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AGC Data DIGest: August 3-9, 2021

Construction employment edges higher in July; wage premium shrinks; AGC updates cost alert

Construction employment, seasonally adjusted, totaled 7,421,000 in July, a gain of 11,000 from June, following three-straight monthly declines in the past five months, according to AGC’s analysis of Bureau of Labor Statistics (BLS) data posted on Friday. The July total was 227,000 (-3.0%) below the pre-pandemic peak in February 2020. The gap widened between residential and nonresidential employment gains. Residential construction employment, comprising residential building and residential specialty trade contractors, increased by 8,300 in July, putting the total 59,000 (2.0%) higher than in February 2020. Nonresidential construction employment—building, specialty trades, and heavy and civil engineering construction—rose by 2,900 in July but remained 285,000 (-6.1%) below the February 2020 level. The heavy and civil engineering segment has regained only 37% of the jobs it lost between February and April 2020, compared to around 60% for other nonresidential segments and 112% for residential construction. A total of 592,000 former construction workers were unemployed in July, a sharp drop from July 2020 but substantially higher than the July 2019 total of 386,000. The industry’s unemployment rate in July was 6.1%, not seasonally adjusted, compared to 8.9% in July 2020 and 3.8% in July 2019.

Contractor readers are invited to take the 2021 AGC/Autodesk Workforce Survey, which will close on Friday, August 13. AGC will report the results at the beginning of September.

The BLS report also covers average hourly earnings by industry. Construction industry earnings averaged $32.93 per hour, seasonally adjusted, in July, a 3.7% increase from July 2020, and 7.8% more than the total private sector average of $30.54. The construction pay “premium” has shrunk from a maximum of 10.6% in late 2018, implying that the financial attractiveness of construction jobs may be slipping as other sectors that are expanding faster raise pay to attract more workers. The premium has declined across all subsectors of construction, based on June data (the latest available for subsectors). Over the past two years the premium diminished the most for employees of residential building firms (-3.6 points, from a 9.0% premium above the private-sector average in June 2019 to 5.4% in June 2021) and heavy and civil engineering construction firms (-3.5 points, from 15.3% to 11.8%), followed by specialty trade contractors (-1.5 points, from 5.8% to 4.3%) and nonresidential building firms (-0.7 points, from 25.5% to 24.8%).

AGC posted the third revision (dated August 2021) of its Construction Inflation Alert, a document to inform owners, officials, and others about the latest materials cost and supply-chain challenges contractors are experiencing. Readers are welcome to download and forward the document. Readers are invited to report cost and supply issues to AGC’s chief economist at Ken.Simonson@agc.org.

Materials suppliers continue to announce both immediate and future price increases. On August 2, Steel Dynamics Structural & Rail Division announced it “will be increasing published prices on most parallel flange products” by $50 per ton and $30 on structural merchants, effective with “new orders received after 8:00 pm EST, Friday, July 30.” On July 27, ClarkDietrich announced it “will implement a minimum price increase of 10% on all steel products for all markets effective October 1…in addition to our August and September increase announcements. As a reminder, invoice pricing is determined at time of shipment” (emphasis in original). On July 23, the Houston-area office of Cemex announced its “base ready-mix price will increase $6 per cubic yard,” effective on October 1.

“Lead times are becoming as significant of a concern as price escalation,” a reader reported on Wednesday. “Many stock items require weeks to acquire, ‘quick ship’ options for fixtures and equipment are evaporating, and major equipment lead times are tracked in months rather than weeks. We have had vendors tell us within a few days of delivery that there will be multi-week delays.” On Wednesday, James Hardie Building Products announced discontinuation of several products and said its “Multi-Family Desk will not be quoting or contracting new projects indefinitely.” In the latest Small Business Pulse Survey, conducted July 12-18, the Census Bureau found 59% of construction industry respondents reported domestic supplier delays; 31% reported difficulty locating alternative domestic suppliers, and 36% reported delays in delivery/shipping to customers. In addition, 18% reported foreign supplier delays and 9% reported difficulty locating alternative foreign suppliers. “Production delays at this business” were reported by 23%.

The Dodge Momentum Index fell 6% in July from the revised June reading, Dodge Data & Analytics reported on Friday. The index “is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. Both components of the Momentum Index fell in July. Commercial planning fell 3%, while institutional planning dropped 9%. The Momentum Index posted strong gains through much of the winter and spring as the economy and building markets began to stabilize following the recession. While the economy has continued its forward progress through the summer, the Index has regressed somewhat as higher material prices and shortages of skilled labor continue to exert a strong influence over the construction sector. Despite the declines in June and July, the Momentum Index remains near levels last seen in 2018. Compared to a year earlier, the Momentum Index was 25% higher than in July 2020—institutional planning was up 27% and commercial planning was 25% higher than last year.”