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AGC's Data DIGest: May 26-29, 2015

Construction jobs increase in 40 states in April; materials, labor costs dip, IHS finds

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Seasonally adjusted construction employment rose in 40 states and the District of Columbia from April 2014 to April 2015, declined in seven and remained level in Indiana, Oregon and Vermont, an AGC analysis of Bureau of Labor Statistics (BLS) data released on Wednesday showed. California again added the most construction jobs (42,600 jobs, 6.4%), followed by Florida (32,200, 8.2%), Texas (25,300, 3.9%), Washington (18,700, 12.0%) and Michigan (14,800, 10.6%). Idaho again added the highest percentage of new construction jobs (12.4%, 4,400), followed by Washington and Michigan. The largest and steepest percentage losses again occurred in West Virginia (-4,400, -13.1%) and Mississippi (-3,200, -6.3%). U.S. construction employment rose 4.6% over the period, BLS reported on May 8. Despite the strong, widespread gains, only five states have topped pre-recession highs for construction employment: Iowa, Louisiana, North Dakota, Oklahoma and South Dakota. (BLS combines mining and logging with construction in D.C., South Dakota and five other states to avoid disclosing data about industries with few employers.)
Consultant IHS and the Procurement Executives Group (PEG) reported on May 27 that "construction costs fell again in May....The headline current IHS PEG Engineering and Construction Cost Index (ECCI) registered 47.9 in May, up from April's reading [46.2], but still below the neutral mark" of 50. The higher the reading, the more widespread is upward pricing strength. "The headline index has not indicated rising costs since December 2014. The current materials/equipment index registered 47.4 in May, an improvement from April, but still consistent with the overall narrative of softer prices. Five of 12 individual components registered falling prices this month, with the lowest readings in carbon steel pipe and fabricated structural steel....Six components did show higher prices in the materials/equipment index in May, led by ready-mix concrete. Additionally, copper-based wire and cable showed higher month-on-month prices for the first time since September. This comes after it registered the softest reading of any component in February and March and follows the recent gains in copper prices this month....The current subcontractor labor index registered 49.0 in May, on par with the April reading."
Two recent surveys hint at mixed growth for various construction segments. "U.S. engineering firm leaders remain bullish on their market prospects, according to the first quarter 2015 (Q1/15) ACEC Engineering Business Index (EBI), although their enthusiasm has dropped slightly from previous quarters," engineering company trade association ACEC reported on Tuesday. "The Q1/15 EBI, conducted March 15-April 6, of 325 engineering firm leaders, produced a composite score of 65.3, which is strongly positive, but a slight drop from the 66.5 score in the Q4/14 EBI, and from [the] 67.4 score one year ago. EBI is a diffusion index that charts the health of the engineering industry by consolidating senior leadership responses on market and firm performance into a single number. Any number above 50 indicates expansion."        
"Improved billings over year-end 2014 and an increased number of inquiries contributed to an optimistic economic outlook for U.S. interior design firms at the end of 1st quarter 2015," the American Society of Interior Designers (ASID) reported on May 18 in releasing its quarterly Interior Design Billings Index (IDBI). The index registered 57.7 at the end of March, up from 52.3 in December 2014. New project inquiries registered 58.8 at the end of the first quarter, rising two points over December. "It was a positive first quarter for design firms specializing in single-family residential projects. That market sector ended the quarter with a two-point increase to 56, while firms specializing in multifamily projects dropped to 47. In the commercial sectors, the office, hospitality, entertainment and retail segments registered sub-50 IDBI scores. In the institutional sector, the healthcare and government markets experienced declines but maintained scores above 50. Education dipped to an index score of 33. Looking forward, the design industry's six-month business conditions index of 73 suggests continued expansion for the interior design industry. [The index] is a diffusion index compiled from a monthly ASID survey of 300...firms that primarily offer interior design services or offer interior design services as part of architectural, engineering and other related practices." Scores range from 0 to 100 (above 50 indicates expansion and below 50 contraction).
"Real-estate demand continues to outpace supply in all property types except apartment, thus occupancies continue to improve with more markets in their cycle growth phase," the quarterly Dividend Capital Research Cycle Monitor reported on May 22 in a summary of conditions for five property types in more than 50 metro areas. Office "demand continues to inch forward...In many markets rent has not recovered enough to allow cost-feasible new construction, but the trend of employment moving back into central business districts to attract millennial workers has allowed many old offices to be rehabilitated or old industrial buildings to be converted. San Jose, Austin, Houston, Nashville, San Francisco and Salt Lake all have more than 4% new construction growth vs. the national average of 1.7%....Total new [industrial] construction is still under 1% of total space which should continue to allow for a balanced national industrial market overall....We expect the national average for [apartments] to move into the hypersupply phase," in which construction continues but the rate of rent growth slows, in the second or third quarter of 2015. "Solid same-store sales growth in 2015 should motivate [retailers] to begin expanding in the second half of the year.... Demand is driving more new hotel construction and is also supported by the continued low interest rates available for financing."

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