(08-20-20)
Most firms that received a PPP loan anticipate having to reduce staff and/or staff hours as their loan is exhausted The majority of architecture firms continued to report a decline in their firm’s billings in July, as the pace of that decline remained at about the same level as in June, with an ABI score of 40.0 (a score below 50 indicates a decline in firm billings). Inquiries into new projects continued to show just a modest decline, but more seriously, the value of new signed design contracts slipped from its June level. Unfortunately, with the continued resurgence in COVID-19 cases in many areas of the country, clients may be interested in starting new projects, but remain reluctant to sign on the dotted line. Firm billings remained soft at firms in all regions of the country in July as well, with firms located in the Northeast continuing to report the weakest conditions, although the pace of the decline did continue to stabilize again this month from the low point in April. By firm specialization, firms with a multifamily residential specialization came close to seeing billings growth in July, for the first time since January, but still fell short and continued to experience a slight decline instead. Conditions remain softest at firms with a commercial/industrial specialization, while firms with an institutional specialization saw their decline in billings stabilize somewhat. This month we also asked responding firms to estimate how they think their firm’s revenue will change in the third quarter of 2020, as compared to the second quarter. On average, firms expect a decrease of 4.6% in their revenue, although more than one quarter of responding firms (27%) anticipate that their revenue will increase. Differences in expectations were most stark by firm specialization, with firms with a commercial/industrial specialization expecting their revenue to decline by 5.7%, and firms with an institutional specialization predicting a loss of 5.4%, while firms with a multifamily residential specialization expect revenue to be flat from the second quarter to the third quarter, and nearly half (46%) actually expect to see an increase in revenue during that period. Construction jobs hold steady, while small business uncertainty jumps In the broader economy, nonfarm payroll employment had another month of significant gains in July, with a total of 1.8 million jobs added; however, that is well below the gains seen in the previous two months, and remains 8.4% (12.9 million jobs) below the February pre-pandemic peak. Construction employment was essentially flat following strong gains in June and May, while architecture services employment shed 2,800 positions in June (the most recent data available), falling below the previous pandemic low-point and erasing the gains that were seen in May. Architecture services employment currently stands at a total of 188,900, which is 11,800 fewer positions than the most recent high mark in February. Meanwhile, the National Federation of Independent Business reported that their Small Business Optimism Index declined in July. The uncertainty component of the index increased, and just 25% of small businesses reported that they expect better business conditions in the next six months. However, small businesses did indicate that their job creation plans increased slightly.
