February 2022 - Zach's Construction Landscape

To My Valued Clients,

I toured the Seagrit Marine Terminal last month and it gave me a sense of optimism, it was packed with sea containers being unloaded and moved by huge forklifts. Ports across the country will see $17B of federal funding stemming from the Infrastructure Bill, along with another $241MM in grants. The US Department of Labor, reported that union membership in the construction industry declined in 2021, to 12%. In 1947, union membership within the construction industry was 87% of the workforce. Most contractors that I work with are entering 2022 with backlogs taking them through summer, which corresponds with ABC’s backlog indicator of 8.2 months, which is up from December 2020’s of 7.3 months.

A lot of people ask when the fruit of the Infrastructure Bill will hit the street. I don’t control the red tape of the government nor am I an employee of the USDOT, however, I did some research and here is what I found. The last time something this expansive was accomplished from a nationwide infrastructure perspective was the Federal Highway Act in 1956, where 41,000 miles of interstate highways were built costing $26B. The IIJA (Infrastructure Bill) is supposed to deliver $550B in new infrastructure construction spending over 5 years, where most of the funding will flow through the USDOT, while other funds go to the states through a grant program ($120B). With this much new spending the state and federal government must hire additional employees to handle the additional work load…, along with creating the new grant programs for distributing the money. The grant programs will be an important determining factor how states will receive funds. For example, each state is getting $100MM for broadband projects, yet the legislation provides for $65B, that shows how important these grants will be to the states. Many of the initiatives in the bill are already being funded through existing programs like the Highway Safety Improvement Program, so those funds will hit the street quicker because the system is already setup. Electric vehicle charging stations are newer so those will take longer.?

We discussed a lot of money being spent on construction, don’t worry, on January 15th, OSHA just increased their penalties to track with inflation.

Notable Numbers:

1.??????The construction industry had 345,000 open jobs at the end of November, that’s down from 455,000 in October

2.??????Manufacturing construction starts in 2021 increased by 86%, totaling $26B

a.??????Warehouses were up 28%, totaling $40B

3.???????Skanska’s operating income for Q4 dropped 45%, however, for the year income only dropped 12%, coming in at $888mm. It was profitable enough to increase dividends

4.??????Q4 results are coming out and the stock market is moving and it’s not up

a.??????Caterpillar trading at $200

b.??????Deere & Co trading at $371

c.??????Tutor Perini trading at $11.83

d.??????NVR trading at $5,552

Zach’s Street Talk.