Construction input costs again outpace building PPIs; hires rise; 39 states add jobs
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The producer price index (PPI) for final demand in February, not seasonally adjusted, increased 0.4% from January and 2.2% year-over-year (y/y) from February 2017, the Bureau of Labor Statistics (BLS) reported on Tuesday. AGC posted tables and an explanation 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, dipped 0.1% for the month but increased 1.2% y/y. The 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—also rose 1.2% y/y. Increases ranged from 0.5% y/y for industrial construction to 0.6% for health care buildings, 0.9% for school buildings, 1.7% for office buildings and 2.0% for warehouses. PPIs for new, repair and maintenance work on nonresidential buildings ranged from -0.6% y/y for electrical contractors to 0 for plumbing contractors, 2.3% for roofing contractors and 4.3% for concrete contractors. The PPI for inputs to construction—excluding capital investment, labor and imports—comprises a mix of goods (59%) and services (41%). This index increased 3.6% y/y, outpacing the increases in the PPIs for finished nonresidential buildings and implying a squeeze on profits unless contractors can pass on cost increases or improve productivity. (Average hourly earnings in construction, a measure of labor costs, rose 2.7% y/y, BLS reported on March 10.) The PPI for all goods used in construction rose 4.8% y/y—the steepest increase since December 2011—as the sub-index for energy soared 40% y/y, while the PPIs for goods less food and energy and for services each climbed 1.9% y/y. PPIs for inputs to seven types of new nonresidential structures had y/y increases ranging from 3.0% for educational and vocational structures to 6.7% for power and communications structures. PPIs for inputs tonew residential structures rose 3.5% y/y for single-family and 3.3% for multifamily housing. Materials important to construction that had notable one- or 12-month price changes include diesel fuel, up 1.6% for the month and 35% y/y; copper and brass mill shapes, up 6.5% and 25%, respectively; steel mill products, up 2.5% and 15%; gypsum products, up 5.3% and 7.8%; lumber and plywood, up 2.4% and 6.6%; and cement, up 1.3% and 5.5%. In addition, several materials that go into construction products had large y/y increases, implying possible further price hikes for construction inputs: iron and steel scrap, up 68% y/y; liquid asphalt, 32%; and copper base scrap, 18%.
There were 147,000 construction industry job openings, not seasonally adjusted, at the end of January, BLS reported on Thursday in its monthly Job Openings and Labor Turnover Survey (JOLTS). Openings declined slightly from January 2016 (158,000) after 13 months of y/y increases. In contrast, the number of hires (344,000, not seasonally adjusted) was the highest January total since 2007. These figures suggest contractors had a slightly easier time filling positions in January.
Seasonally adjusted construction employment rose in 39 states from January 2016 to January 2017, held steady in Hawaii, and fell in 10 states and the District of Columbia, an AGC analysis of BLS data released on Tuesday showed. Oregon led in percentage gain (12%, 10,000 jobs), followed by Idaho (11%, 4,500), Nevada (10%, 7,600), Rhode Island (8.9%, 1,600) and Florida (7.9%, 36,400). The most jobs added were in Florida, California (15,500, 2.0%), Texas (13,700, 2.0%), Washington (12,300, 6.9%) and Oregon. Alaska had the steepest percentage loss (-10%, -1,700 jobs), followed by D.C. (-8.0%, -1,300), Wyoming (-5.4%, -1,200) and Mississippi (-4.8%, -2,200). Mississippi lost the most jobs, followed by Alaska, Illinois (-1,500 jobs, -0.7%), D.C. and Wyoming. For the month, employment rose in 38 states and D.C., shrank in 11 states and was flat in Virginia. Employment set a record in Massachusetts. (AGC's rankings are based on seasonally adjusted data, which in D.C., Hawaii and five other states is available only for construction, mining and logging combined.) BLS noted that "not seasonally adjusted data beginning with April 2015 and seasonally adjusted data beginning with January 2012" for states and metro areas (see below) "have been revised as a result of annual benchmark processing."
Construction employment, not seasonally adjusted, increased from January 2016 to January 2017 in 219 (61%) of the 358 metro areas (including divisions of larger metros) for which the BLS provides construction employment data, decreased in 104 (29%) and was stagnant in 35, according to an AGC release and map today. (BLS combines mining and logging with construction in most metros.) The largest gains occurred in Atlanta-Sandy Springs-Roswell (8,600 construction jobs, 8%), followed by the Dallas-Plano-Irving division (8,300 combined jobs, 6%), Tampa-St. Petersburg-Clearwater (7,700 construction jobs, 12%), Orlando-Kissimmee-Sanford (6,700 construction jobs, 10%) and Riverside-San Bernardino-Ontario, Calif. (6,200 construction jobs, 10%.) The largest percentage gains occurred in Grand Forks, N.D.-Minn. (36%, 1,000 combined jobs) and Lewiston, Idaho-Wash. (36%, 400 construction jobs), followed by Pocatello, Idaho (29%, 400 combined jobs) and Lake Charles, La. (28%, 4,800 construction jobs). The largest job losses were in Houston-The Woodlands-Sugar Land (-8,200 construction jobs, -4%), followed by Pittsburgh (-2,700 construction jobs, -6%), the Los Angeles-Long Beach-Glendale division (-2,100 construction jobs, -2%) and the Middlesex-Monmouth-Ocean, N.J. division (-1,900 combined jobs, -5%). The largest percentage losses occurred in Casper, Wyo. (-22%, -700 construction jobs), followed by Cleveland, Tenn. (-21%, -400 combined jobs), Danville, Ill. (-20%, -100 combined jobs), and Charleston, W.Va. (-18%, -1,300 combined jobs). (Not-seasonally-adjusted data should not be compared to other months.)
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