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AGC's Data DIGest: January 7-11, 2016

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Construction ends 2015 with job gains; two market trackers say projects are delayed

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.

Nonfarm payroll employment increased by 292,000 in December, seasonally adjusted, and by 2,650,000 (1.9%) for the year, while the unemployment rate held steady at a 7-1/2 year low of 5.0%, the Bureau of Labor Statistics (BLS) reported Monday. Construction employment rose by 45,000 for the month (to 6,538,000) and by 263,000 (4.2%) over 12 months. Industry employment reached the highest level since January 2009 but remained 1.2 million (15%) below the April 2006 peak. The number of unemployed jobseekers who last worked in construction edged down from 680,000 in December 2014 to 645,000 in December 2015, the lowest December total since 2000. The unemployment rate for such workers dipped from 8.3% a year earlier to 7.5%, the lowest December rate since 2005. (Industry unemployment data are not seasonally adjusted and should only be compared year-over-year, not across months.) Average hourly earnings—a measure of wages and salaries—in construction increased by 2.9% over 12 months, the largest rise since 2009. The pickup in wages is consistent with the decline in overall and construction unemployment and the results of a survey AGC released on Wednesday in which 70% of contractors reported difficulty finding qualified hourly craft or salaried professional workers.

Two recent reports suggest some project delays are occurring, perhaps because of worker shortages. Readers are invited to report their experiences to AGC chief economist Ken Simonson at simonsonk@agc.org. On Thursday, Jay Parsons, Director of Analytics & Forecasts for real-estate research firm MPF Research, a division of RealPage, Inc., wrote, "At mid-year 2015, the top 100 U.S. markets were scheduled to complete about 282,000 units for calendar year 2015. The actual total came in 18% lower. We started to see finish dates pushing back in Q3 [the third quarter of 2015] and that persisted into Q4." However, not all late completions are due to construction delays. He noted, "We consider a property completed once it receives its final certificate of occupancy, so some of the delays could be on the inspection side. And we measure a delay by looking at scheduled completion dates (as reported to us) versus actual."

"There are bottlenecks in every step of the construction process, pushing out projects," investment research firm Thompson Research Group reported on Friday in its Q4 '15 survey of building products suppliers. For steel studs, "All attempts for price increases in 2015 have been lackluster, driven more by the reality of a precipitous drop in global steel prices....Raw steel pricing is currently at $185 per ton, down 61%+ vs. 2015 early January's $480 per ton." Stock market participants "trickled out confirmation that [wallboard] pricing modestly slipped intra-quarter." There apparently will not be a January price increase, unlike the past four years, and distributors expressed uncertainty about an increase in April. "The previously announced October 2015 residential insulation price increase was shifted to January 2016" but distributors expressed uncertainty as to whether it would stick. "...there does not appear to be any material/fundamental change to insulation pricing in the market presently....Roofing pricing was mostly flat for Q4'15 and for the full-year 2015, according to monthly feedback from industry contacts....The ceiling tile industry has announced a 5% ceiling tile increase in January/February 2016, and the early read from distributors is that this should be at least partially successful."

An AGC analysis of Census Bureau data posted on January 4 found that retail construction spending (including automotive) slipped 1% from November 2014 to November 2015 and was less than half the total reached in 2007 (without adjusting for inflation), as consumers continue to shift away from purchasing goods, especially in stores. "Increasingly, shoppers are passing up the cashmere sweaters or leather handbags and instead shelling out for experiences such as a beach vacation, a dinner out on the town or a concert," the Washington Post reported on Friday. "Malls and shopping centers are also moving to configure themselves for an experience-seeking consumer. Tom McGee, the chief executive of the International Council of Shopping Centers, said restaurants, theaters and gyms are now taking up a greater share of such properties." The Post reported on Saturday, "Finish Line announced this week that it is closing 150 of its 617 stores....Many of its retail industry counterparts are doing the same calculus: Macy's is set to close 36 stores this year, while Gap is the process of closing about one-quarter of its North American fleet. Pier 1 Imports plans to shutter 100 stores over three years."

The Dodge Momentum Index, "a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year," rose 4.1% in December, "essentially reversing the 3.6% decline that took place in November," construction data provider Dodge Data & Analytics reported on Friday. "The December rise in the Index was fairly evenly spread between a 4.7% increase for institutional projects and a 3.6% increase for commercial projects. On a year-over-year basis, the Index finished 2015 up 2.4% from its reading at the end of 2014. The year-over-year change for the Index was dampened by a 6.7% decline for commercial projects, as this sector settled back to a more sustainable pace after surging 26.4% over the course of 2014. Renewed growth in planning activity for the commercial sector is expected to take place in 2016, supported by strong industry fundamentals such as vacancy rates and employment. Institutional projects at the planning stage jumped 15.8% in December compared to the same month a year ago, helped by the passage of recent construction bond measures and the improved fiscal health of state and local governments."

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.