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Nonfarm payroll employment in August rose by 156,000, seasonally adjusted, from July and by 2,089,000 (1.7%) year-over-year (y/y), the Bureau of Labor Statistics (BLS) reported on Friday. (Data collection was largely completed before Hurricane Harvey hit, BLS noted.) The unemployment rate, 4.4%, matched the rate in April and June, just above the 4.3% rate in May and July. After five months of little change, construction employment increased by 28,000 on August and 214,000 (3.2%) y/y. The August total, 6,918,000, was the largest since October 2008. Employment increased for the month and 12 months in all five construction subcategories, with residential construction employment (residential building and specialty trade contractors) up a combined 0.5% for the month and 4.3% y/y, and nonresidential (building and specialty trades, plus heavy and civil engineering construction) up a combined 0.3% and 2.5%, respectively. Average hourly earnings in construction increased 2.7% y/y to $28.96, or 9.7% higher than the average for all private-sector employees ($26.39, a rise of 2.5% y/y). The unemployment rate in construction, not seasonally adjusted, was 4.7%, the lowest August rate since the series began in 2000, and the number of unemployed jobseekers with construction experience was 448,000, the lowest August total since 2000. (Not-seasonally-adjusted employment may be affected by normal weather and holiday patterns and thus should not be compared to levels in other months.)
Construction spending totaled $1.212 trillion at a seasonally adjusted annual rate in July, 0.6% below the rate for June (which was revised up by $13 billion or 1.1%), the Census Bureau reported on Friday. The rate in July was up 1.8% y/y but was the lowest since October. Public construction slumped 1.4% for the month and 5.6% y/y. Of the three largest public segments, highway and street construction fell 4.7% y/y; educational construction slid 6.2%; and transportation (transit, passenger rail, ports and airports) declined 8.0%. Private nonresidential spending skidded 1.9% from June and 3.6% y/y, with monthly decreases for all 11 segments shown on the Census release. Of the four largest components, power (electric power plus oil and gas pipelines and field structures) fell 7.2% y/y; commercial (retail, warehouse and farm) added 7.6%; manufacturing slumped 16% and office inched down 0.1%. Private residential spending in July rose 0.8% for the month and 12% y/y. New multifamily construction ticked up 2.8% y/y; new single-family construction rose 10% and residential improvements soared 16% YTD.
It is too early to know what impact the devastation from Hurricane Harvey will have on construction materials prices and supply. There have been immediate price surges for motor fuels because of refinery shutdowns; these will affect supply all along pipelines to the Southeast, Mid-Atlantic and Midwest that depend on Gulf Coast production or imports. However, refinery production is resuming day by day, and some fuel is being moved from other locations. A building-materials distributor in the Southeast reported on Thursday, "polyethylene prices skyrocketing, on allocation, and long lead times," as plants producing resin are expected to remain closed at least until mid-week, and transport is also disrupted. Demand for plywood, wallboard and other materials used to repair, stabilize or replace damage may cause short-term price and supply disruptions, but the longer-term impacts will depend on how much production capacity is offline and for how long. Medium-term demand for construction in the affected region may increase or decrease, depending on how many businesses close or cancel construction plans and how quickly housing and infrastructure are replaced. Most construction following natural disasters is spread out over many years. Readers are invited to send notices regarding materials prices, allocations and delivery delays to simonsonk@agc.org.
The value of new construction starts rose 6% from June to July at a seasonally adjusted annual rate, Dodge Data & Analytics reported on August 21. "Leading the way was a 26% jump by the nonbuilding construction sector, which reflected an improved level for public works and the start of two massive power plants...in California and New York. Residential building in July increased 8%, as multifamily housing rebounded after three consecutive monthly declines. Running counter was a 7% slide for nonresidential building following its 14% hike in June, as both office buildings and hotels retreated from June's elevated activity, outweighing a sharp rise for healthcare facilities in July. During the first seven months of 2017, total construction starts on an unadjusted basis were...down 1% from the same period a year ago[, with nonresidential building up 8%, residential up 1% and nonbuilding down 15%]. Dampening the year-to-date performance for total construction was a steep 44% decline for the electric utility/gas plant category. [If that] category is excluded, total construction starts in this year's January-July period would be up 3% from a year ago."
There is mixed evidence about hotel construction. The Census spending report shows private lodging construction rose 6.9% for the first seven months of 2017 compared with January-July 2016, but spending has been roughly flat since April 2016. The Wall Street Journal reported on Thursday, "Hotel developers are slowing down new U.S. construction projects after years of rapid growth, a result of tighter lending conditions and a ballooning supply of rooms in large markets." However, consultancy Lodging Econometrics (LE) reported on August 28, "The total 2017 forecast for 1,021 projects/114,906 rooms, represents a 20% increase over the actual number of hotel openings in 2016...LE forecasts that 1,160 projects/133,880 rooms will open in 2018 and another 1,193 projects/137,393 rooms will open in 2019, still a distance from the annualized new openings peak of 1,316 projects/140,227 rooms, set in 2009."
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