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AGC's Data DIGest: Apr. 24-May 4, 2015

Construction spending slips in March; jobs grow in 70% of metros; wages accelerate

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Construction spending in March totaled $967 billion at a seasonally adjusted annual rate, down 0.6% from the upwardly revised rate in February, but up 2.0% from March 2014, the Census Bureau reported on Wednesday. Because unseasonably mild or severe weather can distort monthly comparisons in winter, it is more revealing to compare year-to-date figures for January through March combined. On that basis, total spending increased 3.2% from the same months of 2014, private residential spending edged up 0.8%, private nonresidential spending increased 6.4% and public construction spending gained 1.7%. The largest private nonresidential segment was "power" construction, which in Census' classification includes conventional and renewable power plus oil and gas fields and pipelines, and which plunged 16% year-to-date. This figure masks a huge difference between electric power, down 44%, and other (mainly pipelines), up 47%. The next largest private segments (in descending order of current size) were manufacturing construction, which soared 35%, propelled in part by a 68% leap in chemical manufacturing projects; commercial (new and renovated retail, warehouse and farm), up 17%, driven by a 46% jump in warehouse construction; and office, up 23%. Of the top two public segments, highway and street construction declined 2.9% year-to-date, while public educational spending slid 1.1%. Of the three residential components, new single-family construction climbed 10%, new multifamily soared 27%, and improvements to existing residential structures tumbled 23%. Although improvements are included in totals, Census does not consider the estimate reliable enough to publish. It seems improbable that improvements would have fallen, let alone so steeply, when there were year-to-date increases in new-home sales (22%, Census reported on April 23 February) and existing-home sales (6%, according to National Association of Realtors reports).

Construction employment, not seasonally adjusted, increased from March 2014 to March 2015 in 249 (70%) of the 358 metro areas (including divisions of larger metros) for which the Bureau of Labor Statistics (BLS) provides construction employment data, decreased in 56 (16%) and was stagnant in 53, according to an AGC analysis of BLS data released on Wednesday. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers.) The Seattle-Bellevue-Everett division added the largest number of construction jobs in the past year (12,400 construction jobs, 17%), followed by Denver-Aurora-Lakewood (11,400 combined jobs, 13%), Houston-The Woodlands-Sugar Land (8,600 construction jobs, 4%) and the Dallas-Plano-Irving division (8,400 combined jobs, 7%). The largest percentage gains occurred in Wenatchee, Wash. (33%, 600 combined jobs), Merced, Calif. (25%, 400 combined jobs), Atlantic City-Hammonton, N.J. (23%, 1,000 combined jobs) and Beaumont-Port Arthur, Texas (22%, 3,900 combined jobs). The largest job losses were in New Orleans-Metairie (-3,300 construction jobs, -11%), followed by Gulfport-Biloxi-Pascagoula, Miss. (-1,800 combined jobs, -17%) and Cleveland-Elyria (-1,600 combined jobs, -5%). The largest percentage decline was in El Centro, Calif. (-22%, -700 combined jobs) followed by Weirton-Steubenville, W.Va.-Ohio (-19%, -400 combined jobs), Gulfport-Biloxi-Pascagoula and Santa Fe N.M. (-15%, -400 jobs). An AGC map shows that many states have a mix of construction job gains and losses among their metros.

Total compensation—wages, salaries, benefits and required employer payments for social insurance and workers compensation—increased 2.8% for all private industry workers from the first quarter (Q1) of 2014 to 2015Q1, the steepest annual increase since 2008, BLS reported on Thursday. Compensation in construction increased 1.8%, matching the 2013Q4-2014Q4 increase. It is likely that the smaller increase and lack of acceleration in compensation in construction reflects a compositional shift, as employment rose more in the lower-paid residential building and specialty trade segments (6.0% from March 2014 to March 2015, according to an AGC analysis of BLS data) than in the higher-paid nonresidential building, specialty trades, and heavy and civil engineering segments (3.8%). Wages and salaries in construction increased 2.0% from 2014Q1 to 2015Q1, up from 1.3% a year earlier and the highest annual increase since 2009.

Real (net of inflation) gross domestic product (GDP) inched up 0.2% at a seasonally adjusted annual rate in 2015Q1, a sharp slowdown from the 2.2% rate in 2014Q4, the Bureau of Economic Analysis reported on Thursday. Real private fixed investment in nonresidential structures (including wells and mines) plummeted 23%, the first downturn in eight quarters. The biggest decrease was in mining exploration, shafts and wells, -49%. But there were also declines in real investment in power and communication structures (for the fourth consecutive quarter), -19%; commercial and health care structures, -7.8%; and other structures, 25%. These more than offset a 31% jump in manufacturing structures. Real private fixed residential investment slowed to a 1.3% rate from 3.8% in 2014Q4. Single-family investment slipped 1.1%, while multifamily rose 13%. Real government gross investment in structures plunged 13%, from a 4.4% growth rate the previous quarter. The GDP price index increased at 1.2% rate. The index for private nonresidential structures fell at a 0.1% rate; the index for private residential investment gained 2.2%; and government structures price index was flat.

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