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Solely due to soaring residential activity, construction spending in March increased 0.2% from a downwardly revised February rate and 5.3% from March 2020 to a seasonally adjusted annual rate of $1.51 trillion, the Census Bureau reported on Monday. Because unusually mild or harsh weather can cause monthly totals to vary significantly early in the year, it is useful to compare year-to-date figures for January-March combined in 2020 and 2021. On that basis, total spending increased 4.5% but the disparity widened further between strong residential spending growth and diminishing nonresidential activity. Private residential construction spending jumped 21% year-to-date, with gains of 27% for new single-family construction, 15% for new multifamily, and 14% for owner-occupied improvements. Private nonresidential construction spending declined 9.8% year-to-date, with decreases in all 11 components. The largest private nonresidential segment (ranked by year-to-date spending)—power—slumped 9.3% year-to-date (including electric power, -11%, and oil and gas field structures and pipelines, -5.3%), followed by commercial, -4.3% (including warehouse, 3.2%, and retail, -23%); manufacturing, -9.0%; and office, -4.5%. Lodging had the largest decrease, -26%. Public construction spending slipped 1.8% year-to-date. The largest public segment, public education construction, slid 2.4% (primary/secondary, 2.4%, and higher education, -14%). Highway and street construction declined 4.6% year-to-date. Public transportation construction fell 1.8%.
Inflation-adjusted gross domestic product (real GDP) increased 6.4% at a seasonally adjusted annual rate in Q1, the Bureau of Economic Analysis (BEA) reported on Thursday, following increases of 4.3% in Q4 and 33% in Q3 2020, leaving real GDP 0.4% above the Q1 2020 level. Real residential investment in permanent-site structures leaped 25%, including investment in single-family structures, 31%, and multifamily structures, 4.6%. In contrast, there was a 4.8% decrease in real gross private domestic investment in nonresidential structures, including commercial and health care structures, -13%; manufacturing structures, -0.8%; power and communication structures, -10%; wells and mining structures, 60%; and other non-mining structures, -14%. Real government gross investment in structures declined 9.3%, including federal investment for defense structures, -24%; nondefense structures, -6.1%; and state and local structures investment, -8.9%. The GDP price index increased 4.1%, with price indexes for nonresidential structures investment, 4.0%; residential investment, 11%; and government investment in structures, 7.4%.
Notices of materials price increases continue to flood in. “In a normal year, Ron Whalen, vice president of Roger B. Kennedy Construction, receives one or two ‘Dear Valued Customer’ letters from suppliers notifying him of price increases for certain materials,” the New York Times reported today. “This year, a stack of 30 such warnings sits on his desk in Orlando, Fla., alerting him that things as diverse as lumber, drywall, aluminum and steel are going to cost 10 to 20% more.” Readers are invited to send information on materials costs and supply-chain issues to ken.simonson@agc.org. Readers this week sent announcements of steel price increases for steel and cement. AGC chief economist Ken Simonson will present his latest information with the chief economists of the American Institute of Architects and ConstructConnect in a free webinar on Thursday, May 6 from 2 to 3:30 pm EDT. Register here.
Construction employment, not seasonally adjusted, decreased from March 2020 to March 2021 in 203 (57%) of the 358 metro areas (including divisions of larger metros) for which the Bureau of Labor Statistics (BLS) posts construction employment data, increased in 104 (29%) and was unchanged in 51, according to an analysis AGC released on Wednesday. (BLS reports combined totals for mining, logging, and construction in most metro areas, to avoid disclosing data about industries with few employers; AGC assumes the construction-only changes in these areas match the combined change.) The largest year-over-year (y/y) losses occurred again in Houston-The Woodlands-Sugar Land (-31,000 construction jobs, -13%) and New York City (-24,000 combined jobs, -15%), followed by Midland, Texas (-10,000 combined jobs, -26%); Odessa, Texas (-8,000 combined jobs, -39%); and Nassau County-Suffolk County, N.Y. (-7,900 combined jobs, -10%). Odessa had the steepest percentage decline, followed by Lake Charles, La. (-35%, -6,800 construction jobs); Midland; Longview, Texas (-24%, -3,600 combined jobs); and Greeley, Colo. (-21%, -4,100 combined jobs). The Seattle-Bellevue-Everett division had the largest y/y gains (5,300 construction jobs, 5%), followed by Indianapolis-Carmel-Anderson, Ind. (4,300 construction jobs, 8%); Austin-Round Rock, Texas (4,000 combined jobs, 6%); Sacramento--Roseville--Arden-Arcade (3,200 construction jobs, 5%) and Ogden-Clearfield, Utah (3,100 combined jobs, 15%). Sierra Vista-Douglas, Ariz. again had the highest percentage increase (35%, 900 combined jobs), followed by Fargo, N.D.-Minn. (24%, 1,800 combined jobs); Cleveland, Tenn. (16%, 300 combined jobs); Niles-Benton Harbor, Mich. (15%, 300 combined jobs) and Ogden-Clearfield. Nine areas set new lows for March and 36 set new highs, in series dating in most cases to 1990.
Total compensation (wages, salaries, and benefits, including required employer payments) in the construction industry rose 0.9%, seasonally adjusted, in the first quarter (Q1) of 2021, compared to 0.6% in both Q4 and Q1 2020, BLS reported today. Wages and salaries in construction also rose 0.9% in Q1 2021, vs. 0.7% in Q4 and Q1 2020. Over 12 months, compensation increased 2.7%, vs. 3.1% in the previous 12 months, while wages and salaries rose 3.0%, down from 3.5% in the previous 12 months. BLS does not break out benefit costs for construction, but the fact that total compensation increased less than wages (2.7% vs. 3.0%) indicates that benefit costs rose less rapidly than wages. For all private industry employees, employer costs over the past 12 months increased 2.8% for total compensation, 3.0% for wages and salaries, and 2.5% for total benefits (including 2.1% for health insurance).
