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AGC's Data DIGest: Jan. 28-Feb. 2, 2016

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Construction spending inches up in December; pay accelerates; 44 states, D.C. add jobs

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.

Construction spending in December totaled $1.117 trillion at a seasonally adjusted annual rate, 0.1% above the downwardly revised November rate and 8.2% higher than a year before, the Census Bureau reported on Monday. However, all of the growth for the year occurred in the first seven months. The December total was just 0.2% higher than in July. The full-year total, $1.097 trillion, was the highest annual level since 2007 before adjusting for inflation but was still 5.5% short of the 2006 record. Spending patterns diverged widely by segment and time period. Private residential spending increased by 0.9% for the month and 8.1% year-over-year (y/y). In contrast, private nonresidential spending slumped 2.1% for the month to a level lower than in May, although it was still up 12% y/y. Public construction increased 1.9% and 3.9%, respectively. New multifamily construction jumped 2.7% and 12%; new single-family construction gained 1.0% and 8.7%; and residential improvements rose 0.1% and 5.8%. Most private nonresidential segments decreased for the month but rose y/y. In descending order of December size, manufacturing construction plunged 7.3% for the month but was up 19% y/y and 44% for the full year; power edged up 0.2% for the month and 12% from December 2014 (comprising a 30% y/y jump in oil and gas pipelines and field structures offsetting a 1% drop in electric power facilities); commercial (retail, warehouse and farm) slid 1.1% for the month and 4.5% y/y; and office declined 1.9% for the month but gained 20% y/y. Of the two largest public segments, highway and street construction soared 9.4% for the month and 12% y/y, while educational dipped 0.5% from November but climbed 9.4% y/y.

Compensation costs (wages, salaries and benefits, including required employer payments such as unemployment and workers compensation) in private industry increased 0.5% in December from September, seasonally adjusted, and 1.9% from December 2014, BLS reported on Friday. Wages and salaries rose 0.6% over 3 months and 2.1% over 12 months. Benefits increased 0.4% and 1.3%, respectively. Compensation in construction increased 0.7% in the fourth quarter and 2.2% over 12 months, the largest 12-month increase since 2008. Construction wages and salaries rose 0.9% in the quarter and 2.6% over 12 months, the biggest quarterly and annual increases since 2008. (BLS does not post benefits data for construction.)

Seasonally adjusted construction employment rose in 44 states and the District of Columbia from December 2014 to December 2015 and declined in six states, an AGC analysis of Bureau of Labor Statistics (BLS) data released on January 26 showed. California again added the most jobs (59,300 jobs, 8.6%), followed by Florida (28,500, 7.0%) and New York (26,500, 7.6%). Hawaii again posted the steepest percentage gain (15%, 4,800 jobs), followed by Iowa (13%, 10,000), Idaho (11%, 4,100) and Arkansas (11%, 5,200). North Dakota lost the highest percentage and total number of construction jobs (-8.1%, -3,000). Other states that lost jobs for the year include West Virginia (-7.1%, -2,300), New Mexico (-3.5%, -1,500), Wyoming (-1.7%, -400), Rhode Island (-0.6%, -100) and Pennsylvania (-0.2%, -500). Six states set or tied new construction employment highs in December: Iowa, Louisiana, New York, Oklahoma, South Dakota and Texas. From November to December, construction employment rose in 39 states and D.C., declined in 10 states and was unchanged in Louisiana. (BLS combines mining and logging with construction in D.C., Hawaii, South Dakota and four other states to avoid disclosing data about industries with few employers.)

Gross domestic product, net of inflation (real GDP), increased 0.7% at a seasonally adjusted annual rate in the fourth quarter of 2015, down from 2.0% in the third quarter, the Bureau of Economic Analysis reported on Friday. Private real nonresidential fixed investment in structures (including mining) decreased at a 5.3% rate in the fourth quarter and 7.2% in the third quarter. There was consideration variation among private nonresidential structure types. Investment in commercial and health care structures edged up 1.0% following a dip of 0.7%. Investment in manufacturing structures accelerated to an 8.8% rate from 6.1%. Investment in power and communication structures declined 0.6% after rising 2.8%. Investment in other nonresidential structures fell 0.9% after a 9.6% rise. Real residential fixed investment increased 8.1% and 8.2%, respectively. Real government investment in structures declined at a 4.9% rate in the fourth quarter following an 8.6% rate of increase in the third quarter. The price index for GDP slowed to an 0.8% rate of increase from 1.3%. The price index for private nonresidential structures investment slipped 0.2% following a 1.2% rise. The price index for residential investment climbed 2.4% in the fourth quarter and 2.6% in the third quarter. The price index for government investment in structures edged down 0.7% following an 0.1% increase. (BEA estimates for structures are derived from Census data but the BEA figures were prepared before the Census estimates for December or the latest revisions to November and October data were available.)

The Quarterly Merger and Acquisition Chronicle that consultancy Headwaters MB posted on Monday includes aggregated data from GF Data on transactions involving firms in highway, street and bridge construction; utility system construction; and foundation, structure and building exterior contractors. Across the three segments and revenue sizes ranging from $10 million to $250 million, there is a very similar average ratio (5.0 to 5.8) of total enterprise value to earnings before interest, taxes, depreciation and amortization.

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