Jobs added in 2014 are most since 2005; union pay raises inch up; retail metrics improve
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Nonfarm payroll employment increased by 252,000 in December, seasonally adjusted, and by 2,952,000 (2.1%) over 12 months, the Bureau of Labor Statistics (BLS) reported on Friday. Construction employment rose by 48,000 for the month and 290,000 (4.9%) over the year to 6,166,000, the highest total since March 2009 and the largest annual increase since 2005. Residential construction employment (residential building and specialty trade contractors) climbed by 13,500 for the month and 132,100 (6.0%) for the year. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) increased by 34,400 in December and 158,200 (4.3%) year-over-year. Average weekly hours set all-time highs for all employees in construction (39.4 hours, in a series starting in 2006) and production and nonsupervisory employees (40.1 hours, in a series dating to 1947). The number of jobseekers who last worked in construction dropped from 958,000 in December 2013, not seasonally adjusted, to 680,000, the lowest December total since 2000. (Industry unemployment data are not seasonally adjusted and should only be compared year-over-year, not across months.) The record level of weekly hours, along with the steep decline in unemployment, suggests that experienced workers are becoming increasingly scarce and firms are paying more overtime. Contractors may face problems in 2015 finding enough workers, especially if current employees are not available to work more hours.
Local construction union contract wage and fringe benefit increases averaged 2.3% for the first year in 2014, up a bit from 2.2% in 2013 and the largest rise since 2009, the Construction Labor Research Council reported on December 26, based on 390 agreements covering 15 crafts. Second-year increases averaged 2.4% (vs. 2.6% in 2013). Third-year increases averaged 2.5% (vs. 2.6%). By craft, average first-year increases ranged from 3.0% for carpenters to 1.7% for bricklayers.
"The average strip-center vacancy last year was 10.2%, the lowest annual percentage since 2008, according to new data from real-estate research firm Reis Inc.," the Wall Street Journal's online "Developments" blog reported on Wednesday. "Average rents increased 2%, the largest increase since 2007, said Reis, which tracks the largest 77 markets. At malls, the vacancy rate ticked up slightly to 8% in the fourth quarter from 7.9% in the third, due mostly to closures by Sears Holdings Corp. But vacancy remains down from the recent high of 9.4% set in the third quarter of 2011. Mall rental rates, meanwhile, rose for the 14th consecutive quarter, albeit by tiny measures in each case, [Reis said.] A dearth of new construction in recent years has kept vacancy rates in check and allowed lease rates to rise, if only slowly. Completed construction of strip-center space in the top 77 markets hasn't exceeded 7 million square feet in any of the past three years, according to Reis. By comparison, builders delivered more than 34 million square feet of strip centers in 2005."
"Readings on office-space usage have barely budged," the Journal reported on Monday. The vacancy rate stood at 16.7% in the fourth quarter, down only a hair from the 16.9% registered a year earlier and compared with the postrecession peak of 17.6% reached in 2010, according to data from [Reis]. Office demand in a handful of markets with rapid job growth—including San Francisco and Silicon Valley—is near record highs, pushing up rents and occupancy levels....Overall, employers took on 11 million square feet in the fourth quarter, the most in a three-month period since 2007, according to Reis. But the quarterly data can be volatile, so it is difficult to pinpoint long-term shifts on the basis of one report. In more robust periods, employers routinely added more than 20 million square feet a quarter. Many real-estate analysts expect the slow growth to continue, as more companies shed unneeded office space.
"Nationwide, apartment rents rose an average of 3.6% last year," according to data from Reis, the Journal reported on Tuesday. "The increase pushed the average monthly lease rate to...the highest since Reis started tracking the market in 1980. The vacancy rate last year was 4.2%, the lowest since 2000. Rents were up in all 79 U.S. metro areas tracked by Reis. But unlike in earlier periods, when hefty rent increases mainly affected residents of the largest cities, the current ones are squeezing residents in smaller and midsize cities as well. Average rents were up 7.9% in Denver; 5.5% in Charleston, S.C.; and 4.8% in Raleigh, N.C....'The apartment-construction boom generally has added more supply in the largest cities, while secondary cities saw less supply growth,' said Ryan Severino, a senior economist at Reis....Many economists predict only minor changes in the U.S. apartment market for 2015. Vacancy rates likely will increase this year, but only slightly as strong demand continues to claim most newly built units arriving on the market....Builders started construction of nearly 315,000 apartment units in the first 11 months of 2014, well exceeding the annual average since 2000 of 254,400. Demand from new and existing renters is strong enough to absorb nearly all of that new supply, even as rent increases outpace income gains and inflation as measured by the consumer-price index, according to David Crowe, chief economist for the National Association of Home Builders." Apartment-data research firm Axiometrics reported on Wednesday, "Within the current top 10 metros [measured by number of multifamily permits issued in the 12 months through November 2014], permitting increased significantly from November 2013 in: Phoenix (+101%), San Jose (+78%), Houston (+53%), Los Angeles (+28%), New York (+25%) [and] Seattle (+20%). MF permitting grew moderately in Washington, D.C. (8%). MF permitting decreased in: Dallas (-4%), Atlanta (-16%) [and] Austin (-16%)."
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