Reading between the trend lines

Context for the numbers driving the economy, with a special focus on the number of positions lost in architecture over the past 10 months

The most recent data for architectural services points to 13,600 fewer positions below the pre-pandemic peak of 200,000 in February. Recent AIA research indicates that 60 percent (or about 8,160) of those lost positions were architecture staff, or equal to about 6.4 percent of the total number of licensed architects in the US, which reached a pre-pandemic peak of 126,130.

In the context of this pandemic-induced recession, in which 25.5 million Americans filed for unemployment between March and September, those losses in architecture represent 0.05 percent of total lost jobs nationally, including those in hardest hit industries like retail, entertainment, and hospitality. Compared to the Great Recession, during which an average of 6,800 jobs were lost in architecture each quarter between July 2008 and July 2010, this current recession is averaging 4,500 lost jobs per quarter.

In response, the AIA is working with members and local chapters to facilitate dues exceptions, dues extensions, and dues installment plans for individuals who have lost their jobs or have met economic hardship through furloughs or reduced hours. If a member calls AIA National and needs to adjust their dues because of economic hardship, AIA National will work with their local chapter on a suitable arrangement. In addition, currently unpaid members can opt-in to a dues installment program extension until June 30, 2021, and pay in installments through August 31, 2021. AIA National is also evaluating how to address the lapsed dues deadline to be more accommodating under such uncertain circumstances.

“The message to members is that we care, and we can come up with a solution that best fits your needs. When a member calls and says they can’t continue with their membership, we want them to know that there are a number of things we can do to help them and to keep them as members. We want them to remain part of the AIA community,” says Mike Skiados, Managing Director for Membership Strategy and Services at AIA National. “We want to let people know that if they are having financial hardships, we are here to serve them. If a member calls us, we turn around and call their local chapter to facilitate the dues adjustment process.”

Through its Career Center, AIA also offers members discounts on resume retooling, with experts who understand the AEC industry, as well as a series of resources to help job seekers target the right opportunities. The Career Center also features a Job Search database with current openings, and AIAU has added several courses over the past 10 months addressing economics, pivoting to different practice types, and the latest sustainability intelligence and best practices for course takers to stay competitive. AIA’s Knowledge Communities continue to facilitate real-time discussions across different practice types and interests, as well as create a virtual network at a time when everyone is expanding their virtual outreach efforts.

How do architects fit into the larger unemployment picture?

In April, payroll data indicated that low-wage workers were four times more likely to have lost their jobs than workers in the top-fifth of the pay scale (where architects reside), according to Federal Reserve Board economists. A month later, those numbers improved slightly and, as subsequent months have shown, temporary unemployment has gone down.

A distinction must be made between temporary unemployment, inside of six months, and permanent job loss, meaning you’ve been out of work for longer than six months. Nationwide, temporary unemployment is declining, down from 18 million jobless claims in April to just 4.3 million in September. But the number of Americans unemployed for longer than six months is on the rise, from 2 million in April to 3.7 million in September. The slow creep of permanent job losses has experts concerned not only for macroeconomic reasons of today, but for the human capital impact it will have. In architecture, that has to do with soft skills like time management, but it also has to do with the hard skills developed through technical proficiency. In architecture these days, mastering a new digital platform or a new version of an old platform is a matter of professional pride and marketability, but in a real sense, by real time-is-money considerations for sometimes razor thin profit margins.

For AIA’s Chief Economist Kermit Baker, Hon. AIA, the story of this recession isn’t sweeping narratives about unemployment. It’s about a range of conditions for firms, from market to market and even from block to block, that make for a difficult prognosis. “You can have two firms 100 yards away from each other having very, very different business conditions right now,” he says. “Things could be in the pits or things could be going gangbusters depending on the month with the AIA’s Architecture Billings Index, but you will always find some firms reporting conditions that tell the opposite story of what’s going on for most other firms.”

Consumer spending and construction spending are different dimensions of economic activity even if they are united by quantifiable rates and both represent confidence bellwethers. Both also have subsets such as durable goods like appliances versus travel, or single-family versus healthcare. But, consumer spending on average across all categories tripled in the last 50 years on a steady rise with two notable dips, according to the Bureau of Economic Analysis (BEA). A trough-shaped dip followed the Great Recession and took three years to recover from, while the COVID-induced dip over the last 10 months has been far more precipitous than its predecessor. Today, even though the economy performed extremely well in the third quarter, it continues well below its pre-downturn level as consumers remain circumspect about the future, not to mention restricted by closures and public health warnings.

Construction spending seems like another story on the surface. In August, the Commerce Department posted a seasonally adjusted annual rate of $1.4 billion, which was actually higher than the July number of 1.3 billion and a full 2.5 points above August of 2019. Things are going well, in other words, but “going” is the key word—Commerce counts projects in-process whose owners are loath to halt them. “Once a project is underway,” says Baker, “an owner might say, ‘Gee, the economics of this project have changed, but moth-balling something I’ve already spent so much on doesn't make sense.’”

Baker and others prefer to look at design activity – as presented by the AIA’s Architecture Billings Index (ABI) -- and construction contract awards, instead, for a more accurate picture of where the industry is headed.  September’s ABI of 47 was part of an upward trend after April’s nadir of 29.5, prompting Baker and the economic research team at AIA to note that indicators of future work are improving, but they remain cautious about the next six months. One reason is projected revenue losses by firms, particularly in retail and hospitality, offset slightly by more positive outlooks by firms in healthcare. Another is the outcome of the election--not necessarily the November 3 poll results and their aftermath, but the next administration’s eventual economic response, as well as the terms of another stimulus package.

“If you look at where ABI is right now coming out of October and you look at other sources like Dodge Construction Starts, both of these numbers are down, suggesting the slowdown wave is right behind it,” says Baker. “But we will be monitoring things very closely in the coming weeks and months.”

Do you have questions about the economy you’d like AIA to consider? Email economics@aia.org