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Update:On June 15, OSHA announced that it will extend the comment period on its proposal to ensure crane operators are qualified to safely operate equipment by an additional 15 days. Comments will now be accepted through July 5, 2018.

On May 21, 2018, the Occupational Safety and Health Administration (OSHA) issued a proposed rule to update its standard for cranes and derricks in construction to ensure crane operators are qualified to safely operate equipment.

Entitled Cranes and Derricks in Construction: Operator Qualification, the rule proposes the following changes to the existing standard:

• Require comprehensive training of operators
• Remove certification by capacity from the requirements
• Clarify and permanently extend the employer duty to evaluate potential operators for their ability to safely operate equipment
• Require documentation of that evaluation

The public has the opportunity to comment on the proposed rule.  

Background
On Nov. 9, 2017, OSHA published a final rule extending the operator certification compliance date until Nov. 10, 2018, in order to provide the agency with additional time to complete this rulemaking to address stakeholder concerns related to the Cranes and Derricks in Construction standard.

ABC filed comments during the proposed rule phase on Sept. 27, 2017. In its comments, ABC reiterated its position that while it appreciated OSHA’s proposed one-year delay, ABC strongly encouraged the agency to consider an indefinite extension. Extending the certification deadline indefinitely would alleviate any confusion regarding the current compliance deadline and allow OSHA to craft the safest possible solution to the type and capacity issue to ensure the competency of crane operators.

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Prices for inputs to construction materials expanded 2.2 percent in May and are 8.8 percent higher than at the same time one year ago, according to an ABC analysis of U.S. Bureau of Labor Statistics data. This represents the largest monthly increase in 10 years (since May 2008). Nonresidential construction input prices increased 2.3 percent for the month and 8.9 percent for the year.

“While rapidly rising construction materials prices partially reflect economic strength, for the most part today’s release should be viewed as bad news,” said ABC Chief Economist Anirban Basu. “As economists have been suggesting for many months, inflationary pressures are building. One can observe this in labor markets as well as in the price of gasoline, health care and construction materials.

“The current economic expansion, the second lengthiest in American history, has been built in large measure on persistently low interest rates, which stand to eventually disappear as inflationary pressures become increasingly apparent. Real estate and construction cycles are especially vulnerable to increases in borrowing costs.

“But there is more at work than unfettered economic progress,” said Basu. “Construction materials are becoming increasingly expensive because of policymaking. All eyes are on prices of metals, which are increasing briskly. On a year-over-year basis, iron and steel prices are up nearly 13 percent.  Steel mill product prices are up nearly 11 percent. Separately, the price of softwood lumber, which is the subject of a dispute with the Canadians, is up more than 15 percent compared to a year ago.

“These dynamics are fraught with unforeseeable consequences,” said Basu. “For instance, will the rise in materials prices induce diminishing demand for construction services? Will more expensive materials prices squeeze contractor margins? Moreover, if the general increase in various prices triggers rapidly rising interest rates, it would presumably truncate the ongoing economic expansion, now in its 10^th year. All of this suggests that contractors should be rooting vigorously against full-blown trade wars, which would only serve to exacerbate already observable, problematic trends.”

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A study released by the Minnesota Center for Fiscal Excellence found that the prevailing wage determination process utilized by the Minnesota Department of Labor and Industry leads to inaccurate wage rates on construction projects. A disproportionate 75 percent of prevailing wages reflected union rates in the period analyzed in the study, even though just 32 percent of private construction workers in Minnesota belong to a union. 

The authors studied survey data on nonresidential commercial construction from April 2015 through May 2016 reported to the Department of Labor and Industry. Examining that data led to several stunning findings, including that 72 percent of all prevailing wage rates were set using old rates, imported rates or a combination of both. Furthermore, in some areas, a small number of individuals played an outsized influence in determining prevailing wage rates for that area. These findings contradict the intent of prevailing wage laws, which is to provide local wages to local workers. 

The authors concluded the study with practical policy recommendations to reform Minnesota’s prevailing wage calculation process to achieve more accurate rates. 

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The Michigan Legislature voted to repeal Michigan’s Prevailing Wage law, a 50-year-old law that overcharges taxpayers on public construction projects and limits competitive bidding opportunities for Michigan workers. The historic vote makes Michigan the 24th state without a prevailing wage law. 
 
“For the first time in decades, Michigan will be a place where fair and open competition will be welcomed on public construction projects” said Jeff Wiggins, State Director of the Associated Builders and Contractors of Michigan (ABC). 
 
In addition to forcing businesses to adhere to inflated union contract terms on public projects, critics say the regulations are just as bad. In 2017 alone, Michigan published over 500,000 prevailing wage designations, resulting in almost four times more classifications than there are construction workers in the state.
 
The inflated costs of prevailing wage laws are well-documented by studies from across the country, including Michigan and Ohio, providing real evidence that repeal would save hundreds of millions of dollars. In fact, the Ohio Legislative Service Commission reported that the state realized almost $500 million in savings in the first four years after Ohio repealed its prevailing wage law on school construction.

“Michigan is the sixth state since 2015 to repeal their archaic and costly prevailing wage law,”  said Ben Brubeck, vice president of regulatory, labor & state affairs for ABC National. “Studies and anecdotal evidence suggest eliminating prevailing wage red tape will decrease the cost of doing business for local and state governments, creating the opportunity for more projects, more schools, more infrastructure and more employment opportunities for small business contractors and their employees in the local community.”

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On May 31, U.S. Department of Labor (DOL) Secretary Acosta and Rep. Virginia Foxx (R-N.C.), chairwoman of the House Education and Workforce Committee, visited a jobsite of Omega Construction, an ABC member headquartered in Winston Salem, N.C. Secretary Acosta and Rep. Foxx toured the Hotel Indigo renovation, guided by Omega Construction President Barry Hennings, and met with employees and apprentices. Secretary Acosta and Rep. Foxx also participated in a roundtable discussion about workforce development, apprenticeships and other issues facing the construction industry at Omega Construction Headquarters following the jobsite visit.

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On Friday, June 1, the U.S. Department of Homeland Security (DHS) announced that it would provide an additional 15,000 H-2B visas for non-agricultural seasonal workers. Earlier this year, Congress included a provision in the Fiscal Year 2018 omnibus spending bill that allowed for DHS to increase the number of H-2B visas above the 66,000 statutory cap. Before approval of the bill, ABC joined the H-2B Workforce Coalition in a letter urging Congress to include the provision in the spending bill. ABC will continue to work with Congress and the Trump administration to support the workforce needs of the construction industry. 

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Nonresidential construction spending remained unchanged in April on a monthly basis, according to an ABC analysis of U.S. Census Bureau data. However, year-over-year spending was up a sturdy 6.1 percent.

Private sector spending increased 0.8 percent on a monthly basis and is up 5.3 percent from a year ago. Public sector spending fell 1.4 percent in April, but is up 7.3 percent year over year.

“Between today’s employment and construction spending reports, it is clear that the economy continues to exhibit strong momentum and abundant confidence,” said ABC Chief Economist Anirban Basu. “It’s important to remember that the construction spending data generally have failed to display as much economic strength as many other indicators. Even the most recent monthly readings on construction spending were unspectacular, but the year-over-year numbers are consistent with ongoing economic and industry progress.

“Perhaps most encouraging is the growing strength of the public categories,” said Basu. “For many years, public construction spending languished even as private categories demonstrated growing vigor. With the dramatic improvement in state and local government finances in many communities in recent years, there is greater capacity to invest in infrastructure. Not coincidentally, construction spending in the transportation category rose 22 percent during the past year. Spending in the public safety category, which includes spending on police and fire stations, is up by nearly 17 percent.

“As always, there is a need to pay attention to any clouds forming on the horizon,” said Basu.  “Inflationary pressures continue to build, with tariffs on steel and aluminum likely to accelerate construction materials price appreciation during the next several months. Interest rates are expected to head higher, though perhaps only in fits and starts. Wage pressures also continue to build. The implication is that the cost of financing construction projects is on the rise. Should those costs rise too quickly, the momentum presently observable in nonresidential construction spending and employment data could quickly dissipate.”

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The U.S. construction industry added 25,000 net new jobs in May, according to ABC’s analysis of data from the U.S. Bureau of Labor Statistics. This follows a 21,000 net job gain in April (revised upward from 17,000). The industry has gained 286,000 jobs on a year-over-year basis, the largest such increase since April 2016. 

Nonresidential construction employment increased by 15,400 net jobs for the month. Nearly all of that growth came from the nonresidential specialty trade contractor subsector, which added 14,800 net jobs in May. However, the nonresidential building subsector lost 4,400 net jobs in May.

The construction industry unemployment rate plummeted 2.1 percentage points in May and now stands at 4.4 percent, the lowest level since July 2000. The national unemployment rate inched down to 3.8 percent, its lowest level since April 2000.

“Despite all the noise regarding tariffs, trade wars, Italy, Spain and a myriad of other issues, the U.S. economy continues to move forward with conviction,” said ABC Chief Economist Anirban Basu.  “Today’s employment report is rendered all the more impressive given the difficulty so many firms, including construction firms, report filling available jobs. The ongoing addition of jobs in nonresidential construction is both an expression of confidence as well as evidence of an industry that continues to benefit from economic growth.

“There are obviously reasons for concern,” said Basu. “Inflationary pressures continue to build, and the Federal Reserve stands ready to further tighten monetary policy. Recent decisions regarding tariffs on steel and aluminum are likely to further exacerbate these pressures.

“Construction firms should monitor their backlog with great care and be searching for any evidence of economic slowing. To date, however, there is little evidence of lost U.S. economic momentum,” said Basu.

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Estimated April construction unemployment rates fell in 19 states on a year-over-year basis, were unchanged in four states and rose in 27 states, according to an analysis of U.S. Bureau of Labor Statistics (BLS) data released by ABC.

The April 2018 not seasonally adjusted (NSA) national construction unemployment rate rose 0.2 percent from April 2017 to 6.5 percent. At the same time, the construction industry employed 262,000 more workers nationally than in April 2017.

“Colder-than-normal temperatures in the eastern half of the country, combined with above-average precipitation in much of the eastern third of the nation, were likely factors in somewhat slower construction activity in April and a slightly elevated national construction unemployment rate compared to a year ago. Nonetheless, demand for construction workers continued to be healthy,” said Bernard M. Markstein, Ph.D., president and chief economist of Markstein Advisors, who conducted the analysis for ABC. “Employers are still reporting shortages of skilled construction workers, while building materials price increases hang like a cloud over future construction activity.”

Because these industry-specific rates are not seasonally adjusted, national and state-level unemployment rates are best evaluated on a year-over-year basis. The monthly movement of the rates still provides some information, although extra care must be used in drawing conclusions from these variations.

From the beginning of the data series in January 2000 through April 2017, the national NSA construction unemployment rate from March to April has declined every year. The rate for April 2018 was no exception, down 0.9 percent from March. Among the estimated state construction unemployment rates, 39 were down, 10 were up, and one (Virginia) was unchanged from March.

The Top Five States

The states with the lowest estimated NSA construction unemployment rates in order from lowest to highest were:

1.      Iowa and North Dakota (tie), 2.2 percent

3.      Nebraska and Wyoming (tie), 2.7 percent

5.      Idaho, 2.9 percent

Two of these top states were in the top five in March: Iowa and Nebraska.

Iowa and North Dakota tied for the lowest rate in April. Iowa also held the top rank in March. It was the state’s third lowest April rate after 1.7 percent in April 2015 and 2.1 percent in April 2000. North Dakota saw a significant improvement from having the 14^th lowest rate in March. The state had the nation’s largest year-over-year rate decline, down 2.6 percent. It was also North Dakota’s lowest April rate on record since the beginning of the estimates in 2000. The sharp improvement in the state’s construction unemployment rate was no doubt partly due to the effects of higher oil prices.

Nebraska and Wyoming tied for the third lowest April construction unemployment rate. For Nebraska, this matched its March ranking. For Wyoming, it was a step up from the eighth lowest rate in March. It was Wyoming’s lowest estimated April rate on record. It was also the country’s second largest year-over-year rate reduction, down 1.7 percent.

Idaho had the fifth lowest April rate, up from sixth lowest rate in March based on revised data (previously reported as the fifth lowest rate). This was the state’s lowest April rate on record, matching last year’s 2.9 percent rate.

Colorado, which had the second lowest rate in March based on revised data (previously reported as tied with Iowa for the lowest rate), tied with Massachusetts for the 12^th lowest rate in April, 4.6 percent.

Indiana, which tied with Virginia for the fourth lowest rate in March based on revised data (previously reported as the sixth lowest rate), had the 10^th lowest rate in April, 4.2 percent. It was the state’s third lowest April rate after last year’s 3.4 percent rate and its 3.6 percent rate in 2000.

Virginia, which had the fourth lowest rate in March (tied with Indiana), fell to 11^th lowest in April, 4.5 percent.

The Bottom Five States

The states with the highest NSA construction unemployment rates in order from lowest to highest were:

46.   Oklahoma, 8.9 percent

47.   Rhode Island, 9.2 percent

48.   Arkansas and New Mexico (tied), 10 percent

50.   Alaska, 19.3 percent

Three of these states—Alaska, New Mexico and Rhode Island—were also among the bottom five states in March.

For the 10^th month in a row, Alaska had the highest rate in the nation. Given that these estimates are not seasonally adjusted, a high construction unemployment rate for the state often occurs at this time of year, though certainly not year-round. Its April rate is troubling as it is the state’s second highest April estimated rate on record, after 20.9 percent in 2011. Thus, it is not surprising that Alaska posted the nation’s largest year-over-year increase, up 2.6 percent.

Arkansas and New Mexico tied for the second highest rate in April. For Arkansas, that compared to being tied with Connecticut for the sixth highest rate in March. Along with Rhode Island, Arkansas posted the second largest year-over-year increase, up 2.2 percent. For New Mexico, its April ranking compared to having the fifth highest rate in March. Still, it was New Mexico’s lowest April rate since 2014, when it was 9.5 percent.

Rhode Island had the fourth highest construction unemployment rate in April, an improvement from the second highest in March. As noted, Rhode Island tied with Arkansas for the second largest year-over-year increase, up 2.2 percent. Nevertheless, the state tied with Minnesota for the second largest monthly drop in its rate, down 5 percent, behind Montana’s 8 percent plunge.

Oklahoma had the fifth highest rate in April compared to being tied with Ohio for the 15^th highest rate in March.

West Virginia, which had the third highest estimated construction unemployment rate in March, edged up to the sixth highest rate in April, 8.7 percent.

Montana, which had the fourth highest rate in March, improved dramatically to being tied with New Hampshire for the seventh lowest rate in April, 3.6 percent. This was Montana’s lowest April rate on record.

To better understand the basis for calculating unemployment rates and what they measure, see the article Background on State Construction Unemployment Rates.

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Construction Spending and Employment: History and Forecast Terms and Sources

Construction Spending
Source: Census Bureau Value of Construction Put in Place Survey (VIP) Annual Historical Data (Annual Total Table)

Total Private Employment
Source: Bureau of Labor Statistics (BLS), Current Population Survey (CPS), Table 42
Excludes the self-employed. Only annual data are available.

Construction Spending Forecast Assumptions
Starting with the annual construction spending data for 2017 ($1.23 trillion), the estimate assumes 4 percent growth (to $1.28 trillion) for 2018, 4 percent on top of that (to $1.33 trillion) for 2019, 3 percent growth above the 2019 construction spending level (to $1.37 trillion) for 2020 and 3 percent growth above 2020 construction spending (to $1.42 trillion) for 2021.

Employment Demand Forecast
Based on a model developed by Markstein Advisors to estimate total private construction employment demanded, excluding the self-employed, derived from the amount of construction spending.

Employment Demand Forecast With Additional Infrastructure Spending
Based on the same model developed by Markstein Advisors to estimate total private
construction employment demanded, excluding the self-employed, based on construction spending. According to the model, every $1 billion in extra construction spending generates an average of at least 6,300 construction jobs.

The employment projections assume that the administration’s $1.5 trillion proposed
infrastructure plan, if enacted, will result in $50 billion in additional construction spending in 2019 on top of the baseline construction spending forecast; $150 billion additional spending in 2020; and $200 billion more in 2021. Thus, demand for additional construction workers above the baseline estimate for each year would be 323,000 in 2019, 960,000 more workers in 2020 and 1.3 million more workers in 2021.

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