Construction Economic News

Job losses worsen; construction spending, wages cool; ABI stays weak

July 6, 2009

Nonfarm payroll employment shrank by 467,000 jobs in June, seasonally adjusted, bringing the 12-month total loss to 5,664,000 (-4.1%), the Bureau of Labor Statistics (BLS) reported on Thursday. The unemployment rate rose to 9.7%, not seasonally adjusted (9.5%, seasonally adjusted). Construction again had the highest industry unemployment rate, 17.4%, not seasonally adjusted, up from 8.2% a year earlier. Construction job losses totaled 79,000(-1.3%) in June, seasonally adjusted, and 992,000 (-14%) over 12 months. All construction job categories had severe monthly and 12-month losses: residential building, -10% and -16%; residential specialty trade contractors, -1.4% and -16%; nonresidential building, -1.6% and -11%; nonresidential specialty trades, -0.9% and -13%; and heavy and civil engineering, -1.8% and -11%. Architectural and engineering services employment, a portent of future construction, fell 1.0% for the month and 7.9% over 12 months. Seasonally adjusted average hourly earnings totaled $22.59 in construction, up 82 cents (3.8%) over 12 months, compared to $18.53, a gain of 49 cents (2.7%) for all private production and nonsupervisory employees.

Construction spending in May totaled $964 billion at a seasonally adjusted annual rate, down 0.9% from April and 12% from May 2009, the Census Bureau reported on Wednesday. The May report included routine revisions to monthly and annual totals back to January 2007. Total residential construction tumbled 3.5% and 33%; nonresidential inched up 0.1% for the month but slipped -0.4% from May 2008. Public construction dropped 0.6% for the month but was 3.4% higher than in May 2008. Of the two largest public segments, educational rose 0.5% and 4.6%; highway and street fell -1.3% and -0.7%. Private nonresidential construction rose 0.5% in May but dropped 3.3% over 12 months. In descending order, the largest private segments in May were manufacturing (led by work on several large refinery upgrades), 4.3% and 55%; power (power plants, transmission lines, wind farms), 3.8% and 12%; commercial (retail, warehouse, farm), -5.7% and -30%; office, 0.1% and -18%; health care, -0.8% and -0.6%; and lodging, -2.6% and -17%.

"Wage and benefit settlements reported to the Construction Labor Research Council so far in 2009 have resulted in an average first-year increase of $1.49 or 3.1%," the Council reported in late June, "down considerably from the average $2.30 or 4.9% reported for the comparable period a year earlier."

In another sign that construction is not likely to pick up soon, the American Institute of Architects reported on June 26 that its "Architecture Billings Index (ABI) has failed to show any further hopeful signs in April or May. The ABI score from May was 42.9, barely moving the needle from the 42.8 score in April. Since any score below 50 reflects an overall decline in billings, the May reading indicates that business conditions at architecture firms are still deteriorating, and that there was no significant movement toward recovery during the month….residential and commercial/industrial firms have shown recent trends toward a moderation in the downturn. Institutional firms, in contrast, are still reporting deteriorating business conditions."

"New orders for manufactured goods from U.S. plants (other than semiconductor manufacturing) rose 1.2% in May, seasonally adjusted, the third rise in four months, Census reported on Thursday. Orders for construction materials and supplies fell 1.4% after rising 2.95 in April and falling 5.5% in March. Orders for construction machinery, a very volatile series, jumped 11% in May and 146% in April after falling 69% in March.

"Economic activity in the nonmanufacturing sector contracted in June, say the nation's purchasing and supply executives," the Institute for Supply Management reported today based on a monthly survey it conducts. Six nonmanufacturing industries, including construction, reported growth in June. "The Prices Index increased 6.8 percentage points to 53.7% in June, indicating an increase in prices paid from May. This is the first time the index has registered above 50% since October 2008." Items relevant to construction that rose in price in June included diesel fuel, copper and stainless steel products. Respondents to the manufacturing survey released on Wednesday also reported price increases for aluminum-based products and plastics but decreases for steel and steel products.

The population of New Orleans grew 8.2% from July 1, 2007 to July 1, 2008, faster than any other large city in the U.S., Census reported on Wednesday. Round Rock, Texas, a city north of Austin, was second (8.2%). Texas had three other cities in the top 10: McKinney (north of Dallas, fifth), Killeen (north of Austin, ninth) and Fort Worth (10th). North Carolina had a pair of cities in the top 10: Cary (west of Raleigh, third) and Raleigh (eighth), as did California: Roseville (north of Sacramento, sixth) and Irvine (in Orange County, seventh). Fourth-place Gilbert, Ariz., completed the list. New York added the most number of people, 53,000. Several other large cities added people, in contrast to earlier years, when some of them lost population: Phoenix was second; Houston, third; Los Angeles, fourth; San Antonio, fifth; Fort Worth, sixth; New Orleans, seventh; Chicago, eighth; Austin, ninth; and San Diego, 10th. Population growth is an indicator for residential and nonresidential construction but no guarantee. Census reported that from 2000 to 2008, "New Orleans experienced both the largest rate of loss and largest numerical decline during the period, as its population fell 35.7%….Flint, Michigan, had the second greatest rate of loss, 9.6%; followed by Cleveland; Buffalo; and Pittsburgh. Philadelphia ranked second in numerical decrease, followed by Cleveland, Chicago and Detroit."