Construction employment, seasonally adjusted, totaled 7,560,000 in December, an increase of 22,000 from the upwardly revised November total and a gain of 160,000 (2.2%) year-over-year (y/y) from December 2020, according to AGC’s analysis of Bureau of Labor Statistics (BLS) data posted on Friday. Nevertheless, the December total was 88,000 (-1.2%) below the pre-pandemic peak in February 2020. Residential construction employment, comprising residential building and specialty trade contractors, dipped by 4,100 in December, putting the total 82,000 (2.7%) higher than in February 2020. Nonresidential construction employment—building, specialty trades, and heavy and civil engineering construction—increased for the fourth-straight month, by 27,000. But nonresidential employment remains 169,000 (-3.6%) below the February 2020 level. Nonresidential employment has regained only 74% of the jobs it lost between February and April 2020, compared to 84% for total nonfarm payroll employment and 117% for residential construction. A total of 497,000 former construction workers were unemployed in December, a drop of 433,000 (-47%) y/y. The industry’s unemployment rate tumbled from 9.6%, not seasonally adjusted, in December 2020 to 5.0% last month, tying the lowest December mark since the series began in 2000. Individuals are counted as unemployed only if they have “actively looked for work in the prior four weeks.” The huge decrease in the number of unemployed workers—more than the twice the 160,000-job increase in construction employment y/y—suggests construction workers are either finding jobs in other sectors or dropping out of the workforce, at least temporarily.
Average hourly earnings for “production and nonsupervisory employees” (mainly, hourly craft workers) in construction increased by 5.3% y/y to $31.20, seasonally adjusted, in December 2021, BLS data posted on Friday showed. The average for all private-sector production and nonsupervisory employees rose 5.8% y/y to $26.61. Although the average for construction tops the all-private average by 17.2%, this “premium” has narrowed considerably. The premium aveaged 20-23% annually from 2005 to 2019, compared to 18% in 2020 and 2021. Since the pandemic began, historically low-wage sectors have raised starting wages sharply, offered signing and retention bonuses, and--for some jobs--flexible hours or work locations, inducements that are not possible for onsite construction jobs. These conditions imply construction firms are likely to have a harder time attracting and retaining workers or will have to raise pay even more.
The Dodge Momentum Index fell 3% in December from November, Dodge Construction Network reported on Friday. The index “is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. In December commercial planning fell 4%, and institutional planning slipped 1%. Despite these declines, 2021 was a banner year for the Dodge Momentum Index--despite the lingering risks of COVID-19 and low demand for some types of nonresidential buildings. Throughout the year, the overall Momentum Index increased 23%, the strongest annual gain since 2005. Both the commercial and institutional components of the Momentum Index saw similar gains--with their levels of activity reaching 13- and 14-year highs, respectively.”
“Economic activity in the services sector grew in December for the 19th month in a row,” the Institute for Supply Management reported on Wednesday. Construction is among 16 out of 18 services sectors that reported growth in December, 18 that reported paying higher prices for materials and services, 15 that reported slower supplier deliveries, 13 that reported an increase in orders, and 11 that reported increases in employment and order backlogs. Items reported up in price that are significant for construction included aluminum products, construction labor (13 months in a row), contractors (6 months), copper products, diesel fuel (13 months), personal protection equipment, polyvinyl chloride (PVC) products (4 months), steel products (12 months, but reported down in price by some), and transportation costs (3 months). Items listed in short supply included appliances; construction contractors (4 months), subcontractors (5 months), and materials (2 months); PVC conduit; and steel products (4 months).
Consultancy Rider Levett Bucknall reported on Friday that as of October 1 its construction cost (bid price) index “increased almost 7.5%, its largest [y/y] increase since the start of the global financial crisis in 2007.” The index “tracks the ‘true’ bid cost of construction, which includes, in addition to costs of labor and materials, general contractor and subcontractor overhead costs and fees (profit). The index also includes applicable sales/use taxes that ‘standard’ construction contracts attract. In a ‘boom,’ construction costs typically increase more rapidly than the net cost of labor and materials. This happens as the overhead levels and profit margins are increased in response to the increasing demand. Similarly, in a ‘bust’, construction cost increases are dampened (or may even be reversed) due to reductions in overheads and profit margins.” Among 12 cities, increases ranged from 4.1% in Honolulu and 4.4% in Denver to 9.1% in Washington, D.C. and 10.1% in Seattle.