Construction job growth, unemployment improve; several indicators augur more gains
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Nonfarm payroll employment increased by 195,000, seasonally adjusted, in June and 2,293,000 (1.7%) over 12 months, the Bureau of Labor Statistics (BLS) reported on Friday. Construction employment rose by 13,000 for the month and totaled 5,812,000, seasonally adjusted, the highest level since August 2009 and a gain of 190,000 (3.4%) over the past year. Total hours worked in construction (aggregate weekly hours) increased by 4.7% since June 2012, implying that contractors are lengthening working hours slightly, in addition to hiring new workers. Residential construction employment (residential building and specialty trade contractors) climbed by 5,200, seasonally adjusted, for the month and 90,200 (4.4%) for the year. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) rose by 8,400 and 99,800 (2.8%), respectively. Architectural and engineering services employment, a harbinger of future demand for construction, rose 2.6% over the year. The unemployment rate for jobseekers who last worked in construction tumbled to the lowest June level in five years—9.8%, down from 12.8% in June 2012 and a June high of 20.1% in 2010. Between June 2010 and June 2013 the number of unemployed former construction workers shrank by 960,000, while contractors added only 305,000 employees, implying that more than 600,000 experienced workers left the industry. (Industry unemployment data are not seasonally adjusted and should only be compared year-over-year, not across months.)
The “data indicate that the count of construction sector job openings for the months of 2013 is the highest since 2008,” the National Association of Home Builders pointed out in its Eye on Housing blog on Tuesday. “While the increase in unfilled positions is consistent with the uptick in construction sector activity, particularly for home building, the data reflect only modest increases in total employment thus far. For the construction sector, Job Openings and Labor Turnover Survey [data from BLS] indicate that gross hiring rose to 307,000 in May from 283,00 in April. However, the hiring rate, as measured on a three-month moving average basis, has been slowing since the start of 2013. Consistent with reports of some labor shortages for builders, the number of open, unfilled positions in the construction industry remains near post-Great Recession highs. …103,000 in May, marking four of the last five months for which the total number of open positions was greater than 100,000. This is the first time this has occurred since 2008….The May job openings rate (open positions measured as a percentage of current employment) for construction was 1.7%. Measured as a three-month moving average, the openings rate…has staged a noticeable rise since September 2012. Combined with a declining sector layoff rate (nonseasonally adjusted),… these factors suggest more net construction hiring in the months ahead—if firms can find workers with the right skills.”
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”—slipped 1.5% in June after six consecutive increases, McGraw Hill Construction reported on Tuesday. “The June pause came after May produced the highest level for the Momentum Index since March 2009, and indicates that the rising trend for nonresidential building remains subject to the occasional setback. As shown by such market fundamentals as vacancy rates, the commercial building sector is getting healthier, but the improvement continues to occur at a gradual and hesitant pace. The June Momentum Index revealed a mixed reading for its two major components, as a sharp increase in plans for institutional buildings offset a drop in commercial development,” which recorded declines in both office and retail-related development.
“The amount of office space occupied by employers increased by 7.2 million square feet” in the first quarter, the biggest increase since 2007, according to real-estate research service Reis Inc., the Wall Street Journal reported on Monday. In a commentary posted on Monday, Glen Marker, Senior Market Advisor for CoStar, wrote, “there’s definitely a trend towards a more efficient use of space among office users thanks to the advancement of digital file storage, Wi-Fi, and the like. But… recent office leasing trends point to the cyclicality of office demand as the driver of smaller lease sizes…. Small businesses tend to shed jobs earlier in recessions than midsize and large companies do, but they also drive growth earlier in the recovery stage of each business cycle. In other words, the smaller-than-average size of office leases is as much about where we are in the business cycle as it is about the trend toward more efficient, collaborative spaces. The good news is that the volume of new leasing has been steadily improving over the past few years, as has the size of the average office lease…. The challenge is that 73% of recent leasing activity, in terms of the total square feet occupied, has been driven by tenants requiring less than 25,000 square feet of space. During the previous business cycle, 2000-2007, tenants requiring less than 25,000 square feet accounted for 67% of the total square feet of new leasing demand in any given year, whereas the small-tenant share of new demand reached as high as 75% at the end of 2009. In other words, it appears that smaller tenants continue to drive an above-average share of new demand at this stage in the recovery.”
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