PPIs remain mild in September; employment rises; construction spending drops in August
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The producer price index (PPI) for final demand dropped 0.3%, not seasonally adjusted (-0.1%, seasonally adjusted), in September and rose 1.6% over 12 months, the Bureau of Labor Statistics (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 September and rose 3.0% 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—was flat for the month and up 3.1% since September 2013. The PPI for new warehouse construction fell 0.1% in September and rose 2.2% over 12 months; offices, 0.1% and 3.2%, respectively; industrial buildings, 0 and 3.3%; school buildings, -0.1% and 3.4%; and health care buildings, 0 and 2.7%. PPIs for new, repair and maintenance work on nonresidential buildings by concrete contractors rose 0.1% and 1.5%; electrical contractors, 0 and 1.0%; plumbing contractors, 0 and 4.7%; and roofers, -0.4% and 4.9%. 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—dipped 0.1% in September and increased 1.6% over 12 months.
Nonfarm payroll employment rose by 248,000, seasonally adjusted, in September and 2,635,000 (1.9%) over 12 months, BLS reported on October 3. Construction employment rose by 16,000 for the month and 230,000 (3.9%) over the year to 6,079,000, the highest total since May 2009. Residential construction employment (residential building and specialty trade contractors) climbed by 11,800 for the month and 129,400 (5.9%) for the year. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) increased by 3,700 in September and 100,300 (2.7%) year-over-year. All five residential and nonresidential segments added workers for the year. Average hourly earnings for all employees in construction rose 2.3% from September 2013 to September 2014, the largest year-over-year increase since February 2010 and nearly double the 1.2% increase a year earlier, suggesting employers may be paying more to attract and retain workers as labor supply tightens. The unemployment rate for jobseekers who last worked in construction fell to the lowest September level in seven years: 7.0%, down from 8.5% in September 2013 and 17.2% in September 2010. (Industry unemployment data are not seasonally adjusted and should only be compared year-over-year, not across months.)
Construction spending in August totaled $961 billion at a seasonally adjusted annual rate, down 0.8% from the rate in July and up 5.0% from August 2013, the Census Bureau reported on October 1. Census revised down the total for July by $12 billion. Private residential spending slipped 0.1% for the month but rose 3.7% over the latest 12 months; private nonresidential spending, -1.4% and 9.2%, respectively; and public construction spending, -0.9% and 1.9%. Of the three residential components, new single-family construction rose 0.7% in August and 8.3% year-over-year; new multifamily, 1.4% and 36%, respectively; and improvements to existing residential structures, -2.0% and -10%. The largest private nonresidential segment was power construction (including conventional and renewable power plus oil and gas fields and pipelines), which fell 3.9% for the month but jumped 17% year-over-year. The next largest private segments (in descending order of current size) were manufacturing, up 1.5% and 15%, respectively; commercial (new and renovated retail, warehouse and farm), -3.5% and 10%; and office, -1.0% and 19%. Of the top two public segments, highway and street construction fell 0.6% for the month and 0.1% over 12 months, while public educational spending fell 2.9% and rose 2.9%, respectively.
The value of nonresidential construction starts increased 30% in September from a year ago and 10.5% for the first nine months of 2014 combined, compared with the same months of 2013, CMD (formerly Reed Construction Data) reported last Tuesday, based on information it collected. Heavy engineering starts leaped 55% for the month and 17.5% year-to-date. Nonresidential building starts climbed 14% and 6.4%, respectively, with commercial building starts up 18% and 2.0% and institutional buildings up 16% and 8.6%.
Housing starts increased 6.3% at a seasonally adjusted annual in September from August and 18% from September 2013, the Census Bureau reported last Friday. Single-family starts added 1.1% for the month and 11% year-over-year. The often-volatile multifamily (5 or more unit buildings) starts soared 18% and 30%, respectively. Building permits rose 1.5% and 2.5%, respectively, as single-family permits dipped 0.5% for the month and increased 1.1% year-over-year, while multifamily permits fell 7.0% and 6.3%, respectively.
The National Association for Business Economics reported Monday, “Results from NABE’s October 2014 Business Conditions Survey suggest that growth is continuing at a majority of [the 76] survey respondents’ organizations, with an increasing number of panelists also reporting employment growth and less difficulty in filling open positions.” Of the 48 who reported capital spending on structures, 21% said it had increased at their firms in the third quarter, down from 29% in the second quarter. For the fourth quarter, 26% expect their firms to increase spending on structures, while 15% expect a cut.
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