Construction Economic News

Construction payrolls shrink; October spending edges up; most ballot measures win

November 7, 2008

Seasonally adjusted nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1% to 6.5%, the Bureau of Labor Statistics reported today. Worse, 179,000 more jobs vanished in August and September than was estimated last month. In the past year, payroll employment has decreased by 1,078,000 (-0.8%). Construction accounted for nearly half of those losses-508,000 (6.7% of the October 2007 construction job total), including 49,000 in October. Construction workers had the highest unemployment rate (10.8%, not seasonally adjusted) of any industry in October, and the largest increase (from 6.1%) over 12 months. Average hourly earnings in construction in October rose to $22.14, up 5.1% from October 2007, vs. a 3.5% gain (to $18.21) for all private production and nonsupervisory workers. Employment in all construction segments fell to multi-year lows. One of the worst hit has been highway, street and bridge construction. The latest data for this segment is for September and is not seasonally adjusted, meaning comparisons are valid for the same month in different years but not across months. Employment in September 2008 totaled 371,000, the lowest September since 1998 and down 36,000 (9%) from the peak in September 2005. Many of these workers could be quickly re-employed if a stimulus bill is enacted that sends more highway funds to states.

Construction spending in October totaled $1.06 trillion at a seasonally adjusted annual rate, down 0.3% from September and 6.6% from October 2007, the Census Bureau reported on Monday. Residential construction sagged 1.3% and 27%; nonresidential construction edged up 0.1% and 8.0%. The largest gains were for manufacturing construction (including several massive refinery expansions and new auto, steel and cement plants), up 5.2% and 54%. Lodging (hotels and resorts) climbed 0.4% and 26%; power (power plants, wind and other renewable power, transmission lines), 1% and 26%; offices, 1.7% and 12%; education, 0.5% and 6.6%; and transportation facilities, 0.5% and 3.7%. Declines occurred in commercial (retail, warehouse and farm), -2.9% and -11%; highways and streets, -1.5% and 1.3%; health care, -0.6% and 4.4%.

Infrastructure spending fared well at the polls on Election Day. “There were 696 [bond referendums] totaling $67 billion before voters—the second-largest amount ever for a single election day,” Bond Buyer reported on Wednesday. “As of…afternoon, about 82% of bond referendums for which results were available had been approved for about $54 billion of new debt….Voters in California narrowly approved a $9.95 billion bond issue for high-speed rail [and] okayed $980 million for projects at children’s hospitals….In Los Angeles County, 67% of voters approved a half-cent sales tax that will raise $30 billion to $40 billion to fund light rail, subway and other transit projects over the next 30 years.” Voters in several California and Texas districts approved multi-billion dollar school and community college bond issues, along with large bonds to rebuild major hospitals. “Voters in the three-county region centered in Seattle gave a solid victory to a half-cent sales tax proposal projected to fund $17billion in Sound Transit passenger train and bus projects.” Voters approved sales tax increases for transit and commuter rail in counties in California, Hawaii, Kansas and New Mexico but rejected them in St. Louis and Kansas City.

The quarterly survey of 102 corporate economists by the National Association for Business Economics (, released on Monday, showed that for the first time since 2001, more respondents reported declining demand than rising demand in the previous quarter for their firms’ goods and services. More firms plan to reduce than raise spending on structures in the next 12 months, a reversal from the July survey.

The Federal Reserve’s quarterly survey of senior loan officers at 55 domestic banks and 21 U.S. branches and agencies of foreign banks, released on Monday, found, “On balance, about 85% of domestic banks reported that they had tightened their lending standards on commercial real estate loans (CRE) over the past three months. About 65% of foreign banks, up considerably from about 35% in the July survey, also indicated that they had tightened their lending standards on CRE loans. On net, about 55% of domestic banks—up from 30% in the July survey—and 40% of foreign banks—down from roughly 45% in the July survey—reported weaker demand for such loans."

The credit market shutdown, portfolio losses for endowments and donors, and the deteriorating economy are hitting construction hard. Institutions that have announced construction projects to be put on hold or canceled include Brown, Boston, and Cornell Universities, Massachusetts Institute of Technology and Williams College. “Trinity Health has temporarily shelved plans to expand Saint Joseph Mercy Saline Hospital and build another hospital in Livingston County because of poor economic conditions in Michigan,” Crain’s Detroit Business reported on Wednesday. Data DIGest readers reported this week: “All of my clients are not-for-profit healthcare organizations. Over the last month I have seen many of our prospects postpone previously approved new project starts due to the unavailability of new public bond financing.” “We have seen a decline in the numbers of K12 design projects on the drawing boards. Projects are being shelved for a year or more due to uncertainty in funding and housing starts." "We've had two owners for whom we have ongoing [private-sector work in southern California] cancel further construction."

Attached Files: