(08-20-19)
Business conditions at architecture firms remained essentially flat for the sixth consecutive month in July. Although the ABI score of 50.1 for the month technically indicates growth, the score is barely above 50, which means that the share of firms that reported increasing firm billings for the month is just slightly higher than the share that reported decreasing billings. Overall, this six-month stretch is one of the longest periods of essentially flat billings since the end of the Great Recession. Additionally, there continues to be softness in the indicators of future work, with the score for the value of new design contracts declining to 49.0 in July. Although we did not start collecting this data until 2010, well after the last economic downturn began, this is one of the lowest monthly scores that has been observed in the index’s nearly nine-year history. However, all these signs are still not clear indicators of an impending economic downturn; they are showing a period of softness in the industry that remains worth monitoring closely. Most regions experience declines – Business conditions also remained soft at firms located in the Northeast and Midwest regions in the country in July, as both regions have experienced declining billings since February. Firms located in the South reported declining firm billings for the first time in eight months, although firms located in the West reported growth for the third consecutive month. Business conditions were also essentially flat at firms of all specializations, as those with a multifamily residential specialization saw slight growth, and those with institutional and commercial/industrial specializations reported modest softening. In the broader economy, nonfarm payroll employment grew by 164,000 new positions in July. While this is in line with average monthly gains so far this year, it is well below the average monthly gains of 223,000 in 2018. And construction employment was essentially flat for the month, while architecture services employment was also unchanged from 200,500 in May to June, the most recent data available. The GDP showed some signs of slowing in the second quarter of the year, increasing at an annual rate of 2.1 percent, down from an annual growth rate of 3.1 percent in the first quarter of 2019. Remote work offerings on the rise – This month’s practice questions asked firms about what types of remote work options they offer to their employees, and what benefits and/or challenges they experience related to providing that option. Overall, eight in ten responding firms indicate that they provide at least one telework option to their qualified full-time employees, with the largest share (65 percent) offering staff the option to work remotely on an ad hoc basis. Otherwise, about one in ten firms offer at least one other type of remote work option, like full-time remote work, daily, weekly, and/or monthly options. Of the firms that offer each of these remote work options, 27 percent of employees with the option take advantage of working from home all or almost all the time, 32 percent with the option work remotely on an ad hoc basis, 20 percent with the option work remotely a few days a month or one day per week, and 17 percent with the option work remotely multiple days a week. At small firms, a much larger share of employees that have the option work from home full-time actually do so (58 percent) in contrast to just 3 percent of employees at large firms. This may be because small firms may be more likely than large firms to operate entirely as a remote office. Offering employees the option for remote work can have positive and negative impacts on architecture firms. While firms indicate that it generally has no impact on office space needs, nearly one third of firms (31 percent) indicate that it can help decrease the “carbon footprint” of the office, a share that is even higher for small firms than for large firms. However, 24 percent of firms indicate that having employees that work remotely can increase the need for office equipment, like computers, as some employees may require separate equipment for home and the office. On the positive side, offering the option to work remotely can also help increase employee morale (reported by 76 percent of firms) and retention (reported by 64 percent of firms), by providing employees more work-life flexibility. Employee productivity is more of a mixed bag, with 25 percent of firms indicating that remote work increases productivity, while 21 percent feel that it decreases productivity. This month, Work-on-the-Boards participants are saying: “Very slow, lots of preliminary drawings and submittals but no one is moving forward. Lots of hold ups at municipalities.” —7-person firm in the South, commercial/industrial specialization “While the amount of work remains strong, the number of inquiries is down substantially from a year ago.” —55-person firm in the Midwest, institutional specialization “Looks okay following about a three-month hiccup that put many projects on hold waiting for the new fiscal year to start on July 1.”—28-person firm in the Northeast, mixed specialization. “We have a healthy mix of commercial and multifamily work, as well as a mixture of new construction and renovations. As a small firm, this portfolio diversity helps us feel more confident, should business conditions further soften.”— 1-person firm in the West, residential specialization.
