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AGC Data DIGest: September 13-19, 2022

Input costs in August decline overall but with wide variation; job totals rise in 31 states

Contractors’ input costs declined again on balance in August, while bid prices rose, according to Bureau of Labor Statistics (BLS) data posted on Wednesday. Specifically, the producer price index (PPI) for material and service inputs to new nonresidential construction slid 1.1% for the month, while the PPI for new nonresidential building construction—a measure of the price that contractors say they would bid to build a fixed set of buildings—rose 0.3%. The bid-price index rose 23.9% year-over-year (y/y), while the input index climbed 13.0%. Despite the recent decline in some input prices, the y/y gain still exceeds the increase that consumers or most businesses have experienced: the consumer price index rose 8.3% y/y and the PPI for final demand (all industries) climbed 8.7%. Furthermore, input costs varied greatly. Major declines occurred last month in the PPIs for diesel fuel, -13.4%; steel mill products, -5.7%; aluminum mill shapes, -3.9%; and lumber and plywood, -2.9%. The fuel price drop contributed to a 1.9% fall in the PPI for truck transportation of freight. Prices increased notably for gypsum building materials such as wallboard, which jumped 3.3% for the month; construction machinery and equipment, 2.6%; flat glass, 2.4%; copper and brass mill shapes, 2.0%; ready-mixed concrete, 1.6%; and asphalt paving mixtures and blocks, 1.0%. Among services, the price index for equipment rental and leasing climbed 3.7%. AGC posted tables of construction PPIs. Readers are invited to send cost and supply-chain information to ken.simonson@agc.org.

Seasonally adjusted construction employment rose from July to August in 31 states, declined in 16 states and the District of Columbia, and was flat in Maine, Maryland, and Nevada, according to AGC’s analysis of data BLS posted on Friday. Arizona added the most construction jobs over the month (5,300, 2.9%), followed by Illinois (3,500, 1.5%) and Georgia (3,300, 1.6%). Arizona had the largest percentage gain, followed by Kentucky (2.4%, 1,900 jobs) and Utah (2.0%, 2,600). Minnesota lost the most jobs in August (-1,900, -1.4%), followed by California (-1,700, -0.2%) and Missouri (-1,400, -1.0%). Wyoming had the largest percentage loss (-3.2%, -700 jobs), followed by Mississippi (-2.7%, -1,300) and Montana (-1.5%, -500). The August total topped the February 2020 level in 33 states, lagged in 15 states and D.C, and was flat in Iowa and North Dakota. (February 2020 was the month in which employment peaked nationally before plunging during widespread shutdowns in March and April 2020.) Utah added the most jobs over 30 months (19,000, 17%), followed by Tennessee (16,900, 13%) and Florida (16,400, 2.8%). The top percentage gains were in Utah, South Dakota (15%, 3,500 jobs), Idaho (13%, 7,100 jobs), and Tennessee. New York lost the most construction jobs since February 2020 (-37,000, -9.0%), followed by Pennsylvania (-11,600, -4.3%) and Louisiana (-7,600, -5.5%). New York had the largest percentage shortfall, followed by Wyoming (-6.5%, -1,500 jobs) and Louisiana. For the month, 31 states added construction jobs, (For D.C., Delaware, and Hawaii, which have few mining or logging jobs, BLS posts combined totals with construction. AGC treats the totals as construction only.)

The value of construction starts in current dollars (i.e., not inflation-adjusted) edged up 0.4% y/y in August, not seasonally adjusted, data firm ConstructConnect reported on Friday. Nonresidential building starts slid 7.2% y/y, with institutional starts up 13%, commercial starts down 27%, and industrial (manufacturing) starts down 6.5%. Heavy engineering (civil) starts soared 38% y/y, with roads up 23%, water/sewage up 39%, bridges up 155%, dams/marine up 88%, power infrastructure up 2%, and airports up 5.5%. Residential starts declined 9.3% y/y, with single-family down 13% and apartments down 2.2%. ConstructConnect’s Expansion Index, a measure of the y/y change in the total dollar value of multifamily, nonresidential building, and engineering construction projects in planning, increased for the U.S. as a whole in September for the fifth consecutive month. The index signaled expansion for 46 states and D.C., contraction in Wisconsin, New Mexico, and Washington, and little change in Arizona.

Record tax collections “are allowing states to return some surplus revenues back to citizens, contemplate further tax cuts, and …providing additional funding to transportation projects as most recently seen in Florida and North Carolina,” investment research firm Thompson Research Group posted on September 7. Fiscal year 2023 (FY23) “revenue forecasts are less optimistic than in previous years with several states estimating a decline in revenues, e.g., [California, Florida, and Virginia,] citing growing risk of recession. Texas, however, has just boosted its biennial revenue estimates by 10% given record oil and natural gas tax collections. Should FY23 revenue collections decline at a low to mid-single digit rate, states will be far ahead of pre-pandemic collections, allowing states to transfer additional funding to transportation projects. [California’s] DOT budget is up 13.2% in FY23. Specific construction-heavy line items Capital Projects, Local Assistance and Maintenance are up 15.4% y/y to $14.2B” (billion). Florida’s “FY23 budget includes $13.5B for DOT, up 7.7%.” [Texas] anticipates the transfer of $3.6B to the DOT via Prop 1 in FY23,” up 157% from FY22.

In “The Impacts of Covid-19 Illnesses on Workers,” a working paper posted by the National Bureau of Economic Research, Gopi Shah Goda (Stanford University) and Evan Soltas (MIT) “estimate that workers with week-long Covid-19 work absences are 7 percentage points less likely to be in the labor force one year later compared to otherwise similar workers who do not miss a week of work for health reasons. Our estimates suggest Covid-19 illnesses have reduced the U.S. labor force by approximately 500,000 people (0.2 percent of adults).” Surveys analyzed in 2021 and early 2022 by CPWR showed construction workers were much less likely to have been vaccinated than other workers. The working paper’s findings thus imply that construction is more likely to have persistent job losses from the pandemic than other sectors.