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Nonfarm payroll employment in February increased by 273,000, seasonally adjusted, from January and by 2,409,000 (1.6%) year-over-year (y/y) from February 2019, the Bureau of Labor Statistics (BLS) reported. The unemployment rate dipped to 3.5% from January’s level of 3.6%. Construction employment in February totaled 7,646,000, an increase of 42,000 for the month and 223,000 (3.0%) over 12 months, following an upwardly revised gain of 49,000 in January. The total was the highest since July 2007. The two-month increase was the largest in nearly two years but may have been aided by unseasonably mild winter weather in both months. Average hourly earnings in construction rose 3.0% y/y to $31.35, 9.9% above the average for all private-sector employees ($28.52, also a 3.0% y/y increase). The unemployment rate in construction, not seasonally adjusted, declined from 6.2% in February 2019 to 5.5%, and the number of unemployed jobseekers with construction experience fell from 588,000 to 531,000—the lowest February levels in the 21-year history of both series. (Not-seasonally-adjusted levels vary with normal weather and holiday patterns and thus may not accurately show month-to-month economic trends.)
Construction spending totaled $1.369 trillion at a seasonally adjusted annual rate in January, a jump of 1.8% from the upwardly revised December rate and 6.8% y/y from January 2019, the Census Bureau reported on Monday. Private residential spending increased 2.1% for the month and 9.0% y/y. New single-family construction climbed for the sixth consecutive month, by 2.8% from December to January and 9.6% y/y. New multifamily construction was flat for the month and down 8.3% y/y. Residential improvements rose 1.5% for the month and 14% y/y. Private nonresidential spending increased 0.8% from December and 0.5% y/y. Of the four largest components, power gained 5.7% y/y (comprising electric power, up 11%, and oil and gas pipelines and field structures, down 10%); commercial, -4.0% (comprising retail, -6.3%, and warehouse, 13%); manufacturing, 5.0%; and office, 0.4%. Public construction soared 2.6% for the month and 13% y/y, with double-digit y/y gains in most segments. The three largest public segments all had y/y increases: highway and street construction, 12%; education construction, 4.1%; and transportation (air, transit, rail and port) construction, 11%. Some of the large increases may have resulted from unseasonably mild winter weather that permitted more construction in January than is typical.
The coronavirus outbreak has not produced any reported effects on U.S. construction so far. Impacts are likely to be diverse. For instance, the drop in the 10-year U.S. Treasury-note rate to a record low of under 1.0% as of Thursday is likely to bring mortgage rates down to new lows as well, enabling more households to buy homes, and stimulating homebuilding and improvements. State and local governments may be able to issue bonds for construction at lower interest cost, although some jurisdictions may find their creditworthiness is damaged by falling tax receipts and higher expenses to cope with the outbreak. Unbudgeted emergency spending and revenue declines may force both public and private owners to postpone construction spending. “In the past week,…California put out a warning to prospective municipal bond investors,” the Wall Street Journal reported on Wednesday. Even before these impacts, the Journal’s “analysis of data collected from 478 U.S. municipalities by the National League of Cities [found the] total general-fund revenue reported by these cities…is expected to be lower in fiscal 2019 than in fiscal 2018, adjusted for inflation, the first such dip in seven years.” Two commercial construction segments that appear to be especially vulnerable to project cancellations are hotels and airport retailers. “Airport retail outlets have been a rare success story in the slumping bricks-and-mortar world,” the Journal reported on Wednesday. “But these stores ae being pummeled since the coronavirus epidemic began, as foot traffic drops at airports popular with international tourists….Airport foot traffic in San Francisco fell 15% in February, compared with a year earlier, and declined 20% at Los Angeles International Airport, according to geolocation data platform Advan Research.” Readers are invited to email email@example.com if they encounter changes in project timing, materials or equipment deliveries, or prices attributable to coronavirus impacts.
“The first year of new [construction craft union wage and benefit] settlements agreed upon during 2019…had an average increase of 2.9%,” the same as in 2018, the Construction Labor Research Council reported. There was greater variation in the percentage increases in 2019, although “the number of increases greater than 4.0% has ticked up for at least the past three years.” Among 18 crafts, first-year average increases “ranged from 2.1% for Boilermakers to 3.5% for Teamsters” and Operating Engineers. Based on data from all years of new settlements, “CLRC projects an increase to 3.1%” by 2021.
The National Association of Home Builders reported on Thursday, “New NAHB research shows that despite the slowing of immigration inflow, the share of foreign-born workers in the U.S. construction labor force remain at record-high levels but showed no growth in 2017 and 2018. Immigrant workers now account for [24.3% of] workers in construction,” compared to 16.6% of the non-construction labor force. Immigrants accounted for 30% of workers in construction trades.
“Economic activity expanded at a modest-to-moderate rate over the past several weeks, according to the majority of Federal Reserve districts,” the Fed reported on Wednesday in the latest “Beige Book,” a summary of soundings of firms in the 12 districts from early January to February 23. “Manufacturing activity expanded in most parts of the country; however, some supply chain delays were reported as a result of the coronavirus and several districts said that producers feared further disruptions in the coming weeks…. Insufficient labor lowered growth for many firms and led to delays in construction projects.”