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AGC's Data DIGest: September 16-22, 2014

Construction employment rises in 36 states; BLS, Means, FHWA price indexes diverge

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Seasonally adjusted construction employment increased in 36 states from August 2013 to August 2014, decreased in 12 states and the District of Columbia, and remained flat in Idaho and New Hampshire, an AGC analysis of Bureau of Labor Statistics (BLS) data released last Friday showed. Florida again added the most jobs (43,500 jobs, 12%), followed by California (35,600, 5.6%) and Texas (27,700, 4.5%). The largest percentage gains were in Nevada (13%, 7,200 jobs), Florida, Utah (11%, 8,400) and Delaware (11%, 2,100). New Jersey had the worst construction job losses, -11,300 jobs and -8.1%, followed by Arizona, -5,400, -4.4% (fourth highest percentage loss); Mississippi, -3,700, -7.1% (second in percent lost); and West Virginia, -1,800, -5.3% (third in percent lost). For the month, 28 states added construction jobs, 21 states and D.C. lost jobs, and Arizona had no change. (BLS combines mining and logging with construction in D.C., Delaware and five other states to avoid disclosing data for industries with few firms.)

The producer price index (PPI) for final demand increased 0.1%, not seasonally adjusted (but was unchanged, seasonally adjusted), in August and 1.8% over 12 months, BLS reported last Wednesday. AGC posted an explanation and tables 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. There are no indexes yet for other building types, or for residential or nonbuilding construction. The PPI for final demand construction, not seasonally adjusted, was flat in August and rose 3.2% over 12 months. The overall PPI for new nonresidential building construction—a measure of the price contractors say they would charge to build a fixed set of five categories of buildings—increased 0.1% for the month and 3.1% since August 2013. The PPI for new warehouse construction was flat in August and rose 2.2% over 12 months; offices, 0 and 3.1%, respectively; industrial and school buildings, 0 and 3.5% each; and health care buildings, 0.2% and 3.6%. PPIs for new, repair and maintenance work on nonresidential buildings by electrical contractors rose 0.3% and 1.0%; concrete contractors, 0 and 1.5%; plumbing contractors, 0 and 5.0%; and roofers, 1.4% and 5.4%. The PPI for inputs to construction—an average of the cost of all materials used in construction plus items consumed by contractors, such as diesel fuel—was flat in August and increased 1.7% over 12 months. Major construction materials with notable one- or 12-month price swings included lumber and plywood, 1.5% since July and 11% since August 2013; hot-rolled structural shapes, 0 and 11%; aluminum mill shapes, 3.1% and 8.4%; gypsum products, -0.9% and 7.7%; asphalt felts and coatings, -1.1% and -7.1%; and diesel fuel, -0.3% and -3.9%.

Another measure of building construction costs is produced by RSMeans, which recently reported that its quarterly Means Historical Cost Index for July 1 rose 0.5% from April 1 and 1.8% from a year earlier. The index combines the cost of “various material items, labor hours and equipment rental rates” for nine building types in 30 U.S. cities. Means also calculates an average hourly pay rate, including fringe benefits, for 20 skilled construction trades. The preliminary July 1 reading for the 30-city average was $49.41 per hour, up 1.0% from April 1, following a rise of 0.4% from January to April. Labor rates rose 2.7% from mid-2013.

The Federal Highway Administration (FHWA) updated its quarterly National Highway Construction Cost Index on September 5. The index uses state highway bid awards to track the output price for highway construction. The March 2014 index was 1.1% higher than in December 2013 but 0.5% below the March 2013 level.

New construction starts in August dropped 9%” from July’s total at a seasonally adjusted annual rate, McGraw Hill Construction reported last Friday, based on data it collected. “The decline followed July’s elevated volume, the strongest so far in 2014, and brought activity back to the average pace reported during the first seven months of this year. By major sector, nonresidential building fell sharply [-19%], after being lifted in July by the start of several large manufacturing plant projects, while nonbuilding construction (public works and electric utilities) also retreated [-12%]. Residential building in August ran counter by posting a modest [2%] gain, helped by the continued growth for multifamily housing. Through the first eight months of 2014, total construction starts on an unadjusted basis were…up 4% from the same period a year ago.” Nonresidential building starts increased 13% year-to-date, residential starts rose 5%, but nonbuilding starts fell 9%.

Housing starts tumbled 14% at a seasonally adjusted annual in August from July but climbed 8.0% from August 2013, the Census Bureau reported on Wednesday. Single-family starts dipped 2.4% for the month but rose 4.2% year-over-year. The often-volatile multifamily (5 or more unit buildings) starts plunged 32% and jumped 19%, respectively. Building permits fell 5.6% and rose 5.3%, respectively, with single-family permits slipping 0.8% for both periods, while multifamily permits fell 13% for the month but soared 17% year-over-year.

Private hospital construction spending sagged 8.9% in the first seven months of 2014 combined, compared to the same period of 2014, while state and local hospital construction slumped 13%, the Census Bureau reported on September 2. One reason may be that “Nonprofit hospitals' income declined for a second straight year in 2013 and their median rate of revenue growth fell to an all-time low, according to a new report from credit firm Moody's Investors Service, a trend the credit rater’s analysts say likely will continue this year,” the Wall Street Journal reported on August 27. “The nonprofit hospitals’ performance contrasts with the rising profits and patient volumes reported by public traded hospital operators in recent weeks….About 79% of U.S. community hospital facilities are operated by nonprofits, according to the American Hospital Association.”

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.

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