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AGC's Data DIGest: May 13-20, 2019

Construction employment rises in 43 states through April; Trump reverses some tariffs

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Seasonally adjusted construction employment rose from April 2018 to April 2019 in 43 states and declined in seven states and the District of Columbia, an AGC analysis of Bureau of Labor Statistics data released on Friday showed. Texas again added the most construction jobs (32,500 jobs, 4.4%), followed by Florida (22,600, 4.2%), Arizona (19,800, 13%) and California (19,000, 2.2%). West Virginia again added the highest percentage of construction jobs (34%, 12,200 jobs), followed by Nevada (15%, 13,000), Arizona, Alaska (12%, 1,900), Wyoming (12%, 2,300) and Minnesota (11%, 13,100). Construction employment reached new highs (in records dating back to 1990) in four states: Massachusetts, Oklahoma, Oregon and Texas. Louisiana again lost the most construction jobs (-8,400, -5.5%), followed by South Carolina (-3,600, -3.5%) and Mississippi (-1,800, -4.0%). Vermont had the steepest decline (-7.2%, -1,100 jobs), followed by Louisiana, Maine (-4.1%, -1,200), Mississippi and South Carolina. Construction employment rose from March to April in 32 states and D.C., fell in 15 states and was unchanged in Alaska, South Dakota and Vermont. (AGC's rankings are based on seasonally adjusted data, which in D.C., Hawaii and Delaware is available only for construction, mining and logging combined.)

President Trump announced on Friday that the United States would remove the 25% tariff on steel and the 10% tariff on aluminum from Canada and Mexico that were imposed in March 2018. Canada and Mexico announced they were removing retaliatory tariffs on U.S. goods, and all three nations may move toward enacting the U.S.-Mexico-Canada trade agreement that they negotiated last year as a replacement for the current North American Free Trade Agreement. Separately, the administration on Thursday announced it had reduced the special tariff on Turkish steel from 50% to 25%.Each of these measures should lower costs for products purchased by U.S. construction firms and make other U.S. businesses more competitive, boosting the prospects for increased orders for industrial, distribution and transportation construction. However, timing remains uncertain.

Construction data firm ConstructConnect reported on Wednesday that the value of startsin April 2019 declined 15.5% year-over-year (y/y) from April 2018, not seasonally adjusted. Nonresidential building starts fell 22% (commercial construction, -22%; institutional, -18%; and industrial, -51%); residential starts decreased 7.8% (single-family, -4.5%, and multifamily, -16%); and engineering (civil) slumped 17.5%. The value of starts in the latest 12 months combined slipped 4.5% from the April 2017-April 2018 period, with nonresidential starts down 2.2% and residential starts down 7.9%.

Housing starts (units) in April increased 5.7% at a seasonally adjusted annual rate from March but decreased 2.5% y/y from April 2018, the Census Bureau reported on Thursday. Multifamily (five or more units) startsrose 2.3% from March and 1.4% y/y. Single-family starts increased 6.2% for the month but declined 4.5% y/y. Residential permits edged up 0.6% for the month but declined 5.0% y/y. Multifamily permits increased 7.1% and 1.5%, respectively. Single-family permits fell 4.2% and 9.4%. Despite the inconsistent results, multifamily permits in the first four months of 2019 combined total 138.600, 3.8% ahead of the same period in 2018 and 32% higher than year-to-date starts, implying a substantial backlog of projects that may break ground later in the year.

Hotel construction appears to be picking up steam again, based on reports from two hotel data firms. STR reported on May 14, "STR's pipeline data for the U.S. showed 1,575 hotel projects accounting for 203,890 rooms in construction as of April 2019. This represented a 9.9% year-over-year increase in the number of rooms in the final phase of the development pipeline. After a stretch in 2018 where year-over-year construction decreases were common, the industry has now reported seven consecutive months of growth beginning with October. The 9.9% rise in April was the highest for any month since August 2017....'There has been ongoing acceleration in construction activity, and even though the national total is still more than 7,000 rooms below the previous construction peak in 2007, this is a situation worth watching,' said Jan Freitag, STR's senior VP of lodging insights." STR said the five locations with the most rooms under construction are New York, Las Vegas, Orlando, Dallas and Los Angeles/Long Beach. Lodging Econometrics (LE) reported on May 9, "Annualized construction starts are at the highest level since 2008. In 2019, LE forecasts a 2.2% supply growth rate with 1,038 new hotels/118,385 rooms expected to open. For 2020, LE anticipates 1,174 new hotel openings and 128,598 rooms." LE said the most active markets are New York, Dallas, Los Angeles and Houston. On May 1, the Census Bureau reported that private lodging construction put in place in January through March 2019 increased 8.9% from the same period in 2018, following a 9.9% increase for 2018 as a whole over 2017.

Wind energy construction is on the rise, the Energy Information Administration (EIA)  reported on Friday in its "Today in Energy" blog. "EIA expects that U.S. wind capacity additions in 2019 will total 12.7 gigawatts (GW), exceeding annual capacity additions for the previous six years but falling short of the record 13.3 GW of wind capacity added in 2012....the increase in annual capacity additions for wind scheduled for 2019 is largely being driven by the legislated phaseout of the [production tax credit (PTC)] extension for wind....Facilities that begin construction after December 31, 2019, will not be able to claim the PTC....U.S. wind project developers who want to receive the full 2016 value of the PTC must begin operations by the end of 2020. However, based on the latest project statuses reported on the Preliminary Monthly Electric Generator Inventory, more wind capacity is expected to come online by the end of 2019 than by the end of 2020."

Data DIGest is a weekly summary of economic news. All rights reserved. Sign up at http://store.agc.org. Editor: Ken Simonson, Chief Economist, AGC, simonsonk@agc.org