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AGC's Data DIGest: April 24-May 11, 2018

Construction goods, labor costs accelerate, employment rises in April; March spending falls

Editor’s note: Construction Citizen is proud to partner with AGC America to bring you AGC Chief Economist Ken Simonson's Data DIGest. Check back each week to get Ken's expert analysis of what's happening in our industry.

The producer price index (PPI) for final demand in April, not seasonally adjusted, rose 0.1% from March and 2.6% year-over-year (y/y) from April 2017, the Bureau of Labor Statistics (BLS) reported on Wednesday. AGC posted tables and an explanation focusing on construction prices and costs. Final demand includes goods, services and five types of nonresidential buildings that BLS says make up 31% of total construction. The PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of buildings—jumped 1.1% for the month and 4.2% y/y, the largest y/y increase since March 2012. Increases ranged from 3.4% y/y for warehouses to 3.8% for office buildings, 4.4% for health care buildings, 4.8% for industrial buildings and 5.1% for schools. PPI increases for subcontractors' new, repair and maintenance work on nonresidential buildings ranged from 1.1% y/y for roofing contractors to 4.1% for concrete and plumbing contractors and 4.6% for electrical contractors. The PPI for inputs to construction—excluding capital investment, labor and imports—comprises a mix of goods (56%) and services (44%). This index jumped 6.1% y/y, which exceeded the 4.2% PPI increase for new nonresidential building construction, implying a cost squeeze for contractors. Increases for inputs to seven nonresidential building types ranged from 4.5% for industrial structures to 7.0% for power and communications structures. Increases for inputs to construction accelerated for both services, up 5.7% y/y, and goods (including items consumed by contractors, such as diesel fuel), up 6.4% y/y—the biggest jump since 2011, as the sub-index for energy soared 19%, while the PPI for goods less food and energy rose 4.8%.PPIs for inputs to new residential structures rose 5.9% y/y for single-family and 6.2% multifamily. Items important to construction that had major one- or 12-month price changes include diesel fuel, up 2.4% in April and 42% y/y; aluminum mill shapes, 1.8% and 12%, respectively; lumber and plywood, -0.5% and 11%; copper and brass mill shapes, -1.4% and 10%; gypsum products, -1.0 and 7.5%; steel mill products, 3.2% and 7.4%; ready-mixed concrete, 1.3% and 6.9%; truck transportation of freight 0.2% and 6.0%; and asphalt felts and coatings, 7.6% and 5.8%.

 Nonfarm payroll employment in April increased by 164,000, seasonally adjusted, from March and by 2,280,000 (1.6%) y/y, BLS reported on May 4. The unemployment rate dropped to a 17-year low of 3.9% from 4.1% in March. Construction employment rose by 17,000 for the month (after dipping by 10,000 in March) and 257,000 (3.7%) y/y to 7,174,000 (the highest level since June 2008 but 7% below the April 2006 peak). Average hourly earnings in construction rose 3.5% y/y (the largest y/y increase since July 2009) to $29.63, or 9.7% higher than the average for all private-sector employees ($26.84, up 2.6% y/y). The unemployment rate in construction, not seasonally adjusted, edged up to 6.5% from 6.3% in April 2017 and the number of unemployed jobseekers with construction experience rose to 623,000 from 585,000. (Not-seasonally-adjusted data may be affected by normal weather and holiday patterns and thus should not be compared to levels in other months.)

Construction employment, not seasonally adjusted, rose from March 2017 to March 2018 in245 (68%) of the 358 metro areas (including divisions of larger metros) for which BLS provides construction employment data, fell in 67 (19%) and was unchanged in 46, according to an AGC analysisreleased on May 2. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers.) The largest gains occurred in Houston-The Woodlands-Sugar Land (10,700 construction jobs, 5%), followed by Phoenix-Mesa-Scottsdale (9,500 construction jobs, 9%). The largest percentage gain occurred in Weirton-Steubenville, W. Va.-Ohio. (29%, 400 combined jobs), followed by Merced, Calif. and Wenatchee, Wash. (each 26%, 600 combined jobs). The largest job losses again were in Baton Rouge, La. (-3,200 construction jobs, -6%), followed by Columbia, S.C. (-2,200 combined jobs, -11%). The largest percentage loss again occurred in Auburn-Opelika, Ala. (-34%, -1,300 combined jobs), followed by Monroe, Mich. (17%, -400 combined jobs).

 Construction spending totaled $1.285 trillion at a seasonally adjusted annual rate in March, down 1.7% from the upwardly revised February rate but up 3.6% from March 2017, the Census Bureau reported on May 1. Public construction was flat for the month but increased 3.0% y/y. Of the three largest public segments, highway and street construction rose 1.2% for the month but decreased 3.5% y/y; educational construction, -0.1% and 2.0%, respectively; and transportation, -2.7% and 9.6% (+33% y/y for state and local airport construction and -2.8% for other public transportation—port, transit and passenger rail). Private residential spending slumped 3.5% in March but rose 5.3% y/y. New multifamily construction plunged 2.7% and 8.2%, respectively; new single-family construction, -0.4% and 9.7%; and residential improvements, -8.0% and 3.7%. Private nonresidential spending fell 0.4% in March but rose 2.2% y/y. Of the four largest components, power (electric power plus oil and gas pipelines and field structures) was flat for the month but declined 5.3% y/y; commercial -2.2% and 7.3%, respectively (comprising retail, -3% y/y, and warehouse, +26%); manufacturing -1.1% and 6.9% y/y; and office, 1.1% and 2.3%. 

There were 248,000 job openings in construction, not seasonally adjusted, at the end of March, up from 179,000 in March 2017 and the highest March total since the series began in 2001, BLS reported on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. The industry hired 314,000 employees in March, around the average March level for the past eight years. These figures suggest contractors are still eager to hire more workers but are having difficulty finding ones who have construction experience. 

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at http://store.agc.org.