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AGC's Data DIGest: June 2-6, 2014

Construction payrolls and spending edge higher; Beige Book points to further growth

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 rose by 217,000, seasonally adjusted, in May and 2,379,000 (1.7%) over 12 months, the Bureau of Labor Statistics (BLS) reported Friday. Construction employment rose by 6,000 for the month and 189,000 (3.3%) over the year to 6,004,000, the highest total since June 2009. Residential construction employment (residential building and specialty trade contractors) climbed by 3,300 for the month and 105,600 (4.9%) for the year. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) rose by 2,700 from April and 82,000 (2.2%) year-over-year. All five residential and nonresidential segments added workers over 12 months. Aggregate hours worked in construction increased 2.4% over 12 months, while average hourly earnings rose 2.1%. The unemployment rate for jobseekers who last worked in construction fell to the lowest May level in six years: 8.6%, down from 10.8% in May 2013 and a high of 20.1% in May 2010. (Industry unemployment data are not seasonally adjusted and should only be compared year-over-year, not across months.) Since May 2010 the number of unemployed construction workers has dropped by 1,008,000, not seasonally adjusted. But construction employment rose by only 488,000, implying that over 500,000 experienced workers in the past four years left the industry for employment elsewhere, further training or schooling, retirement, or left the workforce. These departures may make it hard for contractors to find skilled workers if demand rises further, even though the unemployment rate remains higher than the overall nonfarm rate (6.1%, not seasonally adjusted; 6.3%, seasonally adjusted).

Construction spending in April totaled $954 billion at a seasonally adjusted annual rate, up 0.2% from March and up 8.6% from April 2013, the Census Bureau reported last Monday. Census revised up the totals for March ($9 billion) and February ($5 billion). Private residential spending climbed 0.1% for the month and 17% over 12 months to a six-year high. Private nonresidential spending dipped 0.1% for the month but rose 5.6% year-over-year. Public construction spending gained 0.8% and 1.2%, respectively. Of the three residential components, new single-family construction increased 1.3% in April and 14% year-over-year; new multifamily leaped 2.7% and 31%, respectively; and improvements to existing residential structures decreased 2.2% for the month but rose 17% from a year earlier. The largest private nonresidential segment—power (including conventional and renewable power plus oil and gas fields and pipelines)—fell 0.6% and 3.9%, respectively. The next three private segments (in descending order of 2013 size) were mixed for the month but up year-over-year: manufacturing construction, -1.1% and 7.3%; commercial (new and renovated retail, warehouse and farm), 0.6% and 8.1%; and office, 3.1% and 26%. Both of the top two public segments increased 4.9% over 12 months, but highway and street construction declined 1.1% for the month while public educational spending gained 3.0%.

Informal soundings of businesses in the 12 Federal Reserve districts indicated expansion of economic activity between early April and May 22 was “moderate” in seven and “modest” in five, the Federal Reserve District reported last Wednesday in the latest “Beige Book.” The districts are referenced by the name of their headquarters cities. Residential construction activity was mixed, with half the districts reporting increases but a few indicating some weakening in activity; multifamily construction remained particularly robust….construction-related manufacturing activity was mixed. Philadelphia reported weakness in this sector, and Chicago and Kansas City noted some strength, while demand for construction-related materials was mixed in the Dallas district….Nonresidential construction activity was steady to stronger in most districts over the latest reporting period, with strengthening reported in the Boston, St. Louis and Kansas City districts. Cleveland described pipeline activity as strong, and San Francisco noted that a number of public and commercial high-rise projects have been announced or are underway. In contrast, Minneapolis reported a decline in nonresidential construction activity, and Philadelphia characterized it as steady at a low level; Chicago described activity as mixed—with office construction weak but industrial and some segments of retail fairly strong….high or rising prices for some [construction materials] were cited by some districts.”

“Between 2010 and 2013, Texas, Florida, the Carolinas and Colorado were the strongest people magnets, drawing nearly a million movers,” according to an analysis of recently released Census Bureau population estimates by the Pew Charitable Trusts e-newsletter Stateline posted last Tuesday. The post includes a link to county-by-county changes. “At the other end of the spectrum, New York, Illinois, California, New Jersey and Michigan together have lost nearly a million people to interstate moves. By region, almost a net 1.2 million people left the Northeast and Midwest for the South and West between 2010 and 2013, according to Stateline’s analysis….Other states seeing boosts from moving include Colorado and Montana, both of which doubled their movers, and North Dakota, which turned a net loss into a gain over the last decade. [Overall, the] rate of interstate moves has fallen by half since the early 1990s.” Because many movers go to places requiring new housing, buildings and infrastructure, a drop in interstate moves is a negative for both residential and nonresidential construction.

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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