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AGC's Data DIGest: September 22-28, 2015

Fewer than half of metros add construction jobs in August; Dodge starts, ABI drop

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Construction employment, not seasonally adjusted, increased from August 2014 to August 2015 in only 163 (46%) of the 358 metro areas (including divisions of larger metros) for which the BLS provides construction employment data, decreased in 153 (43) and was stagnant in 42, according to an AGC release and map today that analyzed BLS data. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers.) The number of metros with job increases was the smallest since late 2011. It is possible that employment gains in some metros were held down by a lack of available workers rather than lack of projects; 86% of the 1,358 respondents to an AGC survey released on September 10 said they were having difficulty filling hourly craft or salaried professional positions. Denver-Aurora-Lakewood added the largest number of construction jobs in the past year (10,400 construction jobs, 11%), followed by the Seattle-Bellevue-Everett division (8,700 construction jobs, 11%); Anaheim-Santa Ana-Irvine, Calif. (7,500 construction jobs, 9%) and Atlanta-Sandy Springs-Roswell (7,300 construction jobs, 7%). The largest percentage gains occurred in Weirton-Steubenville, W. Va.-Ohio (28%, 500 combined jobs), followed by Fairbanks, Alaska (22%, 700 construction jobs) and Wenatchee, Wash. (17%, 400 combined jobs). The largest job losses again were in Fort Worth-Arlington, Texas (-6,000 combined jobs, -8%), followed by Houston-The Woodlands-Sugar Land (-3,700 construction jobs, -2%). The largest percentage decrease was in Santa Fa, N.M. (-22%, -600 combined jobs), followed by Gulfport-Biloxi-Pascagoula, Miss. (-20%, -1,700 combined jobs); Lawrence-Methuen Town-Salem, Mass.-N.H. (-20%, -500 combined jobs) and Las Cruces, N.M. (-19%, -700 combined jobs).

The value of new construction starts in August dropped 11% from July at a seasonally adjusted annual rate, Dodge Data & Analytics reported on Tuesday, based on data it collected. "Declines were reported for each of construction's three main sectors—nonresidential building and housing pulled back [-16% and -8%, respectively] from their improved July pace, while nonbuilding construction continued to recede [-12% from July] from the heightened performance witnessed earlier in 2015. During the first eight months of 2015, total construction starts on an unadjusted basis were...up 15% from the same period a year ago. If the volatile electric utility and gas plant category is excluded, total construction starts during the first eight months of 2015 would be up a more moderate 7% relative to last year....'While August construction starts were notably subdued compared to recent months, it's useful to keep in mind that construction starts on a monthly basis will often show an up-and-down pattern, and the year-to-date statistics depict an expansion that's still proceeding,' stated [chief economist Robert Murray]. 'For nonresidential building, the early months of 2015 did show some deceleration for the commercial categories, consistent with the slower pace of economic growth in the first quarter, and manufacturing plant construction is now retreating after the exceptional amount of energy-related plant investment in 2014. At the same time, market fundamentals for commercial building (namely rents and occupancies) are still positive, and commercial building projects at the planning stage have recently increased. This suggests that the pace of commercial building starts, while lackluster in August, should soon pick up. For residential building, the August decline was due to a slower pace for multifamily housing after a particularly strong July, and the upward trend for this sector remains intact. For nonbuilding construction, highway and bridge starts have slipped from the elevated activity reported earlier in 2015, and at midyear there was uncertainty related to the depleted Highway Trust Fund.'"

The Architecture Billings Index (ABI) score in August "was 49.1, down from a mark of 54.7 in July," the American Institute of Architects (AIA) reported on Wednesday. "This score reflects a slight decrease in design services (any score above 50 indicates an increase in billings)." Based on three-month moving averages, firms with an institutional practice had the highest score (53.7), followed by mixed practice (52.8), commercial/industrial (49.7) and multifamily residential (49.5).

Consultant IHS and the Procurement Executives Group (PEG) reported on Wednesday that "construction costs fell again in September....The headline current IHS PEG Engineering and Construction Cost Index (ECCI) registered 43.8 this month, down from 45.7 in August and well below the neutral mark [in which a reading greater than 50 represents upward pricing strength and a reading below 50 represents downward pricing strength]. The headline index has not indicated rising costs since December. The current materials/equipment index slipped to 41.6, down from 44.2 in August. The pricing environment appears to be deteriorating, with the current materials/equipment index registering its lowest reading since February of this year [and] the second-lowest reading for the materials index in the last four years. The underlying detail shows falling prices for 11 of the 12 individual components tracked by the survey. Prices for steel products showed continued weakness, with the indexes for fabricated structural steel, carbon steel pipe, and alloy steel pipe falling....Ready-mix concrete was the only material index to register price gains in September and has been the strongest index over the year....The current subcontractor labor index registered 49.0 in September...the second consecutive month below the neutral mark....Subcontractor labor prices rose in the US Northeast, stabilized in the US South and fell in the US West." Adding to the downward pressure on materials prices, China "exported a record volume of [diesel] fuel last month after already shipping unprecedented amounts of steel and aluminum overseas," Bloomberg News reported on Thursday. "Aluminum shipments rose 22% in the first eight months of 2015 compared with the same period a year earlier, customs data showed....Steel product exports over the same period climbed 27%."

On Thursday, October 1, there will be a webinar, "Real Estate and Construction Markets in Transformation: What Lies Ahead?" featuring Ken Simonson, Robert Dietz, Vice President for Tax and Market Analysis of National Association of Home Builders, and Anika Khan, Senior Economist of Wells Fargo Securities. Go to http://www.nabe.com/rt/real/events for more info.

The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at http://store.agc.org.