It’s the ABI, stupid.

The latest report from the Architectural Billings Index should cause concern:

On the heels of a sizeable decrease in April, the Architecture Billings Index (ABI) slowed even further in May.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI score was 47.2, a slight decrease from a reading of 47.6 the previous month. This score reflects a continued decrease in demand for design services (any score above 50 indicates an increase in billings).

Then file this under “duh” from the Consumerist:

While some of us have managed to go back to our pre-bust ways of eating gold-dusted diamonds and speculating on real estate, the Federal Reserve said today that the overall economic recovery hasn’t moved as swiftly as it had previously expected. In the immortal words of Milli Vannilli, the Fed says you can blame it on the rain… and earthquakes, and tsunamis and other disasters.

This is a recipe for disaster.

So why does a performance indicator for construction matter to you? Why should you feel bad for architects (a trade I personally despise)? Put simply: if architects and engineers are not designing buildings, there are no buildings to be built. Owners need cash not only to fund construction, but to pay for design services prior to even considering coming out of the ground.

But why does this matter? Who cares if a few architects,  itinerant carpenters, and masons are out of work, right?

Not so simple. Residential construction alone accounts for roughly 5-10% of our GDP once you factor in design services, new construction, remodeling, landscaping, roofing, pool boys, and all other associated services. Add the commercial sector and you’re talking 15-20% of GDP. That is an awful lot of our economy to eliminate or reduce and considerably more than the 3-4% that our “too big too fail” auto industry contributes.

While none of this is exactly new news, it bears repeating as discussions about the debt ceiling and higher taxes continue on Capitol Hill.

In a nutshell, nine to twelve months from now will see an awful lot of people out of work or working extremely reduced hours should this trend continue. I’m frightened, and you should be too.

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