Construction jobs, spending continue gains; outlook varies for factories, offices, apts.
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Nonfarm payroll employment increased by 88,000, seasonally adjusted, in March and 1,910,000 (1.4%) over 12 months, the Bureau of Labor Statistics reported today. The unemployment rate was 7.6%, not seasonally adjusted (and seasonally adjusted), down from 8.4% a year earlier. Construction employment rose for the tenth straight month and totaled 5,802,000, seasonally adjusted, the most since September 2009. Construction employment rose 162,000 (2.9%) from March 2012, while total hours worked in construction increased by 3.9%, implying that contractors are lengthening working hours and also hiring new workers. The unemployment rate for former construction workers dropped from 17.2%, not seasonally adjusted, in March 2012 to 14.7%. Residential construction employment (residential building and specialty trade contractors) rose by 14,800, seasonally adjusted, for the month and 77,800 (3.8%) for the year. Nonresidential employment (building, specialty trades, and heavy and civil engineering construction) climbed by 3,000 and 84,400 (2.3%), respectively.
Construction spending in February totaled $885 billion at a seasonally adjusted annual rate, up 1.2% from the downwardly revised January total and up 7.9% from February 2012, the Census Bureau reported on Monday. Private residential spending increased 2.2% for the month and 20% year-over-year; private nonresidential spending, 0.4% and 6.1%, respectively; and public construction spending, 0.9% and -1.5%. Of the three residential components, new single-family construction rose 4.3% and 34%, respectively; improvements to existing single- and multifamily buildings, 0.5% and 1.1%; and new multifamily spending slipped 2.2% for the month but jumped 52% year-over-year. Among the largest private nonresidential components (in descending order of current size), power construction (including conventional and renewable power plus oil and gas fields and pipelines) rose 0.7% and 4.0%; manufacturing construction, 0.3% and 9.9%; commercial (new and renovated retail, warehouse and farm), 0.2% and 4.3%; health care, 3.1% and 0.1%; and office, 0.3% and 25%. Of the top two public categories, highway and street construction rose 3.4% and 5.1%, while educational fell 0.3% and 8.4%.
The outlook for chemical manufacturing construction appears bright. Notes on Shale Gas and Manufacturing, a white paper updated on Tuesday by the American Chemistry Council, lists 97 chemical industry construction projects, “representing cumulative capital investments totaling $71.7 billion in the United States….The list is based on actual project announcements rather than conjecture of potential capital spending.” In its Gulf Coast Labor Market Analysis presentation, Industrial Info Resources reported on Tuesday, “There are 19 [plants to liquefy natural gas] to be located at 10 different facilities, representing $55 billion from Corpus Christi, Texas to Pascagoula, Miss.”
The surge in office construction may reflect more remodeling than new building. “The amount of occupied [office space increased in the first quarter] by just 0.12%, according to real-estate research service Reis Inc...., while the national office vacancy rate fell to 17% from 17.1%.,” the Wall Street Journal reported on Tuesday. “The vacancy rate is still well above its 12.5% level at the office market’s peak in 2007. Employers today occupy about 101 million square feet less than they occupied then, according to Reis, which tracks 79 markets. At the current rate of growth—which is about one-third the pace of the recovery that followed the dot-com bust last decade—it would take more than five years to return to that peak level. Such a sluggish pace of recovery is largely attributed to slow employment growth at corporations, many of which are reluctant to sign leases expanding into more space….The San Francisco area had the fastest-growing office market in the country, with rents sought by landlords rising 6.8% over the past 12 months. The city was followed by New York, Houston, San Jose, Calif., and Dallas.” Even firms that add workers may not need to build or lease new space. Office-furniture makers have been “persuading companies that newer office layouts can encourage collaboration and, in some cases, shrink their space requirements and costs,” the Journal reported on Wednesday. “Campbell Soup Co. has been remodeling its…headquarters, providing more common spaces, including ‘huddle rooms’ for meetings of two to four people” instead of underused larger meeting rooms. “Many Campbell managers and executives still have offices, but they are being standardized at 120 square feet. That means smaller offices for some executives, creating more open space that can be devoted to common areas.”
Apartment “overdevelopment remains a concern nationwide,” the Journal reported on Wednesday. Citing Reis, “the nation’s average monthly rent [was] up 0.5% from the previous quarter and up 3.4% from the year-earlier period, marking the slowest growth rate since the end of 2011….The national vacancy rate, which hit 8% in the aftermath of the financial crisis, fell to 4.3% from 4.5% in the fourth quarter….markets that saw solid first-quarter rental gains include Seattle, San Diego and Nashville, Tenn. Washington, D.C., was the only one of the 79 markets Reis tracks to see rents decline…The country’s 54 largest metropolitan markets should see about 150,000 new units this year, followed by an additional 300,000 combined in 2014 and 2015, said Luis Mejia, the CoStar Group’s director of multifamily research.”
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