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AGC's Data DIGest: November 14-21, 2016

Job growth continues in 35 states; PPIs remain mild; multifamily market appears to slow

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Seasonally adjusted construction employment rose in 35 states from September 2015 to September 2016, declined in 14 states and the District of Columbia, and held steady in West Virginia, an AGC analysis of Bureau of Labor Statistics (BLS) data released on Friday showed. Iowa again led in percentage gain (13%, 10,400 jobs), followed by Nevada (13%, 9,200), Colorado (11%, 16,400) and Washington (10%, 17,300). The most jobs added were again in California (34,100 jobs, 4.6%) and Florida (28,400, 6.6%), followed by Washington and Colorado. Kansas had the steepest percentage loss (-7.6%, -4,700), followed by Maine (-7.5%, -2,000), Wyoming (-7.4%, -1,700) and Delaware (-6.0%, -1,300). Illinois lost the most jobs (-5,500, -2.5%), followed by Kansas, Kentucky (-3,500, -4.5%) and Pennsylvania (-3,000, -1.3%). For the month, employment rose in 23 states and D.C., shrank in 23 states and was unchanged in four. (AGC's rankings are based on seasonally adjusted data, which in D.C., Delaware and five other states is available only for construction, mining and logging combined.)

The PPI for final demand in October, not seasonally adjusted, was unchanged from September and increased 0.8% year-over-year (y/y) from October 2015, the BLS reported on Wednesday. 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 by an unusually steep 0.7% for the month but only 0.6% 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 0.6% y/y. Changes ranged from -0.1% y/y for school building construction to 0.4% for industrial and healthcare buildings, 1.2% for office buildings and 1.3% for warehouses. PPIs for new, repair and maintenance work on nonresidential buildings fell 1.0% y/y for electrical contractors and 0.8% for plumbing contractors, and rose 1.2% for roofing contractors and 4.3% for concrete contractors. The index for inputs to construction—excluding capital investment, labor and imports—comprises a mix of 59% goods (including 5% for energy) and 41% services (including trade services, 26%; transportation and warehousing, 4%; and other services, 10%). The overall PPI for inputs to construction slipped 0.2% for the month and increased 0.8% y/y. The PPI for all goods used in construction was flat for the month and up 0.5% y/y, as the sub-index for energy rose 0.9% for the month but declined 2.2% y/y, while the PPI for goods less food and energy dipped 0.1% from September and climbed 0.8% y/y. The index for services fell 0.6% in October but moved up 1.3% y/y. PPIs for inputs to seven types of new nonresidential structures were nearly flat, with y/y changes ranging from -0.1% for industrial structures to 0.8% for commercial structures. The PPI for inputs to new single-family construction rose 1.4% y/y and for multifamily, 1.3%. Materials important to construction that had notable one- or 12-month price changes include diesel fuel, down 3.0% for the month and down 8.4% y/y; asphalt paving mixtures and blocks, -0.7% and -6.5%, respectively; and cement, 0.1% and 5.4%.

Housing starts in October soared 23% at a seasonally adjusted annual rate from September to the highest rate since 2007, the Census Bureau reported on Thursday. The year-to-date (YTD) total for the first 10 months of 2016 compared to the same period in 2015 rose 5.9%. Single-family starts jumped 11% for the month and 10% YTD. Multifamily (buildings with 5 or more units) starts rebounded 75% for the month, after plunging by 60% in September, and are down 1.8% YTD. Building permits, a fairly reliable predictor over time of near-term starts, edged up 0.3% for the month and 0.7% YTD. Single-family permits increased 2.7% for the month and 7.5% YTD. Multifamily permits declined 1.7% from September and 10% YTD. Multifamily permits YTD (336,000) are slightly above YTD starts (321,000), suggesting the backlog of unbuilt projects is shrinking.

"Landlords are battling a slowdown in sales and rising vacancy rates of multifamily housing units across the U.S.," the Wall Street Journal reported on Wednesday. "Adding to the market's worries are new rules that go into effect on Christmas Eve [that] likely will make borrowing more costly and complicated...Regulators earlier this year warned that vacancies have been growing in the rental-apartment market, and that higher interest rates in the next two years could damp price growth there." Another damper on demand for new residential construction is that the "percentage of Americans moving over a one-year period fell to an all-time low in the United States to 11.2% in 2016," Census reported on Wednesday.  

The Architecture Billings Index (ABI) score moved above the breakeven 50 mark in October (to 50.8, seasonally adjusted) after two months below that level, the American Institute of Architects reported on Wednesday. Nevertheless, the three-month average reading (49.6) was the lowest in more than four years. The ABI measures the percentage of surveyed architecture firms that reported higher billings than a month earlier less the percentage reporting lower billings; any score over 50 indicates billings growth. The institute says the index "reflects the approximate nine to 12 month lead time between architecture billings and construction spending." Firms with all practice specialties had scores near 50 (based on three-month moving averages): multifamily residential, 51.2, up from 50.7 in September; commercial/industrial, 49.8, down from 50.3; mixed practice, 49.5, down from 50.5; and institutional, 49.1, nearly unchanged from 49.0.

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.