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You can view a helpful table of key materials done by the AGC here.

Let’s start with the bad news. The number of people filing for first-time unemployment compensation continues to be high. Even as many other metrics of the economy are turning higher quickly (see below), unemployment claims remain stubbornly high. Last week’s total was down substantially from the week before, to 720,000, but the number of those on unemployment and extended unemployment stayed above one million for the week.

Now for the better news. Friday’s Employment Situation Summary (i.e. the monthly jobs report) was a big surprise to the upside. Here’s an excerpt from the National Outlook column from the upcoming March/April BreakingGround:

Employers added 379,000 jobs in February, boosted by a gain of 355,000 jobs in leisure and hospitality hiring and the decline in infections. That bodes well for a strong recovery mid-year if recent loosening of mitigation measures does not trigger another surge in infections in spring. Among the nuggets of information below the headline: the number of people working from home due to the virus outbreak declined by 0.6 points; labor force participation remained weak at 61.4 percent; and the number of people reported not working because their employer closed due to the pandemic fell by 1.5 million to 13.3 million.

Economic news is better because the outlook for the pandemic is better. More than 2 million new vaccines were administered on 3 different days last week, bringing the 7-day rolling average to just below 2 million per day. That pace is advancing even as the manufacturing of vaccines is still in the ramp up stage. The other big driver of optimism is the passage of the $1.9 trillion American Relief Act, which passed Congress today and will be signed shortly by Pres. Biden. The bill includes $1,400 direct payments to people making less than $80,000 per year (or $160,000 as a couple), funds more COVID vaccine distribution, and provides a $3,600 child credit for 2021. Economists watching the progress have significantly upped forecasts for growth this year, with some (like Goldman Sachs) predicting GDP growth of 6%. Those more upbeat forecasts rest primarily on the fact that the U.S. consumer’s life is going to get much better if the current arc of things continues. With 70% of GDP coming from consumer spending, the charts below demonstrate why the bolder predictions seem plausible. Personal savings are up. Wealth was conserved (and mostly increased) during the pandemic. And those with the greatest need for assistance are about to get it. There are long-term risks associated with the amount of government borrowing and spending that has been required to support the economy for the past year. If, as many predict, Americans respond to returning to something like normal later this year, inflationary pressures could arise and put pressure on the economy in 2022. For now, those concerns are on the back burner.

Pittsburgh’s construction economy had begun feeling this optimistic outlook a bit before last week, but last week was a good one for the market too. Ahead of reviewing its Institutional Master Plan with the Pittsburgh Planning Commission, the University of Pittsburgh moved several of its $100 million projects off the back burner. Two of the major projects on the upper campus, which Pitt is calling Victory Heights, will begin moving forward again. The Chilled Water Plant, which will be built by Turner/Mosites, will get a guaranteed maximum pricing round within the month and is scheduled to start construction in September. The Human Performance Center, for which Massaro/Gilbane is the CM, will be designed over the next year or so, with construction in fall 2022. Construction is expected to start in October 2021 on the Hillside Student Housing and Garage, which Mascaro Construction will build. Mascaro is also CM for the Student Recreation and Wellness Center that should begin in spring 2022.

In other college project news, Mosites Constrution took bids on the $45 million Forbes Beeler dormitory at CMU. Duquesne University short-listed Rycon Construction and PJ Dick as CM finalists for the $50 million College of Osteopathic Medicine. Turner Construction was awarded the $8 million Google third floor renovation at Bakery Square. Shannon Construction was selected for the $3.8 million TI for Intervala at RIDC Westmoreland. F. J. Busse Co. will build out the new $1.5 million Huntington National Bank branch in the Strip District. Landau Building Co. was awarded the new Bank of America branch in Bridgeville. AIMS Construction was selectedfor the $1.2 million Africana Studies renovation at Pitt. Wyatt Inc. announced that it will build a new 120,000 square foot millwork manufacturing facility in South Huntingdon Township, Westmoreland Co. Whiting-Turner started construction on the 120,000 square foot buildout of the Goodblend cannabis facility at the Northside Commerce Center. Whiting-Turner also took bids on a $100 million buildout for Krystal Labs in Moon Township. Massaro Corp. was selected as CM for the $50 million Fifth & Dinwiddie West development in the Hill District. Rocky Bleier Construction Group started work on the $5-8 million Richard G. Laube Cancer Center expansion at Armstrong County Memorial Hospital.

In the public sector the airport’s Terminal Modernization Program got a kick start with the release of an $85 million steel and concrete decks package, due April 14. The Port Authority also released a $17 million Light Rail Transit Station renovation program, due April 1.

Let ‘s start this optimistic post off with a dash of bad news. Even as vaccines begin to be administered worldwide, the surging rate of infections and hospitalizations are dampening the economic recovery from COVID-19. Last month, retail spending fell 1.1% from October, which was down 0.1% from September. The Commerce Department report from December 16 showed weakening across most retail categories. This morning, initial claims for unemployment jumped much higher to 885,000, marking the second week in a row above 850,000 claims and the fourth week in six with an increase from the previous week. Vaccines will help bring down the terrible human toll over the next few months. It’s going to take government intervention to reduce the economic toll until the vaccines do their job. The pandemic aid legislation being negotiated in Congress now is critical to extending the bridge to the end of the pandemic.

The fact that the end of the pandemic seems to be in sight is helping owners make decisions to proceed with construction projects. Bidding is still very light, although that could be a function of the holiday season as much as the economic outlook. Permits for new construction have picked up and contracts are being awarded for projects that had been on hold. Some, like Millcraft’s $60 million new hotel at the Rivers Casino, are projects that were about to start. Others, like the airport Terminal Modernization Program, were still in the design stage. Massaro Corp. is expecting to re-start construction on the casino hotel by the end of the first quarter. Preparation for the airport project should resume and the next major structural bid packages should go out to bid mid-2021. You can read about the agreement with airlines to fund 2021 operations at Blue Sky News.

Commercial real estate is seeing the most thawing. That may be a surprise, given that hospitality and office properties have been greatly impacted by the pandemic and vacancy rates are rising nationally (see below); however, the local developers are bullish on Pittsburgh’s post-COVID economy and are investing through the downturn. In addition to its joint development with RDC on the Vision on 15th, Burns Scalo Real Estate has authorized NEXT Architecture to design a 150,000 square foot first building in the Diamond Ridge development in the Parkway West Corridor. Elmhurst Group’s purchase of land for the Elmhurst Technology Center was approved by the URA. Continental Building Co. will build the 175,000 square foot tech flex center. Planning commission approved a new design for the $200 million 1501 Penn Avenue office building, to be built by PJ Dick/Dick Building Co. joint venture. That project still needs an anchor tenant before construction proceeds.

The industrial market has already thawed. Take a preview peak at the Regional Update from the upcoming BreakingGround for January/February.:

“It’s not a surprise that industrial development is continuing to add new product. After the addition of roughly one million square feet of distribution space during the past two years, occupancy remains nearly full for Class A warehouse. Amazon is the poster child for the boom in distribution and fulfillment centers. The ecommerce giant recently signed a lease for 300,000 square feet at the former Sears Outlet in Lawrenceville and is reported to be the user for the 850,000 square foot center being planned by Hillwood Properties at the former Westinghouse Research Center in Churchill, and a 278,000 square foot distribution center proposed by Suncap Development in Findlay Township. Additional large distribution centers are in the pipeline throughout the region for other users as well. Since the fall the 400,000 square foot Clinton Commerce Center Building 5 been started, along with the first 150,000 square foot building at Hempfield Commerce Center. Suncap also purchased land to develop a 250,000 square foot distribution center, likely a build-to-suit, at the Victory Road Business Center in Butler County. Other large users of warehouse space are in the market but have not announced site selections as the year ended.”

Even at the smaller end of the spectrum, industrial activity is up. W. K. Thomas & Associates purchased land in the Victory Road Business Park to build a 25,000 square foot warehouse. W. K. Thomas is also building a 225,000 square foot expansion of the Altmire Trucking facility in Eau Claire, PA.

In other construction news, Amazon’s lease at the Sears Outlet unfortunately cancelled the planned $25 million conversion that Rycon Construction was scheduled to do. Rycon was awarded the $8 million Light of Life Mission expansion and renovation. Turner Construction was awarded the $3.2 million UPMC Passavant Cranberry lobby renovation and a $2.5 million fitout for Curology. Allegheny Health Network selected A. Martini & Co as CM for the $1.2 million Urgent Care Center at Suburban General Hospital. Landau Building Co. was selected as as CM for the $1.8 million AGH Emergency Dept. CT Scanner. Volpatt Construction was awarded the $1.25 million AGH hybrid operating room.

There is no question that the state of the economy is a mixed bag as 2020 winds down. This week will see the release of a number of key economic metrics, including the monthly jobs report on Friday morning. Thursday morning, the data on unemployment claims has good news, relatively speaking. During the week of Nov. 28, there were 712,000 new claims for unemployment insurance. That’s terribly high compared to anything like normal but it’s a 75,000 claim decline from the previous week, and a reversal of the recent trend of accelerating claims. There were 350,000 fewer persons receiving any form of unemployment insurance, another positive step. For perspective, however, it’s worth noting that the 20.16 million people on unemployment last week compares to 1.5 million one year earlier. Clearly lots of ground to make up.

The Institute for Supply Management (ISM) released two important purchasing manager indexes (PMI) this week. The November PMI fell slightly to 58 for manufacturing companies but remained well above the slow growth line. New orders index jumped to 65.1%, a very good forward-looking sign. The ISM Non-Manufacturing Services Index was also solid at 55.9%, down slightly from October but above 50 for the sixth consecutive month. Wednesday’s ADP Payrolls report was not as cheery. Private non-farm employers added 307,000 jobs in November. That’s a continuation of the slowdown in hiring since late summer. Economists expected a slightly higher figure but the data fits in with the overall trend that appears will be unchanged until evidence that the vaccine rollout is loosening up activity.

One other area of concern with respect to new hiring is the Federal Reserve Bank’s most recent Beige Book responses from employers regarding hiring. Businesses were overwhelmingly reporting improved conditions but a far smaller share were expecting to hire back to pre-pandemic levels once the COVID-19 threat recedes. The most common reply was that businesses have learned to do more with fewer people. Should that sentiment prevail once activity accelerates, the recovery will be slower.

Regional construction activity has picked up, although much of the progress is in anticipation of the pandemic receding in the spring, which means that construction is not likely to return to higher levels until the second quarter. ALCOSAN released its $110 million East Head Works project for bid, due Feb. 17. Permits were issued to Sota Construction for the $5 million Hazelwood Brewing Building renovation and to Mosites Construction for the $2.5 million Brashear Community Center renovation. Oxide Development/Schiff Capital presented its 114-unit, $20 million 32nd & Penn Apartments to the Pittsburgh Planning Commission. Rycon Construction is the CM. The planning commission also reviewed plans for the $2-3 million conversion of the Triangle Building into residential, which Franjo Construction will build. A. Martini & Co. was selected for the $6 million next phase of the Hunter Building restoration in Wilkinsburg. E. E. Austin was the successful bidder on PSU Behrend’s $5.5 million Federal House addition in Erie. Penn State also selected ZGF Architects for its $146 million new Physics Building and Osmond Building Renovation. Mele & Mele & Sons announced it was building a new 38,000 square foot headquarters and shop at the RIDC Duquesne site. ATI announced $85 million in cpaital improvements to its Vandergrift stainless mill.

If you’ve watched enough college football over the past five years or so, you have noticed a number of teams gathering at the end of the third quarter and holding four fingers up as they prepare to start the fourth quarter. It’s a rallying cry to finish the game strong, a recognition that how the team finishes the fourth quarter matters. That visual works for the U.S. economy right now. Congress should be holding up four fingers, especially as it appears likely that a couple of vaccines could begin rolling out by the end of 2020. The literal end of 2020, December 31 is looming as an economic cliff that could set recovery back even as the COVID-19 virus is contained. In most years, the period from now until New Years Day is particularly unproductive for Congress. In lame duck years, that’s more so; and in lame duck presidential years (like 2020), the tendency is for next to nothing to happen. With Republicans trying to use the lame duck to ram through last-minute appointments, the attention of Congress should be diverted long enough to address the looming expiration of key safety net measures. If a vaccine to end the pandemic is truly looming for 2021, the nascent economic recovery should be given as much fuel to grow as possible.

The economic recovery has been judged to be durable because of the relatively strong rebound during the third quarter and the (apparently) short runway to a viable vaccine to end the pandemic. The timing of this assessment is particularly worrisome, however, as we are entering a period of heightened risk, even as the delivery of a vaccine seems likely to be sooner than expected. Setting aside the unknown impact of the surge in COVID-19 infections as winter looms, there are known risks that could sabotage the economy just ahead of a recovery. More than 12 million unemployed persons will lose compensation on December 31 without an extension or passage of further assistance. On that date the moratoria on foreclosures, student loan payments, and evictions expire. Household savings will have been tapped for an additional three months since the rosy third quarter estimates.

Most of the aid or stimulus programs passed in 2020 were meant to be bridges to the vaccine. When the CARES Act was passed, there was no realistic estimate of how long that bridge needed to be. That fact made it difficult to gain agreement on subsequent aid legislation. As the holidays approach we have a pretty clear idea of the length of the bridge. Failing to extend the safety net for tens of millions may not prove to damage the recovery but, with the duration of another round of aid being 90 days or so, providing that safety net assures that there will be demand for a recovery that will be sorely needed. We don’t need another extended weak recovery a la 2010-2015.

JLL’s chief economist, Ryan Severino, discusses the case for more stimulus in his weely email  today. Former U.S. Treasury Dept. economist Ernie Tedeschi talks a lot on the subject on Twitter @ernietedeschi. The upshot of the current situation is that the spike in COVID-19 hospitalizations and deaths is driving economic activity lower just ahead of a time when the unemployed are going to become vulnerable (along with a lot of low wage earners in the hositality industry). Personal savings has soared since the pandemic started. The current savings rate remains at 14% (It was 1% ahead of the Great Recession by comparison). There is $6.5 trillion in money market accounts looking for a place to deploy. That capital will fuel the supply. The demand will come from consumers, who provide 70% of GDP. They, and the economy, are vulnerable as the year ends. The chart below shows just how much people have altered their behavior and spending as the COVID-19 cases spike again. Extending the safety net another 90 days could make a world of difference to an economy in the midst of a vaccine rollout on April 1.

One sector of the Pittsburgh construction market that has been surprisingly disrupted by the pandemic is multi-family. The economic disruptions caused by COVID-19 were expected to cause some pain for apartment owners but the case for apartment development should not have been dented. If anything, the economic case for renting instead of owning grows during recessions. It doesn’t appear that it has been the economic justification that has slowed multi-family construction, but rather the execution of plans to build. There is still a pipeline of several thousand units in development but roughly 1,200 to 1,500 units that were scheduled to start in 2020 aren’t going to get underway until next year. When Al. Neyer Construction starts site work on the 150-unit 5803 Centre Apartments in December, the project will bring the total for 2020 to about 950 units of new construction, about half what was forecasted. The good news is that the business case for the 1,200 or so units that were delayed has not eroded. Apartment construction in 2021 should return to the 2,000-plus unit pace again.

Neyer is currently taking bids on the 5803 Centre project. Elford Construction has been taking bids on the 370-unit Brewer’s Block Apartments in Bloomfield. Elford is bidding to partner with RDC Design + Build on that project. Massaro Corporation was selected as CM for Conemaugh Hospital’s $50 million Building D project.