State construction job losses remain widespread; PPI tumbles; MHC, Reed starts rise
August 24, 2009
Seasonally adjusted nonfarm payroll employment fell in 29 states in July and rose in 21 states and the District of Columbia, the Bureau of Labor Statistics (BLS) reported on Friday. North Carolina had the largest percentage drop, -0.7%; followed by Mississippi, -0.6%; Nevada and New Mexico, -0.5% each. The largest percentage gains were in D.C., 1.9%; Michigan, 1.0%; New York, 0.7%; South Dakota and Tennessee, 0.6% each. Over the year, nonfarm employment fell in 49 states and rose in North Dakota, 1.0%; and D.C., 0.9%. The biggest over-the-year percentage drops were in Arizona, -7.5%; Michigan, -6.7%, Nevada, -6.4%; and Oregon, -5.7%. Construction employment fell for the month in 34 states plus D.C., rose in 13 and was level (or within 100 of the June figure) in Illinois, Alabama and New Hampshire. Compared to July 2008, construction employment fell everywhere except in Louisiana, 3.6%; North Dakota, 2.8%; and Mississippi, unchanged. The largest 12-month losses were in Arizona, -28%; Nevada, -25%; Connecticut, -22%; and Kentucky, -21%.
The producer price index (PPI) for finished goods fell 0.9% in July, not seasonally adjusted, and -6.8% over 12 months, BLS reported on Tuesday. The PPI for inputs to construction industries, a weighted average of all materials used in every type of construction plus items consumed by contractors, such as diesel fuel, sank 0.6% and 8.6%. The largest decline by construction segment was for inputs to highway and street construction, -1.2% in July and -15% over 12 months; followed by other heavy construction, -0.8% and -14%; nonresidential buildings, -0.6% and -9.0%; multi-unit residential, -0.4% and -6.2%; and single-unit, -0.2% and -3.7%. The disparate results reflect different weights for specific materials: the PPI for diesel fuel tumbled 9.0% and 60%; asphalt paving mixtures and blocks, -1.7% and -10%; copper and brass mill shapes, -9.2% and -27%. Concrete products fell 0.4% for the month but was up 1.4% from a year earlier, similar to gypsum products, -0.9% and 1.3%; and insulation materials, -0.6% and 1.7%. Steel mill products rose 1.7% in July but fell 29% from July 2008; similarly, aluminum mill shapes, 2.3% and -23%. The PPI for construction machinery and equipment rose 0.2% and 3.5%. PPIs for finished buildings, which include contractors' overhead, labor and profits, and for nonresidential building work by subcontractors mostly fell in July but rose over 12 months: new industrial buildings, -3.8% and 0.3%; warehouses, -2.0% and 1.4%; schools, -0.1% and 7.7%; offices, -2.0% and 2.7%; concrete contractors, -0.9% and 2.2%; roofing, 0.1% and 8.6%; electrical, -1.7% and -0.2%; and plumbing, -1.0% and 4.5%.
The value of new construction starts climbed 8% in July, seasonally adjusted, McGraw-Hill Construction (MHC) reported on Tuesday, based on data it compiled. Nonresidential building climbed 13%, "putting on temporary hold the descent that brought contracting down 26% from the end of last year through June. The nonresidential total received much of its lift in July from the institutional structure types. In particular, healthcare facilities soared 172%, reflecting the July groundbreaking of seven massive hospital and medical center projects….The commercial categories in July registered a mixed performance. Gains from a weak June" were reported for stores, 2%; warehouses, 18%; and hotels, 46%; "while office buildings retreated an additional 16%. The manufacturing plant category had an especially weak July, falling 71% from the previous month. Residential building…advanced 10% in July. Single-family housing grew 5%, although July's pace was still 13% below last year's monthly average. Multifamily housing in July jumped 45%, but despite the large percentage gain contracting was still down 47% from last year's monthly average." Nonbuilding construction in July grew 1%. For the first seven months combined, compared to the same period in 2008, total construction starts shrank 35%, with nonresidential building off 38%, nonbuilding construction down 20%, and residential construction lower by 43%.
Reed Construction Data reported on Wednesday that the value of nonresidential starts climbed 27% in July, offsetting part of a 71% plunge in June, based on Reed's own data compilation. "Every construction category rose substantially in July after dropping substantially in June." Year-to-date nonresidential starts were 15% below the total for the first seven months of 2008. "The relatively strongest markets in June-July were energy-related manufacturing, hotels, education and highway paving, with a boost from stimulus plan funding…..The relatively weakest sectors in June-July were offices, warehouses, parking garages and nursing homes. Each of these was down about -40% to -50% from May."
The Architecture Billings Index, which reflects the number of architecture firms in a monthly survey that report higher or lower billings in the latest month (with 50 indicating an equal number), rose to 43.1 in July, the American Institute of Architects reported on Wednesday, "up noticeably from 37.7 the previous month. This score, however, still indicates a decline in demand for design services." Practice specialty subindexes, which are three-month moving averages and thus reflect the overall drop reported for June, showed little change: commercial/industrial and mixed practices went from 44 to 43; residential (mainly multifamily), 42 to 41; and institutional, unchanged at 37. Shifts in billings foreshadow changes in demand for construction several months later. "Work resulting from the federal stimulus plan is reaching more architects now than earlier this year. In response to this month's special question, 4 in 10 of the panelists reported having received some degree of interest in projects related to stimulus funding; with more than 15% indicating that they have received actual billable work from the stimulus plan. Additionally, just under a quarter (24%) having received inquiries for future projects from stimulus funds. This is up by six percentage points from May."