Single-family, public construction lift spending total; wage costs stall but vary by area
August 4, 2009
Construction spending in June totaled $966 billion at a seasonally adjusted annual rate (SAAR), 0.3% above the revised May estimate but 10% below the June 2008 level, the Census Bureau reported on Monday. Private residential spending was up 0.5% for the month but down 30% from a year earlier, as new single-family construction increased 2.4% in June but fell 51% year-over-year. New multifamily construction tumbled 7.2% and 33%. Although Census does not separately show residential improvements (additions and major renovations to existing single- and multifamily buildings), an estimate is included in the total. Improvements, now nearly half of the private residential total, rose 1.2% and 6.4%. Total nonresidential spending was up 0.1% from May but down 0.7% from June 2008, as private nonresidential fell 0.5% and 4.8% but public nonresidential rose 0.9% and 5.1%. Public educational construction climbed 0.4% and 4.6%; highways, 0.2% and 2.8%. Among private nonresidential categories, in descending order of size: manufacturing, 0.9% and 46%; power, -2.4% and 15%; commercial (retail, warehouse and farm), -0.6% and -30%; office, 1.0% and -21%; health care, 3.0% and -1.1%; and lodging, -3% and -25%.
Real (net of inflation) gross domestic product (GDP) fell 1.0% (SAAR) in the second quarter, according to the "advance" estimate issued Friday by the Bureau of Economic Analysis, following a revised decline of 6.4% in the first quarter. Real private investment in nonresidential structures (including wells and mines) dropped 8.9%, following a 44% plunge. Real private residential investment shrank 29% in the second quarter, 38% in the first. Real government investment in structures jumped 16%, after a decline of 4.3%. The price index rose 0.2% for gross domestic product and 2.5% for private residential investment but fell 9.1% for private nonresidential structures and 3.4% for government structures.
The July 29 Beige Book, a report on business conditions in the 12 Federal Reserve districts, referred to by their headquarters cities, reported, "Construction activity was limited and/or declining in most Districts, although exceptions were noted for health and institutional construction in the St. Louis District, public sector construction in the Chicago District, and the reconstruction of the World Trade Center in Manhattan. Tight credit was cited as an ongoing factor in the dearth of new construction activity."
The employment cost index, which measures employer costs for wages, benefits and required payments, rose just 0.2%, seasonally adjusted, for all private-sector workers in each of the last two quarters and 1.5% over the past year, the Bureau of Labor Statistics (BLS) reported on Friday. "This is the smallest percent change published for this series since it began in 1980," BLS said. Employer costs in construction were flat in the second quarter, fell 0.2% in the first and rose only 1.0% over the year.
In an analysis of employment in the 334 largest counties in December 2008, released on July 21, BLS reported that construction had the largest year-over-year employment decline, -10%. Trade, transportation and utilities posted the largest number of jobs lost, -957,500; followed by manufacturing, -850,400; and construction, -749,900. Average weekly wages were $1,052 nationwide in construction in the fourth quarter of 2008 and rose 4.9% from the fourth quarter of 2008, compared to $918 and 2.2% for all workers. In the 10 largest counties, construction wages and wage growth were: Los Angeles (city and nearby suburbs), $1,138 and 4.8%; Cook (Chicago and suburbs), $1,478 and 6.9%; New York (Manhattan), $1,939 and 0.6%; Harris (Houston), $1,217 (change not listed); Maricopa (Phoenix and suburbs), $986 and 3.4%; Orange, California, $1,234 and 4.5%; Dallas, $1,075 and 1.7%; San Diego (city and suburbs), $1,140 and 5.5%; King (Seattle and suburbs), $1,197 and 6.8%; and Miami-Dade, $973 and 5.5%. The wide range of average levels and changes reflects differences in local overall pay scales, mix of residential and nonresidential activity, and union strength.
Average pay in 77 metro areas in 2008 was highest in the San Jose-San Francisco-Oakland at 19% above the national average, BLS reported on July 24. The lowest "pay relative" was 77 in the Brownsville-Harlingen, Texas, metro area, meaning workers there earned an average of 77 cents for every dollar earned by workers nationwide. The pay relative to the national average for construction and extraction occupations varied from 132 in the New York-Newark-Bridgeport area, covering counties in New York, New Jersey, Connecticut and Pennsylvania, to 66 in the Brownsville-Harlingen area.
The number of mass layoff actions (involving 50 or more workers) dipped slightly in June, seasonally adjusted, from record levels in May, but was more than 60% above year-earlier levels in terms of events and workers, BLS reported on July 24. In construction, the number of events and workers affected climbed 20% from June 2008 to June 2009.
The Office of Advocacy of the U.S. Small Business Administration on Monday posted data on starts, closures, growth and decline of firms in 19 sectors, including construction, from 2005 to 2006 (www.sba.gov/advo). Construction created about one out of six new firms in the U.S. that year (109,000 out of 670,000), even though the industry initially accounted for less than one out of 10 firms (652,000 out of 6,640,000). Construction also accounted for one out of seven closures (82,000 out of 599,000). The results in part reflect the strong expansion that year in nonresidential construction and the beginning of the homebuilding slump, but also the fact that construction businesses are relatively easy to start.