A Sustainable Workforce Starts With You

AGC's Data DIGest: July 27-31, 2015

Only half of metros add construction jobs; industry wages rise at fastest rate since 2008

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 employment, not seasonally adjusted, increased from June 2014 to June 2015 in only half (180) of the 358 metro areas (including divisions of larger metros) for which the BLS provides construction employment data, decreased in 127(28%) and was stagnant in 51, according to an AGC release and map on Wednesday that analyzed BLS data. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers.) The number of metros with job increases was the smallest since September 2012. The Seattle-Bellevue-Everett division again added the largest number of construction jobs in the past year (11,300 construction jobs, 15%), followed again by Denver-Aurora-Lakewood (10,200 combined jobs, 11%). The largest percentage gains occurred in El Centro, Calif. (21%, 400 combined jobs), Visalia-Porterville, Calif. (20%, 900 combined jobs), the Camden, N.J. division (19%, 4,000 combined jobs) and the Tacoma-Lakewood, Wash. division (19%, 3,600 construction jobs). The largest job losses again were in New Orleans-Metairie (-2,700 construction jobs, -9%) and Gulfport-Biloxi-Pascagoula, Miss. (2,100 combined jobs, -21%). The largest percentage decline was in Santa Fe., N.M. (-22%, -600 combined jobs), followed by Gulfport-Biloxi-Pascagoula.

Total compensation—wages, salaries, benefits and required employer payments for social insurance and workers compensation—increased 1.9% for all private industry workers from the second quarter (Q2) of 2014 to 2015Q2, the slowest annual increase since early 2014, BLS reported today. Wages and salaries rose 2.2% over four quarters, while total benefits rose 1.4%. In contrast, compensation in construction increased 2.1%, up from 1.3% a year earlier. It is likely that the relatively mild increase in construction reflects a compositional shift, as employment rose more in the lower-paid residential building and specialty trade segments (5.5% from June 2014 to June 2015, according to an AGC analysis of BLS data) than in the higher-paid nonresidential building, specialty trades, and heavy and civil engineering segments (3.5%). Wages and salaries in construction increased 2.4% from 2014Q2 to 2015Q2, up from 1.2% a year earlier and the highest annual increase since 2008.

Real (net of inflation) gross domestic product (GDP) increased 2.3% at a seasonally adjusted annual rate in 2015Q2, a pickup from the 0.6% rate in Q1, the Bureau of Economic Analysis reported on Thursday. Real private fixed investment in nonresidential structures slipped 1.6% in Q2 and 7.4% in Q1, dragged down by decreases in mining exploration, shafts and wells of -44.5% in Q2 and -68% in Q1. There were large Q2 gains in real investment in manufacturing structures, 65%; power and communication structures, 35%; commercial and health care structures, 17%; and other structures, 30%. Real private fixed residential investment slowed to a 6.6% rate following a 10% rise in both Q1 and 2014Q4. Single-family investment rose 1.1%, while multifamily soared 14.5%. Real government gross investment in structures jumped 13.5%, following a -9.9% rate in Q1. The GDP price index increased at 2.0% rate. The index for private nonresidential structures fell at a 2.5% rate; private residential investment, -1.5%; and government structures, -0.5%.

Manufacturing structures investment leaped in part due to a surge in petrochemical and fertilizer plant construction that seems likely to continue. "In 2016, three methanol plants are expected to come online in the Gulf of Mexico area," the Energy Information Administration reported on Wednesday. "Additionally, a large nitrogen fertilizer plant...is currently under construction on Louisiana's Gulf Coast and is expected to come online in 2016, according to Bentek Energy....Northwest Innovation Works, a multinational company, is planning two methanol facilities for 2018 on the Columbia River in Washington and Oregon. The company plans to export methanol produced in the United States to a plant in Dalian, China, where it would be converted to olefins and used in manufacturing....Later this year, a large fertilizer/urea plant in Wever, Iowa, is scheduled to come online...Ohio Valley Resources has proposed a fertilizer plant in Rockport, Ind., for 2017, and Fatima Resources has proposed a plant in Mount Vernon, Ind., for 2018....Two North Dakota ammonia-based fertilizer plants are proposed for 2018 and are both in the permitting stage: farm-owned cooperative CHS Inc.'s proposed plant in Spiritwood and Northern Plains Nitrogen's proposed plant in Grand Forks."

Consultancy IHS and the Procurement Executives Group (PEG) reported on Wednesday, "Materials and equipment prices continue to drag down overall construction costs....The headline current IHS PEG Engineering and Construction Cost Index (ECCI) registered 48.4 in July, up from June's reading of 47.4, but below the neutral mark [in which a reading greater than 50 represents upward pricing strength; below 50, downward pricing strength]. The current materials/equipment index registered 47.4 in July, up from 46.0 in June. The pricing environment appears to be stabilizing, a change from the weakness seen in the first half of the year, but remains soft. [Prices fell] for half of the 12 individual components tracked by the survey. Prices for copper-based wire and cable, carbon steel pipe and fabricated structural steel registered the weakest performance. Six components did show higher prices in July, led by turbines, which overtook ready-mix concrete prices as the strongest price performer. Ready-mix concrete prices have held the top spot since January....The current subcontractor labor index registered 52.1 in July, higher than June's reading of 50.7; moving the index solidly above the neutral mark. The majority of regions reported rising cost in July, with the exception of the U.S. Midwest. The U.S. South continues to be the strongest region with reported tightness in skilled labor markets due to petrochemical and [liquefied natural gas] projects in the region."

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.