Employment shows biggest gain in six years; Beige Book reports widespread pickup
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Nonfarm payroll employment increased by 236,000, seasonally adjusted, in February and 1,966,000 (1.5%) over 12 months, the Bureau of Labor Statistics reported on Friday. The unemployment rate was 8.1%, not seasonally adjusted (7.7%, seasonally adjusted), down from 8.7% a year earlier. Construction employment rose for the ninth straight month and totaled 5,784,000, seasonally adjusted, the most since September 2009. The increase of 48,000 from January was the largest one-month gain since March 2007. Construction employment rose 140,000 (2.5%) from February 2012, while total hours worked in construction increased by 3.3%, implying that contractors are lengthening working hours and also hiring new workers. The unemployment rate for former construction workers dropped from 17.1%, not seasonally adjusted, in February 2012 to 15.7%. Residential construction employment (residential building and specialty trade contractors) rose by 19,400, seasonally adjusted, for the month and 64,200 (3.1%) for the year. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) climbed 29,000 in February and 75,700 (2.1%) over 12 months.
Informal soundings of businesses in the 12 Federal Reserve districts “indicated that economic activity generally expanded at a modest to moderate pace” through February 22 from six weeks earlier, the Fed reported on Wednesday in the latest Beige Book, so named for the color of its cover. “Manufacturing related to residential construction was a source of strength for many districts, including wood product manufacturing in the St. Louis and San Francisco districts; household goods [Chicago]; cement [Dallas]; and general housing construction” products in Philadelphia, Cleveland and Boston. (Districts are referenced by the name of their headquarters cities.) “Home construction increased in most districts, with the exception of [Kansas City,] where it was reported as unchanged. Several districts noted ongoing strength in multifamily construction, although contacts in [Atlanta and Cleveland] mentioned continued financing difficulties for builders. …Commercial contractors in [Cleveland] noted a slowing in activity, particularly for defense-related projects. Office vacancy rates declined across most of the New York district and industrial vacancy rates in upstate New York posted their lowest levels in three years. Richmond contacts described the supply of Class A office space as tight, which they attributed to the absence of new construction. Commercial development and leasing activity increased in the San Francisco Bay and Seattle markets, fueled by sustained growth in the technology sector. Commercial construction improved by varying degrees in [Atlanta, Chicago, St. Louis, Minneapolis and Kansas City]. Respondents in the Boston district expressed concerns about overbuilding in Boston’s apartment market and office sector, while Philadelphia contacts noted an increase in energy-related projects and repair work resulting from Hurricane Sandy….Credit for commercial development and transactions was widely available, although Boston noted a large decline in loan demand and contacts in [Cleveland] said financing difficulties continued….Demand for commercial real estate loans was also strong in [Cleveland, Richmond and Kansas City]. Cleveland reported reduced hiring plans from commercial builders….Builders in Philadelphia, Cleveland, Chicago, Kansas City and San Francisco] cited an increase in construction material costs, particularly for lumber, drywall and steel.”
The National Association of Home Builders reported on Thursday that its Multifamily Production Index, which measures builder and developer sentiment about current conditions in the apartment and condominium market on a scale of 0 to 100, increased two points to a level of 54 in the fourth quarter. It is the fourth straight quarter with a reading over 50. “The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse. [The component] tracking builder and developer perceptions of market-rate rental properties dropped four points to 65, but has been above 60 for six consecutive quarters—the longest sustained period of strength since the inception of the index in 2003. For-sale units had its highest reading since the fourth quarter of 2005, increasing two points to 46, while low-rent units increased seven points to 53. ‘The apartment and condo markets continue to improve as new household formations generate demand,’ said W. Dean Henry, CEO of Legacy Partners Residential in Foster City, Calif., and chairman of the Multifamily Leadership Board. ‘However, there are certain issues facing builders and developers that may impede their ability to keep up with this demand, such as the rising cost of building materials, labor shortages and the price of land.’ The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry's perception of vacancies, dropped two points to 31 [on a 0-to-100 scale]. With the MVI, lower numbers indicate fewer vacancies. After peaking at 70 in the second quarter of 2009, the MVI declined consistently through 2010 and has been at a fairly low level throughout 2011 and 2012. Historically, the [indexes] have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates…one to three quarters in advance.”
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