Wednesday, November 9, 2011

Construction jobs, spending show little 1- or 12-month change; wage gains slow

Seasonally adjusted nonfarm payroll employment increased by 80,000 (0.1%) in October and 1.5 million (1.2%) over 12 months, while the unemployment rate dipped to 9.0% (8.5%, not seasonally adjusted), the Bureau of Labor Statistics (BLS) reported on Friday. Seasonally adjusted construction employment fell by 20,000 (0.4%) to 5,525,000, and up only 13,000 (0.2%) from a year ago. The unemployment rate for former construction workers fell to 13.7%, not seasonally adjusted, from 17.3% in October 2010. (BLS does not report seasonally adjusted rates by industry.) The fact that unemployment fell sharply over the year despite a very small increase in employment suggests that workers are leaving the industry to take work elsewhere, return to school or training, or drop out of the labor force—all ominous indicators for future recruitment. Among the five BLS construction employment categories, nonresidential building posted the strongest year-over-year results: a monthly drop of 0.7% and a gain of 1.6% over 12 months. Heavy and civil engineering construction employment rose 0.4% and 0.7%, respectively; residential building, 0.6% and 0.6%; residential specialty trade contractors, 1.0% and 0; and nonresidential specialty trades fell 1.0% and 1.1%.

Construction spending in September totaled $787 billion at a seasonally adjusted annual rate, up 0.2% from the revised August total but 1.3% below the September 2010 mark, the Census Bureau reported on Tuesday. Census lowered its estimates for August and July by $13 billion and $15 billion, respectively, mainly because it reduced estimates for residential improvements. Public construction spending dropped 0.6% for the month and 9.2% year-over-year, with mixed results for the two dominant categories: highway and street construction climbed 1.4% in September but fell 6.3% from a year earlier, while public educational construction slid 0.9% and 5.2%, respectively. Private nonresidential construction gained 0.3% and 7.4%. In descending order of current size, 1- and 12-month percentage changes were: power (including oil and gas fields and pipelines), -0.6% and 26%; commercial (retail, warehouse and farm), -1.6% and 9.5%; manufacturing (including data centers), -0.4% and 4.1%; and private health care (hospitals, medical office buildings and special care facilities), 3.5% and -2.6%. Private residential construction edged up 0.9% and 0.1%, with new single-family, 0.5% and -0.1%; improvements to existing single- and multifamily, 1.4% and -0.6%; and new multifamily, 0.2% and 6.5%.

The employment cost index for private industry—a measure of wages and benefits—increased 2.1% from September 2010 to September 2011, BLS reported on October 28. The index increased 1.0% for construction, less than for any other industry and down from 1.2% between June 2010 and June 2011. The index for wages and salaries alone went up just 0.7% for construction vs. 1.7% for all private industry.

The National Highway Construction Cost Index—an average of all accepted bids by state highway agencies, adjusted for project types, rose from 1.05 in March to 1.07 (2%) in June, the Federal Highway Administration reported on Monday. The June level was 21% below the most recent peak of 1.35 in September 2008.

New orders for U.S. manufactured goods (excluding semiconductor manufacturing) rose for the third straight month in September, by 0.3%, seasonally adjusted, the Census Bureau reported on Thursday. Orders for construction materials and supplies fell 1.8% in September and 1.7% in August. Construction machinery orders rose 2.4% and 4.7%.

Economic activity in the nonmanufacturing sector grew in October for the 23rd consecutive month, according to a survey of purchasing executives that the Institute for Supply Management released on Thursday. Eight sectors reported growth and eight, including construction reported contraction. Relatively few commodity price movements were reported. Items relevant to construction that were reported up in price included freight charges, lighting supplies, oil products, plywood, polyvinyl chloride (PVC) products and steel products; items that were down included copper and fuel. Purchasing executives at manufacturing firms, in a survey released on Tuesday, reported aluminum products, copper and steel and both up and down in price; titanium dioxide as up and diesel as down. However, the Energy Information Administration reported on Monday that the national average retail price of diesel fuel rose for the third straight week, by 6.7 cents per gallon to $3.89, 82 cents (27%) higher than a year ago.

Rapidly rising production of oil, natural gas and natural gas liquids from shale formations in Pennsylvania, North Dakota, Texas and other states is spurring several categories of construction. The formations require construction of access roads, drilling pads, storage tanks and service buildings. Many of the fields are in lightly populated areas, and the influx of construction, mining and transportation workers is spurring local demand for motel, retail and residential construction. “In response [to a shortage of pipeline capacity in North Dakota], companies are building rail terminals,” the Wall Street Journal reported on Wednesday. On the Gulf Coast, “energy companies…are planning or have already begun building…projects to liquefy and export gas as they seek to capitalize on growing demand for liquid-gas imports,” especially from Asia, the Journal reported on October 27. BG Group PLC “is now seeking permits to convert a facility in Lake Charles, Louisiana, to export gas. Freeport LNG Development LP has teamed with Macquarie Group to export [liquefied natural gas] from a Texas facility” and Cheniere Energy Partners LP plans to begin “construction of a $6 billion facility in Cameron Parish, La., next year.”

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