Economists breathed a sigh of relief when the Census Bureau reported that U.S. employers added 559,000 jobs in May. That’s more than double the job creation in April and more in line with what expectations would be for a fully recovering economy. The unemployment rate renewed its downward trend, falling to 5.8%.

Forecasts for May job growth were slightly higher – most topped 600,000 – but after April’s surprising shortfall, no economist was making a confident estimate for May. The number reported Friday morning more closely mirrored Thursday’s data on private payrolls from ADP. The payroll processing giant reported 978,000 additions to payrolls in May.

New hiring in May was reported to be lower than the potential for job growth. The JOLTS survey in May showed a record number of new openings. Employers are increasingly citing an inability to attract applicants. Employment recruiters unanimously report that listings are outnumbering job seekers by a wide margin. This input, along with the fact that wages have jumped 1.2% in the past two months, adds weight to Republicans seeking to end the supplemental and extended unemployment benefits, which they say is an incentive to stay unemployed.

The reality is more complicated than politicians care to embrace. No conclusive surveying has been done that can keep up with the dynamic situation of this recovery but there are a number of factors keeping people out of the workforce that have been identified. First among them is lingering concern about health. The pandemic has not ended. Vaccinations have knocked down the candidates for community spread but with at least 40% of the adult population unvaccinated, those with concerns about COVID-19 have reason to worry. Related to that, childcare capacity still lags what is needed. The nation’s largest childcare provider – the public school system – has not returned to normal operations yet. Reports of difficulty finding workers cut across most industries but the most common complaints are for low wage positions. These positions will be the ones that benefit most from the enhanced unemployment benefits. ZipRecruiter reports that more than half of its job seekers want work from home options while only 10% of employers are offering that option. Perhaps the most overlooked factor is that the economic recovery driving new hiring is a few months old. In most states, workers in the prime age cohorts of 25-55 have only been eligible for vaccination since mid-April. For those unemployed by the pandemic, the renewed activity has not been here long enough to overcome the many conflicting factors that are keeping workers – particularly young mothers – from re-entering the job market.

One indicator that this is the case is the online job search market. Indeed.com reported that postings were 27% higher at the end of May than in February 2020. ZipRecruiter notes that its listings have increased much faster than online searches.

None of this should be particularly surprising. The world’s biggest economy ground to a halt in about three days last March. Our economy tanked because about 300 million people didn’t leave home for six weeks. All things considered, this recovery has unfolded much more smoothly than expected. I can’t forecast how quickly job creation will ramp up or at what point in 2022 or 2023 the U.S. economy reaches full employment, but I can confidently predict that we will see disappointing job creation numbers again at some point before September. Looking at all the factors influencing economic recovery, it will be a bumpy ride back to normal in 2021.

The one data point that concerns me is the variance between where job seekers want to work and what employers expect for work-from-home. As vaccination rates climb, the decline in infections and hospitalizations has accelerated even though restrictions on gathering have been removed. That has pushed more employers to accelerate plans for full-time return to the office or workplace. There has been a variance between what employees and their bosses predicted about work-from-home throughout the pandemic. Now that time has shown that employers can make the workplace safe from virus spread and the virus is on the decline, the gap has widened. If you think through how that gap may manifest itself, there could be some problems coming.

Employers that embrace work-from-home may attract more and better workers. That could be a competitive advantage. At the same time, if working from home is less productive than its proponents claim (and there is growing evidence that is the case), companies that attract good talent that works from home may fall behind its competition anyway. What will happen to workers with skills that translate well across industries when some industries can work from home better than others? It seems unlikely that a skilled construction worker would leave the trade to work in an industry that allows work-from-home, but will the office and administrative staff for a construction company change industries to work from home instead of the office? At minimum, I believe we will have to see these scenarios play out over the next couple of years before some sort of consensus on work-from-home is reached. And I’m not one who believes that we will end up with a hybrid solution, at least not one that looks different from the model that existed on Valentine’s Day 2020.

Construction is less likely to deal with as many of these uncertainties, including uncertainties about the economy. The nature of the industry is such that the ups and downs of 2021 will have an impact on 2022’s work. The outcome of 2021 is mostly baked in by June and the solutions to the problems of re-starting the economy in 2021 will be mostly worked out by 2022. Assuming that the U.S. can side step any lasting issues from the disrupted supply chain or inflation, construction will be booming in 2022.

Opportunities to land work are accelerating in Western PA. Bids on the $90 structural steel and concrete foundations package for the Airport Terminal Modernization Program was rejected and will be re-bid. The first bid packages for the $230 million FNB Financial Center in the Lower Hill District will go out to bid next week. Packages will include steel, foundations, concrete, and M/E/P. Braddock Library is taking CM proposals from Burchick, Jendoco, A. Martini & Co., PJ Dick, Massaro, and Sota for its 2-phase $13 million renovation. Diocese of Greensburg selected Volpatt Construction for the $2.5 million renovations to St Mary of Czestochowa Church. A. Martini & Co. was selected for the $1.8 million UPMC Passavant Cranberry Cancer Center renovation. C.H. Schwertner & Son started construction on the new Target store at the Kaufmann’s Grand on Fifth. BRIDGES & Co. is building the new $3 million Dialysis Clinic Inc. facility on Perry Highway in McCandless. Extra Storage Space selected Brackenridge Construction for its $6.5 million, 65,000 square foot expansion in Homewood. Continental Real Estate has shifted its Lot 10 building on the North Shore from office/retail/condo to 110-125 apartments. Thompson Thrift will be building the 336-unit, $60 million Prism at Diamond Ridge apartments at the end of 2021.

The title of this post is a bit misleading. The past week was something of a tidal wave of good news that was doused by one bit of very bad news. Rather than burying the lede, let’s start with the bad news: U.S. Steel cancelled its billion-dollar upgrade to the Mon Valley Works. The project involved a $250 million cogeneration plant at the Clairton Coke Works and a billion-dollar new rolling mill at the Edgar Thomson Works in Braddock. You can read the labor/industry reaction here and some of the environmentalists reactions here, or read some of both here. For the construction industry, the project’s end means the loss of about 1,000 construction jobs over the next two years. There are lots of other mega projects in the pipeline, so those jobs lost might not be felt; however, the decision to cancel the project sends a chill through the Mon Valley. There is a precedent for that.

U.S. Steel’s CEO, Dave Burritt, said the right things when announcing the decision. He took a couple shots at the state and county for dragging out permitting but mainly blamed the changing global markets and need to de-carbonize as the drivers of the decision. He also committed to steel-making in the Mon Valley. For residents who lived in the Mon Valley in the 1980s, that probably sounds eerily similar to what David Roderick said then about the mills that were closed a few years later. Perhaps the outcome will be different. It is quite feasible that Burritt will be standing in Braddock in a year or two announcing that conditions allow for reinvestment after all, or at least announcing a smaller-scale reinvestment. Regardless of what the future holds, the decision isn’t great for construction or the economy in the Mon Valley.

Now on to the good news. The big news last week was the first estimate of gross domestic product (GDP) growth, which was an annualized 6.4%. Revived demand, driven by vaccinations and government checks, pushed consumer spending and business investment much higher than expected. Consumers increased spending by 10.7% and business investment jumped 9.9%. The latter is especially encouraging because business investment had been steadily falling since mid-2019 in anticipation of an end to the cyclical boom in 2020 or 2021. COVID-19 was not what businesses were anticipating. The U.S. government’s responses, especially since the end of 2020, have allowed businesses to keep dry powder and consumers to boost personal savings rates to 27.6%. Stocks are at record levels, so publicly-traded corporations also have lots of working capital in reserve. After the sharp rise in the first quarter, total GDP stands just 1% below the record-high levels of the end of 2019.

Economists seem to think that good economic news was going to shoot construction much higher in March than what occurred. The Census Bureau report on total U.S. construction spending came out May 3. It showed spending was basically flat from February to March, rising only $4 billion to $1.513 trillion. Economists had forecasted an increase of 1.2%. The rationale for the increase must have been tied to the robust economic growth in the first quarter but such an increase was unlikely given the lead time needed for construction and the dampening impact of the supply chain disruption. That disruption is causing significant delays and inflation that has slowed construction activity. Demand for construction is probably closer to the growth expectations, but it’s unlikely that construction will reach the levels that demand is driving until the third quarter.

Construction activity in Pittsburgh is noticeably higher. Following an unexpected $1.39 billion in first quarter construction contracting, the pace of bidding and construction starts has not slowed through April. New project announcements keep coming. Architects are busy and struggling to hire staff. Bidding is still very competitive, as contractors are anxious to line up work now after nine months or more of difficult backlog building. Mosites Construction was the low general on the $12.7 million Port Authority LRT station platform renovations. Liokareas Construction was the low general on Gateway School District’s $30.4 million middle school addition and alteration project. Mele & Mele & Sons were the low bidder on the $30 million Center Township wastewater treatment plant modernization in Beaver County.

Summit Smith Development announced this morning that it had been selected by the Veterans Administration to build a new $91 million outpatient facility at the Monroeville Mall. C.D. Smith Construction from Milwaukee is the construction manager. Developer Craig Rippole is teaming with Michael Keaton to help Nexii Building Solutions build a 200,000 square foot plant in the Pittsburgh area. No site has been chosen. Rycon Construction was selected as CM for Duquesne University’s $54 million College of Osteopathic Medicine. Tree of Life announced it had hired architect Daniel Libeskind (working with Rothschild Doyno Collaborative) on its $20 million renovation. The Tree of Life is taking CM proposals from A. Martini & Co., PJ Dick, Jendoco, Mascaro, Massaro, and Mosites on May 7. Hudson Group from Sharon brought the $30 million Julian Apartments on Melwood Avenue before the Planning Commission. Mistick Construction started work on the $10 million Granada Square Apartments in the Hill District.

Friday will bring the first jobs report on 2021. The January Employment Situation Summary is expected to show modest job gains. If today’s report on January private payrolls from ADP is an indication, the number of jobs created is likely to be above the consensus estimates. After December’s dip in employment, economists were expecting 49,000 additions to private payrolls in January but ADP reported a bump of 174,000 jobs. First and foremost, that’s good news. The late 2020 surge in infections and hospitalizations that followed the Thanksgiving holiday brought fresh rounds of restrictions and, more important, resulted in people voluntarily avoiding places where people gathered. That was bad news for bars, restaurants, airlines, hotels, etc. A rebound from that suppressed demand was expected and, to the degree the bounce back overshoots expectations, it’s good to have job creation recovering ahead of the vaccination rollout.

Last week, the first reading on GDP for the year was released by the Commerce Department. It showed that output declined by 3.5% in 2020. That estimate will be updated two more times but most economists don’t expect much to change. The decline was the steepest since 1946, when the U.S. was retooling industry from wartime to peacetime production. The disruption to the economy in 1946 was different than the pandemic of 2020, but there are similarities in that the dropoff was caused by non-economic factors. That provides additional optimism about the recovery in 2021, as there was less destruction of wealth and capital after the pandemic hit, which will give fuel to the rebound later this year.

The improving economic conditions match up to the increased levels of activity from tenants in commercial real estate, including a number of large space requirements in the market; and it helps explain the increase in design activity at regional architectural and engineering offices.

The Airport Authority announced some very good news in its Blue Sky email Tuesday. Last year’s delay of the $1.1 billion Terminal Modernization Program allowed architects and engineers time to produce 90% design documents by the end of January. Construction documents will be completed as bid packages are prepared but the construction management team of PJ Dick/Hunt and Turner will be releasing bid packages in March for the next phase, which is the multi-modal transportation center. The terminal project’s progress is good news for the Pittsburgh construction market, which should see another mega project, UPMC’s Heart and Transplant Hospital, get into the market in late 2021. With the proposed billion-dollar modernization of the US Steel Mon Valley Works on hold, these two mega projects will be major job creators in 2022 and beyond.

https://blueskypit.com/2021/02/01/pits-terminal-modernization-program-ready-to-move-ahead/?utm_source=PITNewsletter&utm_medium=email&utm_campaign=PITNewsletter+(2021-02-01)&utm_content=article+title&utm_term=1

In other construction news, Suncap Property Group is moving ahead rapidly with its two proposed industrial developments. Graycor Construction has started construction on a 278,000 square foot distribution center in Findlay Township. Meridian Design Build will begin work on a 220,000 square foot distribution center – rumored to be for Bayer Healthcare – at the Victory Business Park in Clinton Township, Butler County. Bids will be taken February 5 for Duquesne University’s new osteopathic medical school. Contractors bidding the project are Jendoco, Massaro, PJ Dick, Rycon, and Turner. Construction is not expected to start until end of 2021.

Throughout the U.S. colleges and universities have become hot spots for new COVID-19 infections, often with numbers that are astronomical for the small towns in which the schools are located. After one month, however, returning to school has been less of a problem for the economy than was feared. This doesn’t mean we’re out of the woods, of course, but the outbreaks have so far been mostly confined to the campuses, rather than setting off big spikes in the college towns. Obviously, stay in touch with this issue as flu season begins.

This morning brought a report from the National Student Clearinghouse that was more good news for the higher ed market. The National Student Clearinghouse Research Center released a preliminary report on fall enrollment across the U.S. today and its results were better than expected. Colleges and universities have seen undergraduate enrollment decline 2.5% in fall compared to last year. Public 4-year schools were nearly even with 2019, and private non-profit schools were off 3.8%. One downside surprise was that community colleges saw a 7.5% decline. Community colleges were expected to get a bump because of the economic impact of the pandemic. Another troubling trend was the decline in foreign students. The pandemic, and its related travel restrictions, accelerated the declining foreign student enrollment to 11% in fall 2020. Only 22% of the colleges and universities reported in time for this update, so it is possible that these trends will see revisions by the time of the final report in late fall.

Pennsylvania institutions fared much worse than the nation as a whole, probably because of the predominance of private 4-year schools, with enrollments shrinking 9.2%. One national trend that is likely to hit Pittsburgh universities harder than most is the 11% drop in foreign students enrolled in U.S. colleges. Locally, Duquesne University was off very slightly, as an increase in graduate students virtually offset the drop in undergrad enrollment. The same trend boosted enrollment slightly higher at Slippery Rock and California University of PA. Local private colleges Point Park University and Grove City College both report that enrollment was lower but in line with 2019. Robert Morris University saw a decline of just under 10% but attributed that to an unusually large graduating class in 2019 and a significant drop in international students. Data on Pitt and CMU enrollments wasn’t available but, assuming enrollment declines were milder than expected there also, news is good for the many planned construction projects in Oakland.

In project news, JMC Holdings selected the PJ Dick/Dick Building Co. team as construction manager for the 1501 Penn Avenue office building, which is expected to advance in spite of rejection by the Pittsburgh Planning Commission. Another large redevelopment will be before the Zoning Board of Adjustment in October. Echo Realty’s Shady Hill mixed-use project, a demolition and redevelopment of the Shakespeare Street Giant Eagle in Shadyside, involves a new 36,000 square foot Giant Eagle and 38,000 square feet of retail, to be built by Continental Building Co., and a $10 million, 432-car garage that has been awarded to Carl Walker Construction. Shady Hill also includes a $37 million, 252-unit apartment being developed by Echo’s partner Greystar. Massaro Corp. is the contractor for the apartments.

Mele & Mele was low on the $25.7 million Canonsburg-Houston WWTP. Yarborough was low bidder on the $1.9 million Port Authority Manchester Garage engine test facility. Masco Construction was low on the $3.6 million Robinson Township Police Station. Sentinel Construction is about to start on an $8.7 million renovation of Seven Oaks Country Club in Beaver. Johnson Development has awarded a contract to Franjo Construction for the new $6 million, 105,000 square foot Cube Smart Self-Storage on the North Side. Franjo is also the contractor for a $3.2 million upgrade to Zamagias’ Shaler Plaza.The $67 million Canon McMillan Middle School is out to bid due Oct. 15.