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by Kermit Baker, PhD,
Hon. AIA
Chief Economist
Billings at U.S. architecture firms leveled off in March,
with the AIA Architectural Billings Index registering just 50.5 for the
month. Any score above 50 indicates an increase in billings from the
previous month, so March billings after seasonal adjustment were just
slightly in excess of February levels. Inquiries for new projects continued
to grow, pointing to increasing project activity in the months ahead.
However, the 59.4 score for the inquiries index is the lowest since May
of 2004, so incoming work should be monitored to see if it is beginning
to slow.
Regionally, business conditions remain solid for firms in the Northeast,
Midwest, and South. Firms in the West, however, have reported declines
in each of the first three months of the year. By construction sector,
residential architects are reporting continued solid levels of activity,
and firms principally serving the commercial/industrial sector are reporting
a growth in billings in recent months. Institutional firms, however,
reported a decline in March, coming on the heels of a decline in February.
Jobs indicate healthy growth
The broader economy continues to show signs of healthy growth. Over 200,000
net new jobs were created in March, bringing the total to almost 600,000
for the first quarter of the year. That puts the economy on pace to
create well over 2 million net new jobs this year, in excess of the
pace of job growth last year.
Job growth in the construction sector slowed in March. However, in February,
total construction put in place totaled close to $1.2 trillion when seasonally
adjusted and annualized, 8 percent above year-ago levels. The nonresidential
sectors have done particularly well recently. The retail and other commercial
construction, education, and health-care sectors all increased at a double-digit
rate in February compared to year-ago levels, and office construction
was not far behind, growing by 9 percent.
The major threat to the economic outlook continues
to be inflation, particularly in oil prices. Overall inflation for
consumer goods and services is running close to 4 percent annually,
while inflation in producer prices is running about 5 percent. Price
increases for several construction commodities are a key reason for
the increases in producer prices. Inflation hasn’t been at this
level since the early 1990s. Consumers, however, seem to have adjusted
to rising rates of inflation. Consumer sentiment rose with the early
April reading, and stands well above the levels of last fall when the
oil price spikes first appeared.
Experienced staff at a premium
As nonresidential activity continues to improve, architecture firms report
difficulties in finding architecture staff. Earlier this year, architecture
firms reported that attracting new staff was at the top of their list
for business-related concerns for the year.
This month, we asked firms for the reasons that
they were having difficulties in attracting new staff. The most frequent
response was that many applicants don’t have appropriate experience
for the openings at their firm. A general shortage of architects in
the market was the second most common response, followed by the sense
that many applicants are looking for more compensation than the firm
can afford. Larger firms were likely to mention a shortage of architects
in the market as the key reason for difficulties in attracting new
qualified staff. Smaller firms were more likely to mention that other
firms can afford to pay more for qualified applicants.
Regionally, firms in the Northeast were more likely
to mention that applicants are looking for more compensation than the
firm can afford than were firms in other regions. Firms in the Midwest
were more likely to mention that applicants don’t have the appropriate experience
for openings at the firm, and that potential applicants don’t want
to live in the area. Firms in the South were more likely to mention that
applicants don’t have the skills and aptitude to meet the longer-term
needs of the firm. Firms in the West were more likely to mention that
there are not enough architects in the market at present.
Copyright 2006 The American Institute of Architects.
All rights reserved. Home Page
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This month,
Work-on-the-Boards participants are saying:
• Definite slowdown in residential construction. I think folks are having
problems heating the McMansions.
—4-person firm in the Northeast,
mixed
specialization
• The employee pool in our area is small and underqualified. As the workload
increases, we need to find another way to find staff.
—11-person firm in the West, commercial/industrial
specialization
• After being slow the last 3-4 years, we are suddenly inundated with
institutional, light commercial, and residential work.
—5-person firm in the Midwest,
mixed specialization
• We are seeing an increase in volume after a slower January
and February
—105-person firm in the South, commercial/industrial
specialization.
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