Baron Worthington, manager of economic analysis at Vulcan Materials Co., spoke at the Georgia Construction Aggregate Association’s (GCAA) Management Workshop last year, sharing his outlook on the various construction sectors during a short session. PP&E caught up with Worthington to discuss housing developments across the United States, as well as demographic trends and their impact on aggregates demand.
PP&E: Besides Georgia, how is housing faring in the other states you monitor as Vulcan’s economic analysis manager?
BW: You do have to be careful in looking at a state in total because some metro areas within states may be moving in different directions. That being said, Arizona, one of the hardest hit states with regard to housing, was one of the first to show strong signs of a recovery. Florida looks to be finally turning the corner, as well. Texas, which never experienced a big drop-off in housing like some states, continues to show strength.
PP&E: An interesting point you made at the GCAA Workshop is that the demographics in Georgia bode well for new construction. Why do you correlate changing demographics to new construction, and what are some of the other demographic trends you see developing in Georgia?
BW: Where there are people, there is a need for aggregate. Those states that are forecasted to have above-average population growth (Georgia being one) will experience stronger long‐term growth in aggregate demand. Beginning with this past construction recession, there have been some disconnects with regard to population and aggregate demand. One example is the construction of primary and secondary schools, which has historically moved closely with the population of school‐aged children.
Beginning in 2009 in Georgia, there was a sudden and drastic drop in school construction. At the same time, there has not been a similar decline in the number of school‐aged children. As revenue recovers for local governments, I think you’ll see patterns like this reverse.
PP&E: Are the demographical developments you see in Georgia taking place in other states?
BW: Because demand for aggregate has fallen so much, there are breaks in many of the historical patterns regarding population and demand, regardless of the state. Remember, the U.S. population continues to grow and is expected to add more than 31 million people in this decade alone. In many states you can observe that the construction of schools, other institutional buildings and office space is now far below the needs based on current population growth.
We are just now beginning to come off those lows and work our way back to the long‐term trends or, in other words, the “structural” demand.