Construction employment slips in December; Dodge, Reis reports point to growth ahead
Editor’s note: Construction Citizen is proud to partner with AGC America to bring you AGC Chief Economist Ken Simonson's Data DIGest. Check back each week to get Ken's expert analysis of what's happening in our industry.
Nonfarm payroll employment increased by 74,000, seasonally adjusted, in December and 2,293,000 (1.7%) over 12 months, the Bureau of Labor Statistics (BLS) reported on Friday. Construction employment fell for the first time since May, by 16,000, to 5,833,000, an increase of 122,000 (2.1%) over the past year. Total hours worked (aggregate weekly hours) in construction fell for the month and increased only 0.8% from December 2012, implying that contractors are no longer extending hours per worker, as they had earlier in the year. Residential construction employment (residential building and specialty trade contractors) climbed by 6,200 for the month and 99,800 (4.8%) for the year. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) decreased by 22,900 from November and rose by 22,100 (0.6%), respectively. BLS noted, “Employment in nonresidential specialty trade contractors declined by 13,000 in December, possibly reflecting unusually cold weather in parts of the country.” The unemployment rate for jobseekers who last worked in construction fell to the lowest December level in six years—11.4%, down from 13.5% in December 2012 and 20.7% in December 2010. (Industry unemployment data are not seasonally adjusted and should only be compared year-over-year, not across months.) Since December 2010 the number of unemployed construction workers has dropped by 791,000, not seasonally adjusted. But construction employment rose by only 376,000, implying that many experienced workers left the industry for employment elsewhere, further training or schooling, retirement, or left the workforce. These departures may make it hard for contractors to find skilled workers if demand rises further, even though the unemployment rate remains higher than for the overall economy (6.5%, not seasonally adjusted), and wage growth and job openings do not yet signal any tightness nationally.
The Dodge Momentum Index—a “monthly measure of the first (or initial) report for nonresidential building projects in planning”—rose 1.2% from November to December, McGraw Hill Construction reported on Friday. The index has “been shown to lead construction spending for nonresidential buildings by a full year. December’s increase brought the [index to] the highest reading since February 2009. Over the course of 2013, the Momentum Index showed steady improvement, with December up 32% compared to the same month a year ago. Despite the strong percentage growth during 2013, the Momentum Index remains significantly below its December 2007 pre-recession peak.…The latest month’s increase for the Momentum Index was driven by both its commercial and institutional components. On the commercial side, the 1.5% gain was largely the result of greater planning activity for office and hotel development.” The institutional component rose 0.8%.
"Nearly 42,000 [apartment] units were completed in the fourth quarter, the most since the fourth quarter of 2003, and about 127,000 for all of 2013, according to Reis” Inc., a real-estate research firm, the Wall Street Journal reported on Tuesday. “In 2014, completions should total more than 160,000 apartments, roughly one-third more than the long-term historical average, according to Reis….CoStar Group, another real-estate research firm, predicts new-apartment supply will peak this year at 220,000, but an additional 350,000 units will hit the nation’s 54 largest markets in 2015 and 2016 combined. Much of the construction is in large cities with extensive public transportation, such as Washington, D.C., and San Francisco. Developers are targeting younger renters willing to pay top dollar for smaller units in buildings with lavish shared amenities, such as outdoor theaters and large gourmet kitchens for groups. Industry-watchers warn these markets in particular could see a correction. But so far, none of the markets Reis tracks saw average rents decline….Rent-price growth remained hot in markets benefiting from the tech boom: Seattle saw the highest year-to-year rise [7%], according to Reis….San Francisco and San Jose both saw rent-price gains of over 5% from a year earlier. New York City remained the most expensive market….But its vacancy rate rose 0.5% to 2.7%....New Haven, Conn., remained the tightest rental market, with a vacancy rate of 2.2% in the fourth quarter. San Diego and San Jose, Calif., followed at 2.6% and 2.7%, respectively.”
According to Reis, “the amount of occupied shopping-center space increased by more than 4.7 million square feet in the fourth quarter, the highest rate of ‘absorption’ since the end of 2007,” the Journal reported on Wednesday. “There were 12.8 million square feet of absorption during all of 2013. But that is about half of what is considered a healthy pace.”
A report in December by the National Association of State Budget Officers (NASBO) found, “43 states anticipate growth in revenues and spending in fiscal 2014 compared to fiscal 2013,” Stateline.org reported on Friday. “In states where revenues are not projected to grow, the causes tend to be state-specific and varying: a decline in oil prices and production in Alaska, a big tax cut in Kansas, and a decrease in coal production in West Virginia and Wyoming, [NASBO Executive Director Scott] Pattison said. Many states have fewer employees than they did before the recession, which has helped them hold expenses in check. But many still have a hold on hiring, reflecting angst about the future. States experiencing shale oil and gas booms, such as Texas and North Dakota, are doing well, but Alaska is suffering as oil companies move operations to those states. California and New York are flourishing thanks to skyrocketing income and real estate tax collections.” These patterns should lead to higher state-funded construction spending by fiscal 2015, which begins July 1, 2014, in most states.
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.
Add new comment