Construction jobs, spending dive; Reed's starts rise; Manpower, Fed outlooks are grim
March 10, 2009
The unemployment rate in February climbed to 8.9% overall, not seasonally adjusted (8.1% seasonally adjusted) from 5.2% in February 2008, and to 21.4% in construction from 11.4%, the Bureau of Labor Statistics (BLS) reported on Friday. Nonfarm payroll employment shrank by 651,000 jobs in February, seasonally adjusted, and the estimates for January and December worsened to -655,000 and -681,000, respectively. Since February 2008, the economy has shed 4,168,000 jobs (3.0%). Construction employment sank by 104,000 jobs in February and 826,000 over 12 months. That was one-fifth of the economy-wide loss over the year, even though the industry accounts for only one out of 20 employees. All five construction employment categories suffered steep declines: residential building and specialty trade contractors each lost 15% of employees in a year, while nonresidential building, specialty trades and heavy and civil engineering cut 8.4%. Employment in architectural and engineering services, a harbinger of demand for future construction, slumped 16,000 in February and 56,300 (3.9%) over 12 months. Average hourly earnings in construction fell 4 cents for the month to $22.37, seasonally adjusted, but were 4.1% higher than in February 2008 and 21% higher than the average of $18.47 for all private-sector production and nonsupervisory employees.
According to Manpower Inc.'s quarterly survey of 31,800 employers across the U.S. and Puerto Rico, released today, "employers expect the [seasonally adjusted] hiring pace to slow considerably when compared to Quarter 1 2009. The second quarter net employment outlook for the U.S. is also considerably weaker than one year ago at this time….Construction employers [along with leisure and hospitality employers] anticipate a moderate increase in hiring pace as compared to Quarter 1 2009, but still remain relatively pessimistic with a negative net employment outlook." Data for the 13 industries in the survey are not seasonally adjusted; in the past, construction hiring plans for the second quarter have usually risen more than in 2009.
Construction spending skidded 3.3% to a seasonally adjusted annual rate of $986 billion in January, the Census Bureau reported on March 2. That level was 9.1% lower than in January 2008. December, November and total 2008 spending were revised down, with the annual total put at $1.075 trillion, a drop of 5.5% from 2007. In January, private nonresidential construction fell 4.3%, even more than the declines of 2.9% for private residential construction and 2.3% for public construction. Ten out of 11 private nonresidential categories and 11 out of 12 public categories declined; educational spending was the only exception in each case. Compared to January 2008, private residential spending was down 28%; private nonresidential was up 0.3%; and public, up 4.4%. For public and private nonresidential spending combined, most types fared far worse for the month than over 12 months. Educational spending was up 0.6% and 3.5%, respectively. But the next-largest type, highway and street, slipped to -1.0% from 5.5%; manufacturing, -0.2% from 48%; commercial (retail, warehouse and farm) -2.9% and -19%; office, -2.0% and -3.8%; power, -12% and 8.1%; health care, -5.2% and 5.7%; transportation facilities, -2.3% and -1.2%; and lodging, -4.8% and -0.2%.
The value of nonresidential starts climbed 13% in January and February combined, compared with the year-ago period, Reed Construction Data reported today, based on data it compiled. There were wide differences among types: heavy engineering starts rose 36% and nonresidential building starts, 3.4%, among which institutional starts rose 6.1%, commercial starts were flat and manufacturing tumbled 24%.
Reports from the 12 Federal Reserve districts, known by their headquarters cities, "suggest that national economic conditions deteriorated further during the reporting period of January through late February," the Fed reported on Wednesday in the Beige Book (named for the color of its cover). "The deterioration was broad-based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions. Looking ahead, contacts from various districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010….Manufacturing activity fell on net in all districts, with very sharp declines recorded for some sectors and only partial offsets provided by the few bright spots….For most districts, the drop in activity was especially pronounced for makers of capital goods and construction-related equipment and material…Several districts reported that capital spending plans were curtailed further during the reporting period, notably for companies in the retail sector and within manufacturing…Demand for commercial, industrial and retail space fell further during the reporting period, with some evidence of more rapid deterioration than in preceding periods. Vacancy rates rose and lease rates declined on a widespread basis; New York noted that commercial real estate markets ‘weakened noticeably,' while Atlanta described reports on commercial real estate that were ‘decidedly more negative' than in previous periods. Construction activity has declined commensurately, and assorted reports suggest that market participants expect this weakness to continue at least through the end of 2009. Cleveland noted that public works projects have shown stability of late, although they declined in the San Francisco district as a result of the budgetary struggles of some state and local governments there. Credit constraints and uncertainty were reported to be a drag on commercial construction and leasing activity in the Philadelphia, Chicago, Dallas, and San Francisco districts."