This article was posted 07/11/2006 and is most likely outdated.

Construction employment dips in June, wages jump; materials price hikes continue

Topic - Business/Management
Subject - Construction employment dips in June, wages jump; materials price hikes continue

July 11, 2006  

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Construction employment dips in June, wages jump; materials price hikes continue



Nonfarm payroll employment rose by 121,000 from May to June, seasonally adjusted, the Bureau of Labor Statistics reported on Friday. Construction employment dipped by 4,000, to 7,505,000, matching the April total and marking the first decline since January 2005. The seemingly stagnant job pool results from cross-cutting currents. Residential building and specialty trade construction employment fell by 25,000 since February, including a drop of 9,000 jobs just in June. Meanwhile, nonresidential building and specialty trade contractors added 44,000 workers over four months, including 9,000 in June. The fifth subcategory of construction employment, heavy and civil engineering construction, slipped by 8,000 jobs since February. Despite the setback in June, over the past 12 months construction has added 228,000 jobs, or 3.1%, with all five segments reporting similar gains. The rate is more than double the 1.4% increase in all nonfarm payroll employment. The average hourly wage in construction jumped 17 cents per hour (0.9%) from May to June, to $20.03 per hour, 20% higher than the all-private industry average for nonsupervisory or production workers. The ostensibly large jump may reflect a shift toward more highly paid nonresidential workers and away from relatively lower paid residential workers rather than an acceleration of wage gains for any type of worker.


The Institute for Supply Management issued its monthly surveys of purchasing managers from manufacturing industries on July 3 and nonmanufacturing sectors on July 6. The latter included this comment from a respondent in construction: “The outlook appears to be good for the current timeframe. If the price of liquid asphalt continues to rise, the state [transportation departments] might put off projects.” Respondents in June listed construction as rising in price as well as the following inputs that are important to construction: aggregate, asphalt/asphalt products, building materials, concrete, copper (for the 34th straight month), diesel fuel, freight/shipping, roofing materials, sheet metal products, steel products, and wire and cable. Diesel fuel was also listed as down in price, along with lumber—pine and spruce. Commodities in short supply included copper, stainless steel products, and steel. The manufacturing report listed some of the same inputs as rising in price but also listed copper products as falling. That survey listed steel, but not copper, in short supply.


The U.S. Geological Survey reported on Thursday that shipments of cement in the first four months of 2006 were 8.8% higher than in January-April 2005. Record high temperatures in January and April 2006 allowed earlier concrete-pouring than in most years and probably accounted for some of the increase in cement shipments. Year-to-date domestic production of clinker (which is ground into cement powder) rose 5.8%, while imports soared by 32%. Imports from China accounted for 80% of the increase, leaping from 0.9 million metric tons to 3.2 million. The duty on Mexican cement was lowered from more than $26 per metric ton to $3 on April 3, but imports from Mexico in April were only 3% higher than in April 2005. Contractors have not been reporting cement shortages to AGC this year, in sharp contrast to 2004 and 2005, but they say prices are rising steeply.   


“For the ninth consecutive quarter, the nation’s overall office-vacancy rate improved,” the Wall Street Journal reported on Friday, citing an analysis by Reis Inc. of 72 office markets that showed “the vacancy rate was 13.8% in this year’s second quarter, down from 14.2% in the first quarter….Effective rents—the negotiated price after concessions to tenants—rose 2.1%, mirroring growth in the previous quarter. Topping the list in effective-rent growth in the second quarter was New York with 3.9% growth, followed by Orange County, California; Fort Lauderdale; Miami; and Austin….Best in vacancy rates were: District of Columbia (6.6%), followed by Orange County, New York, suburban Maryland, and Miami…Phoenix fell out of the top five in both vacancy rate and rent growth over the past three months, but only because its numbers in the first quarter were hard to sustain.” A column in today’s Journal notes, “To be sure, the office recovery is uneven. Longtime struggling office markets such as Dallas, while improving, still have high vacancy rates from previous overbuilding, as do areas such as Cleveland and Detroit, where job growth has been limited.” The Census Bureau reported on July 3 that spending on private office construction rose 12% in 2005 but is up only 7.7% in the first four months of 2006 compared to the same months of 2005.


“After seven costly hurricanes in two years, insurers…are questioning how much risk they want to take in vulnerable coastal areas. The shortage of available coverage is particularly acute in the reinsurance sector,” the Journal reported today. “The cost of property-catastrophe reinsurance is projected to rise 25%, according to Robert Hartwig, chief economist at the Insurance Informatin Institute, a trade group. In hurriance-prone areas, rates are rising as much as fourfold, he says.” Higher insurance rates affect contractors directly and also discourage investors from undertaking new construction.


The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved.

Ken Simonson, Chief Economist, Associated General Contractors of America

Phone: 703-837-5313 · Fax: 703-837-5407 ·


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  • When I see higher fuel, lumber, and materials costs, I think of my own state where all of the above is plentiful above and below ground, but we aren't allowed to log or mine or drill for it because those jobs might make it more expensive to hire groundskeepers and maids for the McMansions of the beautiful and enlightened people who grace us with their presence part of the year.


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