PPI rises in May; April job openings widen; Manpower survey shows steady hiring plans
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The producer price index (PPI) for final demand increased 0.3%, not seasonally adjusted (0.5%, seasonally adjusted), in May but declined 1.1% over 12 months, the Bureau of Labor Statistics (BLS) reported today. AGC posted an explanation and tables focusing on construction prices and costs. Final demand includes goods, services and five types of nonresidential buildings that BLS says make up 34% of total construction. The PPI for final demand construction, not seasonally adjusted, rose 0.3% in May and 2.0% over 12 months. The overall PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of five categories of buildings—climbed 1.8% since May 2014. The 12-month increases ranged from 0.9% for healthcare construction to 1.4% for warehouses, 1.8% for schools and industrial buildings, and 2.2% for offices. PPIs for new, repair and maintenance work on nonresidential buildings by plumbing contractors rose 0.2% over 12 month; roofing contractors rose 2.5%; electrical contractors, 2.8%; and concrete contractors, 2.9%. An expanded set of PPIs for inputs to construction, excluding capital investment, labor and imports, adds services to the previous PPI for construction industries, goods (formerly called inputs to construction industries). Goods constitute 60% of the index (including 7% for energy); services, 40% (trade services, 25%; transportation and warehousing services, 4%; other services, 10%). The overall PPI for inputs to construction increased 0.6% from April to May, as the index for energy soared 12% for the month, outweighing declines of 0.2% in the index for goods less food and energy and 0.1% in the services PPI. The PPI for all goods used in construction declined 3.0% over 12 months. Materials important to construction that had notable one- or 12-month price changes include diesel, up 11% for the month but still down 36% over 12 months; steel mill products, -2.0% and -11%, respectively; lumber and plywood, -2.4% and -6.9%; concrete products, -0.2% and 4.9%; and cement, 0 and 7.5%.
"The number of [seasonally adjusted] job openings rose to 5.4 million on the last business day of April, the highest since the series began in December 2000," BLS reported on Tuesday. Construction industry job openings dipped to 153,000 from 168,000 in March and 160,000 in February, but soared 39% from the April 2014 total of 110,000. Construction hires during April increased from 304,000 in April 2014 to 326,000 in April 2015. The ratio of openings to hires in construction rose from .36 to .47, adding to the evidence that contractors are having increased difficulty in filling jobs.
Seasonally adjusted results from Manpower Group's latest survey of 11,000 U.S. employers, released on Tuesday, "suggest that employers expect hiring intentions to remain stable during Quarter 3 [July-September] 2015 compared to Quarter 2 [April-June] and to slightly increase compared to one year ago at this time....employers have a positive outlook in 12 of the 13 industry sectors included in the survey...When the industry sector data is compared quarter-over-quarter,...staff levels are expected to remain relatively stable in [construction and eight other sectors]. Construction employers in all four regions "expect relatively stable hiring." Combining responses from all sectors, "all 100 of the largest Metropolitan Statistical Areas (MSA) in the United States report positive Net Employment Outlooks," led by Rochester, N.Y.; Nashville; Provo, Utah; and San Jose.
"Five years removed from the worst of the Great Recession, employment in each of the nation's  biggest metro areas has bounced back from its lowest point of the downturn, according to a Stateline analysis of federal employment data" published by the Pew Charitable Trusts on June 4. "Two metro areas stand out as the strongest examples of job growth: San Jose, Calif., and Austin, Texas, both of which have seen more than 22% employment growth since their low points in mid-2009. Also in the top five are two other California and Texas metro areas: San Francisco and Houston, both with nearly 18% growth since their recession low points of August 2010 and December 2009, respectively. [Nashville] has experienced the third-most job growth among all metro areas, 19.3%, since its low point in employment in September 2009....On the other end of the spectrum, in six metro areas employment has grown at half the national average or less. Those areas, in descending order of growth, are" Memphis; Buffalo; Rochester, N.Y.; Philadelphia, 4.7%; Virginia Beach, 3.7%; and St. Louis, 3.3%. Over time, employment growth roughly correlates with demand for construction but may also indicate a tight labor market.
Revenue of architectural and related services firms in the first quarter of 2015 increased 0.9% from the fourth quarter of 2014, not seasonally adjusted, and 15% from the first quarter, the Census Bureau reported on Wednesday in its latest Quarterly Services Report. Engineering services firms' revenue dropped 8.8% for the quarter but increased 1.9% year-over-year.
The Bureau of Economic Analysis released its preliminary estimate of 2014 real (inflation-adjusted) gross domestic product (GDP) by state and sector on Wednesday. Real GDP rose 2.2% but the share contributed by construction was -0.03 percentage points. Construction contributed positively in only 17 states, negatively in 32 states and the District of Columbia, and neutrally in Illinois. The largest positive construction contribution occurred in Colorado, 0.29 percentage points out of a 4.7% increase in state real GDP; followed by North Dakota, 0.26 points out of a 6.3% increase; and Iowa, 0.25 points out of a 0.4% increase in real GDP. Construction was the largest drag in Mississippi, -0.54 points out of a -1.2% change in real GDP; Indiana, -0.42 points out of real GDP growth of 0.4%; and West Virginia, -0.33 points out of 5.1% real GDP growth.