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AGC's Data DIGest: January 27 – February 3, 2014

Two-thirds of states post job gains; labor costs rise modestly; steel prices go up for now

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.

Seasonally adjusted construction employment increased in 34 states between December 2012 and December 2013, decreased in 15 states and the District of Columbia, and remained level in Nebraska, an AGC analysis of Bureau of Labor Statistics (BLS) data released last Tuesday showed. Mississippi led all states with an 18% rise (8,500 jobs), followed by Connecticut (12%, 5,800 jobs), Florida (8.4%, 28,800 jobs) and Wyoming (8.3%, 1,800 jobs). California added the most jobs over the year (28,900, 4.8%), followed by Florida, Texas (13,500, 2.3%), Georgia (9,900, 7.1%) and Mississippi. The steepest 12-month declines occurred in D.C. (-5.1%, -700 jobs) and Indiana (-4.5%, -5,500 jobs). The largest number of losses occurred in Pennsylvania (-7,600, -3.3%), followed by Indiana, North Carolina (-3,700, -2.2%) and New Jersey (-3,300, -2.5%). For the month of December (which had unusually widespread cold, wintry weather and the first national drop in construction employment in seven months), 17 states added construction jobs, 32 states and D.C. lost jobs, and employment held steady in Mississippi. The steepest one-month gains occurred in South Dakota (3.4%, 700 jobs), Alaska (2.8%, 500 jobs), Alabama (2.6%, 2,000 jobs) and Wyoming (2.6%, 700 jobs and Ohio (2.3%, 4,000). Ohio added the most construction jobs in December, followed by Texas (3,400, 0.6%) and New York (3,100, 1.0%). The steepest losses for the month occurred in West Virginia (-5.0%, -1,800 jobs), New Jersey (-4.9%, -6,500 jobs) and Maine (-4.1%, -1,100 jobs). New Jersey lost the most jobs over the month, followed by Illinois (-4,500, -2.4%) and Missouri (-4,200, -3.7%). (BLS combines mining and logging with construction in D.C., Nebraska, South Dakota and four other states to avoid disclosing data about industries with few firms.)

The employment cost index, a weighted average of all wages and salaries, benefits, and required employer payments, such as unemployment and worker’s compensation, increased 0.5% in the fourth quarter, seasonally adjusted, for all private-sector employees and 0.4% for construction industry employees, BLS reported on Friday. For all of 2013, compensation rose 2.0% in both sectors, a slight acceleration from 1.8% in 2012 for the private sector and 1.6% for construction. However, it is likely the figures for construction understate the increases in both residential and nonresidential segments because of what is known as Simpson’s paradox. In 2013, residential construction employment increased 4.8%, while nonresidential construction, which has a higher average rate of compensation, added just 0.6% to its workforce. Thus, the mix of employment shifted toward a lower average compensation even if both segments increased pay more than the weighted average.

Construction industry settlements (union agreements) signed in 2013 increased by an average of 2.2% for the first year, and 2.6% for the second and third years, the Construction Labor Research Council reported in January. The first-year average was the highest since 2009 (2.8%), and followed average gains of 2.0% in 2012 and 1.7% each in 2010 and 2011.

"Materials and equipment costs for the North American construction industry rose in January as pricing for carbon steel pipe and fabrications increased for the first time in eight months,” IHS Inc. and the Procurement Executives Group reported on Friday in releasing their monthly Engineering and Construction Cost Index. The index “is based on data independently obtained and compiled by IHS from the procurement executives of leading engineering, procurement and construction firms.” While 10 out of the 12 materials and equipment subcomponents of the index rose in price in January, “the primary factor driving the increase was a jump in steel costs. Notably, eight consecutive months of falling prices for carbon steel pipe came to an end in January [and] pricing for fabricated structural steel also ticked up after falling during November and December.  These moves come after a series of modest increases in steel product prices, such as plate….‘Steel prices climbed starting in August through November, which is resulting in increases for pipe and fabricated metals in January,’ said John Anton, director of the steel service at IHS. ‘Despite the upward movement in these fabricated steel products, the current level…does not signal a sustained upsurge in steel prices for the North American construction industry. In fact, IHS sees no change to our forecast for flat prices through 2014.’” The current subcontractor labor index fell slightly to the lowest reading since June 2013, but the overall index rose for the 24th consecutive month in January.

Real (net of inflation) gross domestic product (GDP) increased 3.2% at a seasonally adjusted annual rate in the fourth quarter, compared with 4.1% in the third quarter, the Bureau of Economic Analysis reported last Thursday. Private real fixed investment in nonresidential structures (including mines and wells) slumped 1.2% after rising 13% in the prior period. Real residential investment sagged 9.8%, following a 10% increase. Real government gross investment in structures slipped 0.5% after rising 2.2% in the third quarter; state and local government investment in structures was flat, while federal government investment fell 7.5%. Price indexes rose 1.3% in the fourth quarter and 2.0% in the third for GDP; 4.3% and 3.1% for private nonresidential structures; 8.3% and 5.2% for residential; and 3.7% and 2.4% for government structures.

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

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