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AGC's Data DIGest: May 1-12, 2017

PPIs for construction costs outpace contractor pricing in April; employment edges up

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.

The producer price index (PPI) for final demand in April, not seasonally adjusted, increased 0.4% from March and 2.5% year-over-year (y/y) from April 2016, the Bureau of Labor Statistics (BLS) reported on Thursday. 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, rose 0.4% for the month and 1.0% 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—edged up 0.9% y/y. Increases ranged from 0 y/y for health care buildings to 0.3% for schools, 0.7% for industrial buildings, 1.6% for offices and 1.7% for warehouses. PPI changes for new, repair and maintenance work on nonresidential buildings ranged from -0.3% y/y for electrical contractors to 0.6% for plumbing contractors, 2.0% for roofing contractors and 2.8% 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. The PPI for all goods used in construction rose 4.3% y/y, as the sub-index for energy soared 26%, while the PPIs for goods less food and energy and for services each climbed 2.3%. PPIs for inputs to seven types of new nonresidential structures had y/y increases ranging from 3.2% for educational and vocational structures to 5.7% for power and communications structures. PPIs for inputs to new residential structures rose 3.5% y/y for single-family and 3.4% for multifamily housing. Materials important to construction that had notable one- or 12-month price changes include diesel fuel, up 1.9% for the month and 33% y/y; copper and brass mill shapes, down 0.1% in April but up 20% y/y; steel mill products, up 0.7% and 17%, respectively; aluminum mill shapes, up 1.6% and 11%; gypsum products, up 4.1% and 7.4%; and lumber and plywood, up 1.2% and 6.4%.

Nonfarm payroll employment in April rose by 211,000, seasonally adjusted, from March and by 2,237,000 (1.6%) y/y, BLS reported on May 5. The unemployment rate dipped to 4.4% from 4.5% in March. Construction employment increased by 5,000 for the month and 173,000 (2.6%) y/y to 6,877,000, the highest total since November 2008. Average hourly earnings in construction increased 2.1% y/y to $28.55, or 9.0% higher than the average for all private-sector employees ($26.19, a y/y gain of 2.5%). The unemployment rate in construction, not seasonally adjusted, rose from 6.0% in April 2016 to 6.3%, and the number of unemployed jobseekers whose last job was in construction inched increased from 530,000 in April 2016 to 585,000.

Construction spending totaled $1.218 trillion at a seasonally adjusted annual rate in March, down 0.2% from the upwardly revised February rate but up 3.0% y/y from the March 2016 rate, the Census Bureau reported on May 1. The two latest totals were the first to exceed the previous high, set in February 2006 (without adjusting for inflation). Private residential spending in March increased 1.2% for the month and 7.5% y/y. New multifamily construction increased 7.4% y/y; new single-family construction rose 4.7%; and residential improvements climbed 12%. Private nonresidential spending declined 1.3% from February but increased 6.4% y/y. By subsegment, in descending order of March size, power (electric power plus oil and gas pipelines and field structures) rose 8.2% y/y; commercial (retail, warehouse and farm) added 13%; manufacturing skidded 9.8%; office jumped 18%; and health care slipped 1.0%. Public construction fell 0.9% for the month and 6.5% y/y. Of the three largest public components, highway and street construction slid 2.4% y/y; educational construction decreased 2.6%; and transportation (transit, passenger rail, ports and airports) plunged 14%.

Construction employment, not seasonally adjusted, rose from March 2016 to March 2017 in 224 (62%) of the 358 metro areas (including divisions of larger metros) for which BLS provides construction employment data, fell in 92 (27%) and was stagnant in 42, according to an AGC release and map on May 2. (BLS combines mining and logging with construction in most metros.) The largest gains again occurred in Riverside-San Bernardino-Ontario, Calif. (12,200 construction jobs, 14%), Atlanta-Sandy Springs-Roswell (9,400 construction jobs, 8%) and Tampa-St. Petersburg-Clearwater (8,600 construction jobs, 13%). The largest percentage gains occurred in Lewiston, Idaho-Wash. (25%, 300 construction jobs), followed by Lake Charles, La. (21%, 4,000 construction jobs) and Redding, Calif. (19%, 500 combined jobs). The largest job losses were in Pittsburgh, Pa. (-2,900 construction jobs, -6%), followed by the Boston-Cambridge-Newton division (-2,300 combined jobs, -4%) and the Middlesex-Monmouth-Ocean, N.J. division (-2,100 combined jobs, -6%). The largest percentage losses occurred in Danville, Ill. (-20%, -100 combined jobs), followed by Gulfport-Biloxi-Pascagoula, Miss. (-19%, -1,800 combined jobs) and Casper, Wyo. (-19%, -600 construction jobs). (Not-seasonally-adjusted data should not be compared to other months.)

There were 172,000 construction industry job openings, not seasonally adjusted, at the end of March, BLS reported on Tuesday in its monthly Job Openings and Labor Turnover Survey (JOLTS). Openings declined from 209,000 in March 2016. In contrast, the number of hires (364,000, not seasonally adjusted) edged up from 354,000 in March 2016. These patterns (fewer end-of-month openings than a year earlier but more hires) also occurred in January and February, suggesting contractors had a slightly easier time filling positions than in 2016, when end-of-month openings exceeded the prior year every month.

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.