share of firms reporting declining billings still higher than the share of firms that saw billings increase in August. Since the ABI rebounded from all-time low scores earlier this year to scores regularly in the low 40s, it has stalled and not moved any higher.
Conditions at firms are better now than they were last winter, but a recovery is not yet imminent. Inquiries, on the other hand, remain relatively strong, with a score over 50 in August for the sixth month in a row. However, architecture firms continue to report that clients are shopping projects around, meaning that firms are seeing many inquiries but few are translating into actual billable work.
Scores rose in all regions of the country in August with the exception of the West. The other three regions are reporting some of the highest scores in a year, reflecting a degree of emerging optimism. On the other hand, it looks to be a tougher recovery for firms located in the West. The West was the first region to report scores below 50 when the recession began, and conditions continue to weaken there even as other regions begin to improve. Any score below 50 indicates a downturn from the previous month.
Firms with a commercial/industrial specialization have been reporting increasingly higher scores since mid-spring, as have firms with a residential specialization. Fewer firms in both sectors report declining billings now than last winter, when their all-time lowest scores were recorded. Business conditions remain weakest at firms with an institutional specialization, with little recovery anticipated in the near future.
lovely. the good new lining for me is that the commercial sector is picking up a little again. that will be essential if we want to see a broader recovery within the profession.
The only building owner's who don't pay attention to how much it costs to run a building are those who have no skin in the game. Besides, any owner worth a lick will not be paying for any energy expenses. The tenants typically pay for those and their costs are a direct reflection on the price of their goods which you and I end up paying for in the end. So you can get rid of your fantasies that the building owner will pick up the tab for something as stupid as cap and tax.
For the record, things are going to get worse.
i'm not sure i'd say anything 'for the record', but the stalled things are starting to go around here, more calls are coming in than were before, and more of it is private work. (public work didn't really go away as much.)
not that everything is coming up roses and i don't claim to know that things aren't going to tank further. the only thing i'm sure about is that none of us know anything about what's going to happen over the next year. wild ass guesses.
might as well be an optimist. the more of us that take that role, the more we push the public opinion numbers to the positive. :)
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