by Kermit Baker, PhD, Hon. AIA
Chief Economist

The upsurge in design activity that began around the beginning of the year continued in April. Almost 29 percent of firms reported increased billings in April, while only 9 percent reported declines. Particularly encouraging is that the strong business conditions are broad-based across the profession. Both larger and smaller firms indicate solid conditions. Firms in all regions of the country—and of all building type specializations—report improving conditions.

Furthermore, there is no evidence of a slowdown in the reported project inquiries. Over 40 percent of firms indicate that inquiries increased during April, while fewer than 10 percent reported a decline as compared to March levels. As with billings levels, the increase in inquiries was broad-based. Reporting particularly sharp increases in inquiries were firms located in the South, and firms specializing in the residential and commercial/industrial sectors.

While architecture firms have gotten off to a strong start this year, the broader economy has not matched this performance. The economy grew at a 3.1 percent pace during the first quarter, well below the 4.4 percent growth in 2004, and the weakest quarter for our economy since the first quarter of 2003. Slower growth in investment spending by businesses on structures and equipment was a major cause for slower growth, and business investment in structures even declined during the quarter.

There is some hope that the second quarter will show a rebound in our economy. Oil prices have stabilized recently, even though they remain at very high levels, and businesses have picked up their pace of adding new workers. April saw an increase in payrolls of 274,000 nationally, well above the 190,000 added per month on average during the first quarter. Construction accounted for almost 20 percent of the payroll gains in April, with its best month in terms of job growth since March 2004.

Continuing compensation concern
After increasing well in excess of the rate of inflation though the mid-to-late 1990s, architect compensation slowed a bit during the nonresidential construction downturn earlier this decade. However, a major study by the AIA on compensation trends in the profession that will be released next month indicates that compensation has begun to pick up.

Still, compensation remains a hot-button issue for the profession. This month’s survey asked members of the AIA Work-on-the-Boards panel to comment on compensation concerns. Four in 10 respondents felt that compensation is a major problem for those considering entering the architecture profession. Almost half (47 percent) felt that compensation is a major problem for those currently in the profession.

The agreement on the pervasiveness of the problem, however, doesn’t translate into a consensus on the experience level for architecture staff where compensation concerns are the greatest. More than 30 percent of respondents felt that the problem was most serious for entry-level architecture staff (0–4 years). More than 40 percent felt that the greatest concern was for mid-level staff (5–10 years). Almost 30 percent felt that compensation of senior staff (more than 10 years of experience) presented the greatest concern.

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