What to Make of the U.S. Economy

NPCA Staff Report

Is the U.S. economy in a virtuous or a vicious cycle? That depends on who you ask. It’s hard to imagine views are split into such opposite camps, but this recovery has been complex, fragile and polarizing. It has been slower than most and plateaued at various stages, and that makes the outlook anything but straight forward.

Factors such as region, socioeconomic status, employment opportunities and political affiliation have shaped people’s views. The right feels the economic recovery has been anemic while the left sees any gains as proof of its policies. Beyond the political jockeying, economists and average Americans are equally split. Despite the volatility of recent months, Wall Street is surging and has recouped its losses and then some – The DOW has nearly tripled since it bottomed out in 2009 – while unemployment still lingers at more than a percentage point higher¹ than pre-recession figures. That number varies by region and industry – the construction industry didn’t hit its trough until 2010 and rates in some regions are much higher – and does not count the “discouraged workers” that have dropped out of the workforce. Add in the fact that only 8% of Americans don’t feel the inequality gap is growing according to the Pew Research Center² and you have the makings of a complicated situation.

So what does all this mean for the precast concrete industry?

For now, optimism seems to be in the air despite uncertainties with regulations, legislation, and rising costs, and the fact that caution and fear still linger in the construction industry. Work has picked up and some precasters are held back only by the lack of quality employees available to hire (see precast.org/employees). Housing starts have fluctuated recently but are trending up and that’s an important cog in the wheel of recovery for the entire construction industry. The Federal Reserve is signaling similarly positive sentiments and seems to be poised to wrap up its bond-buying program by the end of the year. For the precasters interviewed for this story, this summer was a much rosier picture than years past.

Alaska Concrete Casting
Juneau, Alaska
Dave Hanna, President

How are things in your region?

The biggest change we’ve seen since the recession is a more stable pricing structure from our suppliers – no more roller-coaster ride on the metal market. Our customers are more price conscious now but are also more aware of quality issues and the advantage of working with a local producer who can respond to changes in plans.

What products are in demand with your customers?

As far as work out there, it has been primarily DOT-type projects for the big jobs. But we are seeing more and more commercial and residential work again. We are lucky to have a good balance of customers: electrical contractors for highway infrastructure, civil contractors for drainage and retaining walls and building contractors for smaller precast and rebar fabrication.

What is your perspective on the future of the industry?

I think we all see the need for more attention to LEED³ as well as the real need for tighter environmental controls, recycling and increased efficiency. As far as future markets, I think we will all be seeing more hybrid-type applications with mixes of precast and poured-in-place. I think we are all probably looking pretty seriously at more and more uses for SCC and the new reinforcements such as Helix fibers. With more people looking at disaster preparedness, I think all types of concrete construction will be displacing other materials. With the dearth of experienced concrete contractors out there, I think precasters should be able to take a good position in this growing market.

Crest Precast
La Crescent, Minnesota
Steve Mader, President

How are things in your region?

We never dropped below 20% in sales volume as we had the ability to tackle DOT projects and specialty items. We partner with a steel fabricator to produce new forms rather quickly to meet project schedules. And we have increased overall sales by 75% since 2010 by entering the prestress wall panel market and the increased absorptive sound wall business. The backlog of projects is at an all-time high and we cast year-round. The key is to be plant certified to qualify for the work.

What products are in demand with your customers?

The economy in Minnesota and Wisconsin is robust and we are running at 100% of capacity in the sound wall and commercial markets for underground electrical and wastewater products. The agriculture business is up 200% for 2014 due to high milk prices and higher yet for organic milk and cheese. Customers are general contractors including highway, mechanical contractors and electrical segments. We have turned down over $2 million in projects in the last 90 days as we are at capacity. We are breaking ground this fall on a 10,000 sq ft addition and have purchased an additional batch plant.

What is your perspective on the future of the industry?

This is great time to be in the precast business as the number of projects and the size is increasing in all sectors except residential sewers, which have recovered to 70% of previous pre-recession sales.

McCody Concrete Products Inc.
Williston, North Dakota
Bob Horab, President

How are things in your region?

Williston is the biggest city in our state’s oil-producing region and we are fortunate to have had tremendous growth in the energy sector in North Dakota. Most Americans, I think, are aware of the explosion of the big oil companies, energy infrastructure and new jobs in this region.  Consequently, since about 2007 to 2008, we’ve seen significantly increased construction in Williston, and with that development, more quality precast concrete infrastructure to support that growth.

What products are in demand with your customers?

Emerging recovery technology in the oil industry is securing a strong, resilient market for energy-related industries and suppliers in our region. This robust health in the energy industry keeps work ahead of us into the foreseen future.

Obviously, we haven’t experienced an economic recession here. In fact, we’ve been growing since 2004, and due to the booming oil industry, I see us holding solid for the next 15 years. If we intend to be less reliant on Mid-East oil – meaning the Keystone Pipeline is approved by Congress – this region and many parts of the U.S. will see increased growth in the precast industry and more high-paying jobs in other construction sectors as well.

Anderson Precast & Supply Inc.
Bozeman, Montana
Tim Anderson, President

How are things in your region?

Our greatest challenge in the growing economy is in recruiting more members to our production team. It is customary for us to hire individuals with a construction background, then to train them to perform the specific technical nature of what we do as a precaster. However, finding applicants with construction experience has proven to be increasingly challenging in the last year. Many of our local skilled laborers were drawn to the oil patch a few years ago. Others who have stayed in the area are finding a plentiful pool of construction jobs to choose from.

Part of our difficulty in finding employees is that our hiring protocol is intentionally selective. Our hiring process includes the application, three reference checks, criminal history check, motor vehicle check, pre-employment physical and pre-employment drug test. This selectivity is really helping us to get people who are capable of making valuable contributions to our growth as a company.

What products are in demand with your customers?

The one thing that is quite evident in our industry is that everything is getting larger: larger tanks, larger box culverts, larger infrastructure. My dad ran this company for 28 years and made a good business largely in providing residential septic tanks and the pipe and drain field products to accompany them. While we still make a great residential product, we have a new opportunity. Now, our success as a company is focused on the larger products that I mentioned. It is a fun and exciting change as we face new challenges in manufacturing and selling larger products.

One of the best things about this business is that we get to work with an assortment some of the best people in Big Sky Country. Our long-time customers include some bigger local contractors with over 100 employees and a small, family run excavating company with less than five employees. Our customer base has recently grown to include some great contractors in the oil patch as well. We have the pleasure of working with many talented engineers, developers and municipalities as well.

What is your perspective on the future of the industry?

The name of the game seems to be in making products on a, I’ll say it again, larger scale. Whatever the product, local projects are being designed with larger infrastructure components. Additionally, we see a trend in the marketplace where more value is being placed on products made by NPCA certified plants.

Advanced Precast Products LLC
Redmond, Oregon
Milo Dubisar, Assistant General Manager

How are things in your region?

We have seen an increased demand for all precast products. This has required us to increase not only the amount of personnel that we employ, but also the amount of finished product that we need to have on hand in order to fulfill our customers’ needs. Since the recession, we’ve also seen the amount of lead time given to us – from the time we are awarded the project to the time our customers need to have product on-site – greatly reduced. We have been able to change our daily production on very short notice in order to keep up with our customers’ demands.

Central Oregon, specifically, is a recreational hot spot. There are a lot of different things that draw people to our region, from our outstanding outdoor activities to the beer breweries. People want to live here and therefore we have seen the housing market quickly start to rebound. We have seen more subdivision work, which requires new manholes and utility vaults. The custom home builders have also picked up, which has required more septic tanks and utility vaults to be readily available to them.

We have had a number of large industrial and commercial projects around the area as well. These projects can include several precast products, such as: utility vaults, manholes, water vaults, light pole bases and parking bumpers.

What products are in demand with your customers?

The majority of our customers are contractors and municipalities. Recently, we’ve looked for ways to diversify our business in order to broaden our customer base and, consequently, we’ve started making splash blocks. We also started a program called “Concrete-To-Go” where customers can come and use our mobile mixing trailer with their own pickup. Our trailers can hold up to one yard of concrete, which can be used for small projects. We now have several homeowners and contractors making use of our mixing trailers.

What is your perspective on the future of the industry?

In our area, we’ve seen an increase in the demand for housing, which requires municipalities to invest in the infrastructure and, in turn, that requires more underground utilities. We anticipate that the Central Oregon area will continue to grow and expand both in industrial and in residential capacities.

Lee’s Precast Concrete Inc.
Aberdeen, Mississippi
Allen Lee, General Manager

How are things in your region?

It’s a bit more optimistic today than past years. Our main customers are municipalities and our main product in demand is stormwater/wastewater replacements. Our individual wastewater household division is also picking up keeping us currently very busy hiring back employees and maintaining project deadlines.

What is your perspective on the future of the industry?

Construction activity has steadily improved compared to last year. The precast industry had seen a few rough years, but today we’re on the right direction, which is upward. Every year seems like a step up from the year prior, which is what we like to see.

MST Concrete Products
Central, South Carolina
Edward Martin, President

How are things in your region?

This year compared to last year we are seeing a 15% increase in sales. We started the year in January and February down 10% and through the summer we saw some ups and downs, yet we ended in September on a very high-point. September is considered our best month of the year since we were up 70% compared to last year. Any month can vary, but currently we have been able to hire back employees and continue to maintain a strong end of the year.

What products are in demand with your customers?

Our utility stormwater division has skyrocketed since we are replacing a lot of orders that got rained out last year. We work mainly with utility contractors and do some work with municipalities. Lately, we have also seen an increase in sub-division housing work. We had a lot of inventory at the start of year, so it’s good to be able to use that inventory for some of these projects.

What is your perspective on the future of the industry?

I see us staying strong. I don’t see any other industry replacing us. I don’t believe we are competing with the plastic industry since not anyone can create such durable, long-lasting products without using precast concrete.

Four Corners Pre-Cast Inc.
Farmington, New Mexico
Ron Thompson, Operations Manager

How are things in your region?

As far as the overall economy, it’s still a little slow here. It seems to be picking up gradually. It’s not as if we are swamped right now and can’t take on any more projects. We usually run a little behind the east coast. The home building is still not where it was, but it looks like it will get better as the year goes on and into next year.

Our summer when it usually gets the busiest was still sparse, but I’m glad to see that is starting to increase as well. We usually have to look at possible layoffs in the winter since it generally gets very slow around here once the snow starts, but if this positive trend continues, I’ll be happy to not do that.

What products are in demand with your customers?

We work on mostly state jobs since we are near Arizona, Colorado and Utah. We manufacture mostly septic tanks, manholes and similar products. We want to work with as many people as we can who will buy our products.

What is your perspective on the future of the industry?

We have several delivery trucks and boom trucks, but I only have three drivers on staff. We have also kept our crews at a minimum, so I’d love for the future growth to allow us the chance to hire more workers. That’s one thing I hope for with the job we are currently bidding on, to hire a whole new crew dedicated only to that job.

Looking into the crystal ball

There are a lot of factors that will determine the long-term state of the economy, particularly in the construction and precast industries. Will the net effect of P3 (public-private partnerships) be positive or negative when it comes to infrastructure building? Will the government pass a long-term, comprehensive transportation bill that provides adequate funding? What will become of the Highway Trust Fund? Will states continue to innovate to find ways to fund infrastructure investments? How great of an effect does the current state of foreign relations have on the economy at home? Does lending continue to free up in the face of potentially higher interest rates? What effect will the election in 2016 have? Employment and the movement of a new generation of potential homebuyers into the market are the drivers of residential construction and they are hard figures to nail down, let alone project.

There are a lot of what ifs and spending too much time contemplating them is not productive. For now, the positive momentum is encouraging and all the major indicators are headed in the right direction. With Thanksgiving fast approaching, that is certainly something to be thankful for.

References 

¹ United States Bureau of Labor Statistics, August 2014 figure.
² http://www.pewresearch.org/fact-tank/2014/04/28/americans-agree-inequality-has-grown-but-dont-agree-on-why/
³ LEED, or Leadership in Energy & Environmental Design, is a green building certification program that recognizes best-in-class building strategies and practices. US Green Building Council.