Construction job openings, pay rose at yearend but hiring slipped; ISM reports growth

The seasonally adjusted number of job openings in the U.S. at the end of December, and the rate as a percent of openings plus employment during month, increased from November and from December 2010, the Bureau of Labor Statistics (BLS) reported on Wednesday. The job-opening rate in construction increased from 0.8% in December 2010 to 1.3% in both November and December 2011 but remained the lowest of 11 sectors or subsectors BLS reported and about half the overall rate. The hires rate (hires as a percent of total employment) was steady overall from December 2010 to November and December 2011 but decreased in construction. The rate of total separations (quits, involuntary layoffs and discharges, retirements and other) held steady in total but dropped in construction from more than the hires rate in December 2010 to slightly above in November 2011 and a little below in December 2011. The quits rate (workers who quit as a percent of total employment) held steady overall and was similar in construction to the overall rate, with little variation. One possible interpretation of the construction data is that firms are advertising more openings and are laying off fewer workers in anticipation of future work but are not ready to hire yet. Workers have not increased quits, as they might if other firms were hiring more.

Compensation (wages, salaries and benefits) in private industry rose 0.4% in the fourth quarter, seasonally adjusted, and 2.2% for all of 2011, BLS reported on January 31. Compensation in constructoin increased 0.5% for the quarter and 1.6% for the year, compared with a 1.0% increase in the 12 months through September 2011.Wages and salaries increased 1.6% for the year for the private sector and 1.2% for construction.

“Economic activity in the non-manufacturing sector grew in January for the 25th consecutive month, say the nation's purchasing and supply executives,” the Institute for Supply Management (ISM) reported on February 3.

Construction ranked third out of 10 sectors with growth in business activity from December to January; four sectors reported decreased activity. Construction was listed sixth out of 12 sectors with growth in new orders.

New orders from U.S. manufacturers (excluding semiconductor manufacturers) increased 1.1% from November to December, seasonally adjusted, and 12% for all of 2011, the Census Bureau reported on February 3. Orders for construction materials and supplies dropped 0.8% for the month but climbed 3.9% for the full year. Orders for construction machinery rose 2.2% and 38%, respectively.

“In the U.S. last year, developers broke ground on office buildings with a total of just 56 million square feet of space, the lowest level tracked by McGraw-Hill Construction since at least 1960,” the Wall Street Journal reported on Monday…."However, office-building construction isn’t likely to bounce back until there is some combination of higher rents and property values, and less restrictive financing. Prices in most markets are still well below their 2007 peak, making the cost of new buildings too expensive to justify in the face of cheap existing buildings. There are a few markets where property values have come back quickly. Both New York and the San Francisco area, where a technology boom has pushed rents up rapidly, are seeing a few speculative office buildings break ground. But generally, banks remain conservative in their lending.”

According to a quarterly survey released by the Federal Reserve on January 30 of senior loan officers at 56 domestic banks and 23 U.S. branches and agencies of foreign banks, the “domestic banks reported that their lending standards had changed little and that they had experienced somewhat stronger loan demand, on net, over the past three months. Foreign respondents, which mainly lend to businesses, reported a net tightening of their lending standards while loan demand was about unchanged….Domestic banks continued to report little change in their standards for [commercial real estate (CRE)] loans, but modest net fractions had eased some loan terms over the past year. Moderate net fractions of domestic banks reported that demand for CRE loans had strengthened in the fourth quarter. Modest net fractions of foreign respondents reported having tightened standards for CRE loans. Foreign respondents also reported, on balance, little change in demand for such loans.”

Private-sector employment and union membership increased at the same rate from 2010 to 2011, leaving membership at 6.9% of employment, BLS reported on January 27. Employment in construction rose from an average of 6,103,000 to 6,244,000, while union employment rose from 801,000 (13.1%) to 874,000 (14.0%). Median weekly earnings of full-time wage and salary workers in construction rose 1.5%, from an annual average of $735 in 2010 overall to $746 in 2011. For union members, earnings rose 0.8%, from $1,051 to $1,059. For nonunion workers, the rate rose 0.9%, from $692 to $698.