April 4, 2024

🏗️ Labor shortage woes, interest rate cuts, and spending drops, oh my!

The interest rate cuts that have been foretold for generations—signs say they are almost here...

Happy Friday,

Before we get into the news and notes, let's take a peek at how our March Madness contest is shaping up, shall we?

It looks like Peyton is holding it down and will be donning both the Meta Quest 3 and a UConn jersey if UConn brings it home. Espn54927562's Picks 1 has to be absolutely fuming. Meanwhile, Micah is the highest ranked Buildr player and is symbiotically linked to Purdue if they win (though tragically isn't eligible to win the Meta Quest 3 per the rulebook).

As a reminder, here are the prizes and rules: 1stMeta Quest 3 + SLAB tumbler + $65 voucher to the Buildr shop 2nd: SLAB tumbler + $65 voucher to the Buildr shop 3rd: SLAB tumbler + $50 voucher to the Buildr shop  4th: $20 voucher to the Buildr shop 

RULES

  • ONE (1) entry per person.

  • You have to be a SLAB subscriber to place.

  • You have to work for a GC to collect the top prize (the rest are fair game).

  • You're not allowed to disassociate from your family, job, and other obligations if you win the Meta Quest 3.

  • After you get the VR headset in the mail, you have to send us a pic of you at least pretending to use it for construction-related purposes.

Good luck everybody.

SPECS

📉 The thread between more job openings, the interest rate cut stall, less spending and starts...

Today we’re taking a look at three pieces of news and how they’re three slices of the same overly tart pie. If you happen to enjoy extreme tartness in your sweets, please ignore that metaphor.

  • According to the US Bureau of Labor Statistics, there were 441,000 unfilled openings in February (16,000 more/3.8% higher than in January). This number is 7.8% higher than the same time last year. 

  • The Federal Reserve met last month to update us on the much-anticipated interest rate cuts that were projected as early as November 2023 [drumroll]: still nothing. Fed Chair Jerome Powell mirrored the previous meeting’s sentiments on Wednesday at a business conference at Stanford.

  • Nonresidential spending dropped 1% (down 15 of the 16 nonres subcategories) to a seasonally adjusted annual rate of $1.179 trillion, the second straight month in a row it’s dropped. Prior to these two months, there were 19 straight months of growth. Likewise, nonresidential building starts dropped a whopping 16%.

Go: The Federal Reserve reiterated that there would be 3 rate cuts this year… 

No Go: …but this past meeting was the fifth straight meeting for the Fed where interest rates were left unchanged; still between 5.25% and 5.5%.

Go: The construction industry counted 403,000 new hires in February, the second highest rate on record…

No Go: …but there were 375,000 total departures (layoffs, firings, and quits).

Go: Commenting on the high rate of hirings and firings, ABC Chief Economist Anirban Basu said, “This suggests a schism in which certain construction segments powered by federal funding and incentives continue to generate tremendous demand for labor…”

No Go: … “while privately financed segments had somewhat slower growth,” said Basu.

Go: Current inflation sits at 3.15%, much lower than the peak of 9.1% back in July 2022

No Go: …but that 3.15% has slowed and it’s still not 2%, the Fed’s inflation target.

🔨 Here's the Thing

We’re all hanging onto every word that comes out of Jerome Powell’s mouth as if he were Denis Villeneuve talking about his plans for Dune 3. The reason interest rates matter so much is because interest rate cuts would lower financing costs for general contractors, which would trigger an uptick in profit margins.

Banks and financial institutions tighten lending conditions in response to higher interest rates, making it harder for construction projects to secure financing. For GCs, this has caused business growth to slow for some and come to a complete end for others. Two straight down months of spending are suggestive of the stubborn interest rates.

There’s a tricky timing issue here. If the Fed cuts interest rates prematurely, an economic boom + high consumer demand = prices of everything skyrockets and inflation shoots back up again. So for now we continue to wait. The labor shortage in construction grows a little bigger, and with continued plummeting construction spending and starts, there’s less money to give to new employees except when a space frees up (hence the hiring/firing equilibrium).

💬 Contractor Quote

“Reducing rates too soon or too much could result in a reversal in the progress we’ve seen on inflation and ultimately require even tighter policy to get inflation back to 2%. But easing policy too late or too little could unduly weaken economic activity and employment.”

—Jerome Powell, Federal Reserve Chair

⚡️ Punch List

Buildr: Preconstruction software, the comprehensive guide (blog)

ENR: Updates of the Baltimore bridge collapse (news)

Buildr: Redefining preconstruction excellence—Strategies to unlock your business potential (on-demand webinar)

For Construction Pros: Robots are rewriting the rules of construction safety (blog)

Construction Exec: How top-performing construction companies approach business growth (blog)

Construction Dive: What's a chief AI officer, and do you need one? (blog)

The Preconstruction Podcast: Rachael Daly, Associate Director of Cost in NYC discusses women in construction (podcast)

The B1M: This is the world's most remote infrastructure project (video)

CONSUMABLES

Give it 5-10 years and sandworm riding will be an Olympic sport.

Give it 5-10 years and sandworm riding will be an Olympic sport.

McDonut: In an Avengers-esque crossover move for fast food, McDonalds and Krispy Kreme are teaming up because McDonalds on its own apparently had too few calories. (food)

Hold my door: The door prop from Titanic just sold at an auction for a decent chunk of change. Hopefully the buyer can make some high-effort experiments on YouTube that prove once and for all that not only could both leads have fit on that door but 2 more people as well. Forget Leo, the careers of some extras on that cast could've been launched (we'll die on this hill/door). (movies)

Heard it here first: We'll buy two $5.99 lattes plus tip every single day and not blink, but for some reason Spotify's premium plan going up another 1-2 dollars a month to support audiobooks sounds like torture. (tech)

Curb Your Expectations: With the Curb Your Enthusiasm series finale looming, Larry David still defends his Seinfeld series finale. Ending shows is like successfully crash-landing planes, only Captain Sully and Breaking Bad have figured it out. (TV)

Hoop dreams: Since sandworm riding isn't considered a sport (yet), Caitlin Clark is easily the athlete of the year so far. Sorry, Maud'Dib. Everything you need to know about the Caitlin Clark movement. (sports)

Generative X: In this week's "AI is up to no good" news, Google is thinking about adding a fee for an AI-aided Google search. Meanwhile, musicians signed a petition against AI stealing the likenesses of their voices to make music. (AI)

Uh-Ohtani: Everything you need to know about the Ohtani gambling scandal. It all feels very "these empty beer cans aren't mine, Mom, I swear," but we'll refrain from judgment because baseball's back, baby! (sports)

Targaryen and Feather: With a Black trailer and a Green trailer, House of the Dragon reminds us of the two factions that'll be warring against each other this summer as "HBO Sunday nights" will be simultaneously warring against "name any other Sunday night plan." (TV)

Chicken or the egg: If you felt a great disturbance in the Force, as if millions of voices suddenly cried out in terror and then were suddenly silenced, it's because 1.6 million chickens at a single plant in Texas were unalived this week due to fears of bird flu. (news)

Troll toll: If you're a procrastinator, you probably need these 3 tax filing tips. (tax season)

Apple doesn't fall: Federal Trade Commission Chair Lina Khan wasn't allowed on Jon Stewart's Apple-sponsored podcast because she'd likely talk poorly about Apple. Lucky for us, Comedy Central doesn't care. (video)

Job Site

It's a new year and we need new job submissions! Catch wind of an open preconstruction role? Fill out our job post submission form for a chance for the posting to be featured in a future edition of The SLAB.

Have a good weekend,

The SLAB

PS: If you're reading this, congrats. You successfully survived another April Fool's Day. Here's the best and cringiest pranks that brands attempted this year.

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