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AGC's Data DIGest: May 5-8, 2015

Construction hiring rebounds in April; starts slip, CMD says; planning rises, Dodge says

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Nonfarm payroll employment increased by 223,000 in April, seasonally adjusted, and by 2,982,000 (2.2%) over 12 months, the Bureau of Labor Statistics (BLS) reported on Friday. Construction employment posted its strongest monthly increase since January 2014, rising by 45,000, following a drop of 9,000 in March. Since April 2014 construction employment increased by 280,000 (4.6%) to 6,383,000, the highest level since March 2009. Nevertheless, the April total was 1,343,000 (17%) below the record set nine years before. Residential construction employment (residential building and specialty trade contractors) climbed by 23,600 for the month and 153,300 (6.7%) over 12 months. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) increased by 20,800 in April and 126,100 (3.3%) year-over-year. Average hourly earnings of all employees in construction rose to $27.28, a gain of 2.7% over the past year, up from 2.1% in the previous 12 months and 1.4% from April 2012 to April 2013. The steepest wage increases among construction segments (which are reported with a one-month lag) occurred in residential building (5.6% from March 2014 to March 2015) and heavy and civil engineering construction (5.1%), while hourly earnings rose 2.4% in nonresidential building and 2.0% in specialty trades (residential and nonresidential combined). The number of unemployed jobseekers who last worked in construction fell from 796,000 in April 2014 to 652,000 in April 2014, the smallest April total since 2001. The unemployment rate for such workers fell from 9.4% to 7.5%, the lowest April rate since 2006. (Industry unemployment data are not seasonally adjusted and should only be compared year-over-year, not across months.) The acceleration in wages and decline in the pool of experienced jobseekers suggests that contractors soon may have even greater difficulty than they have reported recently in finding qualified new hires.

The value of nonresidential construction starts slipped 1.3%, not seasonally adjusted, from April 2014 to April 2015 and over the first four months combined, CMD (formerly Reed Construction Data) reported today, based on data it collected. The downturn was limited to nonresidential building (-5.8% year-to-date), with institutional building starts down 5.2% and commercial building starts down 17% but industrial (manufacturing) building starts up 101%. Heavy engineering starts rose 7.3% year-to-date, with the largest subcategory, road/highway, up 9.3%.

The Dodge Momentum Index rose 0.8% in April from March and 8.5% from April 2014, Dodge Data & Analytics (formerly McGraw Hill Construction) reported on Thursday. The index "is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. April's slight rise shows planning activity beginning to edge up once again after retreating 2.5% in March, continuing the up-and-down pattern that's been present so far in 2015. Although the planning statistics have essentially plateaued in early 2015, the level of activity continues to be higher than a year ago...With the commercial sector still helped by improving occupancies and rents, while the institutional sector is benefitting from the passage of recent bond measures, it's expected that the Momentum Index will see a more sustained upward trend as 2015 progresses. Planning activity for both the commercial and institutional sectors posted modest gains in April, with commercial up 0.5% and institutional up 1.2%."

Consultant IHS and the Procurement Executives Group (PEG) reported on April 28 that "construction costs fell again in April....The headline current IHS PEG Engineering and Construction Cost Index (ECCI) registered 46.2 in April, up from March's record low, but still below a neutral reading [of 50 on a 0-to-100 scale]. The headline index has not indicated rising costs since December 2014." The materials/equipment index also remained below a neutral mark, moving up to 44.9 from 43.0. "Eight of 12 individual components registered falling prices in April, led by carbon steel pipe and fabricated structural steel....'New capital projects—particularly in the oil and gas sector—are in a holding pattern, with some adopting a "wait and see" approach,' said Mark Eisinger, senior economist, IHS. 'The [capital expenditure] environment has yet to thaw despite some stabilization in oil prices over the past month.' The current subcontractor labor index eased further to 49.1 in April, a touch higher than the March reading. The majority of regions registered flat labor costs in April....For a third month running, the U.S. South did not register higher month-on-month labor costs. Nevertheless, tightness in skilled labor markets was still reported in the Gulf Coast. The six-month headline expectations index dropped to 44.6 in April, following the 45.9 reading in March, well below the historical average. Since the beginning of 2015, the forward-looking index has consistently implied falling price expectations over the six-month horizon. The materials/equipment index rebounded slightly after March's record low, though 10 of 12 individual components still showed falling price expectations. Ready-mix concrete remains the only subcomponent above the neutral mark. Meanwhile, for the first time in survey history, expectations for subcontractor labor were below the neutral mark, falling to 47.4 in April from 55.2 last month. Expectations fell across the regions, with the U.S. South as the only key exception. [The ECCI is based on responses from] procurement executives of leading engineering, procurement and construction firms....Respondents are asked whether prices—either actual paid transactions or company-informed transactions—during the current month for individual materials, equipment, and regional subcontractor rates, were higher, lower or the same as the prior month."

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