(04-20-19)
Billings at architecture firms declined for the first time in over two years in March with the AIA’s ABI score falling to 47.8 (a score below 50 indicates decreasing firm billings). While this score may raise concerns about the start of a period of weaker business conditions, it is important to note that it does follow on the heels of a particularly tough late winter period for much of the country, with record-setting cold, storms, and floods.
In addition, many indicators of future work at firms remain positive, with both inquiries into new work and the value of new design contracts continuing to grow, although the pace of growth of design contracts has slowed in recent months. Backlogs of work at architecture firms also rose to a new high of 6.5 months in March, up from 6.3 months one year ago. However, softer billings were pervasive across much of the country in March. Only firms in the South region saw billings growth, with firms located in the Northeast reporting particularly weak billings. In addition, firms located in the Midwest reported their second consecutive month of declining billings, the first time that has occurred in two years. Billings also softened at firms of all specializations in March, most notably at firms with commercial/industrial and residential specializations, while the decline was smaller at firms with an institutional specialization. In the broader economy, there is still no definitive trend toward a recession. A recent commentary from the economics group at Wells Fargo Securities lays out several arguments for why a recession is not necessarily imminent, despite some worrisome signs in recent months, including the recent inversion in the yield curve. The report indicates that consumer finances remain generally strong, that financial market conditions are not currently too restrictive, and that the commercial construction sector is not yet overbuilt. And after paltry gains in nonfarm payroll employment in February of just 33,000 new positions, payrolls rebounded in March, adding 196,000 new positions. In addition, the unemployment rate remained at a low 3.8 percent, and average hourly earnings continued to increase, rising 3.2 percent over the last year. Architectural services employment also continues to grow, with 1,100 new jobs added in February (the most recent data available), for a total of 2,100 added so far in 2019.