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ABC Reports: Construction Materials Prices Expand in March

CEU2“Although overall construction materials prices rose for the month, prices for more categories of materials decreased than increased” —ABC Chief Economist Anirban Basu.

PPI_Mar15Prices for inputs to construction industries expanded 0.8 percent in March, the largest monthly increase in more than two years, according to the April 14 producer price index release by the Bureau of Labor Statistics. Prices have now expanded for two consecutive months after declining during the prior six; however input prices are down 3.6 percent on a year-over-year basis. March marks the fourth consecutive month year-over-year input prices have declined, the longest such streak since 2009. Crude petroleum prices fell 4 percent in March and have fallen in eight of the previous nine months.

“Although overall construction materials prices rose for the month, prices for more categories of materials decreased than increased, including sharp monthly declines in the price for softwood lumber and iron/steel,” said Associated Builders and Contractors Chief Economist Anirban Basu. “On a year-over-year basis, deflationary pressures are even more apparent as crude petroleum prices are down 55 percent and natural gas is down 45 percent, despite an increase in gas prices in March.

“Though U.S. nonresidential and residential segments continue to expand, global construction volumes remain suppressed by widespread weakness in Asia, Europe and Latin America,” said Basu. “With the U.S. dollar likely to get stronger over the next few months as domestic interest rates begin to rise, there is little likelihood of significant increases in construction input prices over the next six to nine months. Overall producer prices managed to increase 0.5 percent on a monthly basis, the first increase since June 2014. This reading serves to increase the likelihood that the Federal Reserve will begin to increase short-term interest rates later this year.”

Only two of the key materials prices increased in March.

  • Fabricated structural metal product prices inched 0.4 percent higher for the month and have expanded 1.3 percent on a year-over-year basis.
  • Natural gas prices expanded 1.5 percent in March, but are down 45.3 percent from the same time one year ago.

Nine of the 11 key construction inputs did not expand for the month.

  • Prices for plumbing fixtures fell 0.3 percent in March but are up 2.5 percent on a year-over-year basis.
  • Prices for prepared asphalt, tar roofing, and siding fell 0.4 percent for the month and are down 0.2 percent on a year-ago basis.
  • Iron and steel prices fell 2.5 percent in March and are down 11.5 percent from the same time last year.
  • Steel mill products prices fell 1.9 percent for the month and are 4.8 percent lower than one year ago.
  • Softwood lumber prices fell 4.1 percent and are 7.4 percent lower than one year ago.
  • Nonferrous wire and cable prices remained flat on a monthly basis and grew 2.5 percent on a yearly basis
  • Crude petroleum Crude energy prices fell 4 percent in March and are down 55 percent from the same time last year.
  • Crude energy materials prices fell 1.4 percent in March but are 43.7 percent lower year over year.
  • Concrete products prices remained flat in March and are up 4.1 percent on a yearly basis.

To view the previous PPI report, click here

ABC Reviews Construction Job Market


ABCRecently, Associated Builders and Contractors (ABC) launched its state-by-state economic analysis with the release of economist Bernard Markstein’s
 analysis of construction’s contribution to each state’s gross domestic product. Below is Markstein’s analysis of the construction job market and unemployment rate in each state. This analysis will be produced monthly in addition to ABC’s existing national economic data and analysis. Background on how the data was derived and Markstein’s methodology is also available.

Overview

Bad weather often typifies February across much of the country and this February’s weather was particularly harsh. The not seasonally adjusted (NSA) construction unemployment rate for the country often peaks around February and the nation appears to be on track for that pattern this year. The February construction unemployment rate for the country along with estimated rates for 34 states increased over their respective January rates.

The weather around the winter months also makes it more difficult to judge the health of the construction industry. Nonetheless, construction appears to be on an upward trajectory across much of the nation. On a year-over-year basis, February construction unemployment rates were down in 44 of the 50 states along with the U.S. rate.

The Top Five States

Four of the top five states with the lowest February construction unemployment rate (or in the case of Nebraska and Hawaii, the construction and mining unemployment rate) remained the same as in January, though the order was somewhat different. Hawaii, which ranked number one in January, fell to number four in February. North Dakota took over the top spot, moving up from number five in January.

February’s top five states ranked from lowest unemployment to highest are:

  • North Dakota
  • Nebraska
  • Utah
  • Hawaii
  • Wyoming

Given the downturn in oil prices and North Dakota’s recent dependence on oil-driven economic development, it may seem somewhat surprising that the construction unemployment rate remained relatively low for that state; however, two factors are likely at work. First, most new unemployment is probably occurring in the energy sector, which does not show up in construction unemployment. Second, many of the people who are employed in the North Dakota energy economy are from other states. When they no longer have a job there, most of them return to their home state or to a state where there may be jobs for them.

Nebraska (with a combined construction and mining unemployment rate) had the second lowest unemployment rate in February, moving up from number three in January (revised from the originally reported number four position).

Utah slipped from number two in January to number three in February. Texas, which was ranked fourth in January (revised from third), fell back to seventh in the February rankings. Wyoming moved into the top five at number five from sixth in January.

The Bottom Five States

Four of the five states with the highest construction unemployment rates for February also remained the same as in January based on revised data, though the order was somewhat different. Rhode Island had the highest rate in both February and January.

February’s bottom five states ranked from highest unemployment rate to lowest are:

  • Rhode Island
  • Connecticut
  • West Virginia
  • New Jersey
  • Illinois

Connecticut had the second highest unemployment rate in February, up from the third highest in January. West Virginia moved into the bottom five in February, ranking at number three compared to number six in January.

New Jersey had the fourth highest rate in February after registering the fifth highest rate in January (New Jersey originally reported the sixth highest in January, but based on revised data, moved to fifth). Michigan, which was fifth highest in January before data revisions, was seventh highest after the revisions and remained at that spot in February.

Illinois improved from the second highest rate in January to fifth highest in February. Indiana, which was fourth highest in January, moved out of the bottom five to ninth highest in February.

Read more on ABC’s website

ABC REPORTS: Nonresidential Construction Employment Ticks up Despite Dismal Overall Jobs Report

CEU2“Today’s jobs report was a stunner and construction was not spared as the sector lost jobs for the first time in 15 months.” —ABC Chief Economist Anirban Basu.

Employment_4.3.15Nonresidential construction added 5,000 net new jobs in March, with nonresidential specialty trade contractors leading the way by contributing 4,400 new jobs, according to the April 3 Bureau of Labor Statistics preliminary estimate. As a whole, the U.S. construction industry lost 1,000 jobs in March, while February’s construction employment estimate (29,000 new jobs) was unrevised. The residential sector also regressed in March, losing 2,800 jobs.

“Today’s jobs report was a stunner and construction was not spared as the sector lost jobs for the first time in 15 months,” said ABC Chief Economist Anirban Basu. “Coming into the week, the consensus estimate for March’s net new job creation was in the range of 250,000. An ADP report released earlier in the week indicated that the U.S. private sector only added 189,000 jobs, which brought the consensus estimate closer to 200,000, however the initial Bureau of Labor Statistics’ estimate for March fell well short of even that diminished expectation.

“The knee-jerk reaction is to blame the weather,” said Basu. “While that seems natural, the fact of the matter is that the latest employment release comes on top of a sea of other data indicating that the U.S. economy has been losing momentum since the third quarter of last year and retail sales and manufacturing-related data have been among the sources of disappointment.

“Weather serves as a potential partial explanation, but another possibility is that some of the slowdown in job growth is attributable to reduced activity in the nation’s energy sector,” said Basu. “While lower fuel prices are helping to support various forms of activity, the impact on oil producers has been jarring. Those operating in the oil exploration and production segments of the economy have come to dominate layoff announcements recently. It may be that the negative impacts of lower energy prices are felt more intensely in the short-term, but that the positive effects will become obvious later this year.”

The national unemployment rate remained unchanged at 5.5 percent in March, though this is not necessarily a good thing. The labor force lost 96,000 workers in March after losing 178,000 in February. The labor force participation rate currently sits at 62.7 percent, equaling its lowest level since 1977. The construction unemployment rate fell to 9.5 percent in March, a 1.1 percent decrease from March. The falling construction unemployment rate is not something to celebrate, though; this too is a direct reflection of a shrinking labor force.

Construction employment for the month and the past year breaks down as follows:

  • Nonresidential building construction employment expanded by 5,700 net new jobs for the month and is up by 31,600 jobs (4.6 percent) since February 2014.
  • Residential building construction employment shrank by 500 jobs in February, but is still up by 45,300 jobs (7 percent) on an annual basis.
  • Nonresidential specialty trade contractors added 10,000 jobs for the month and employment in that category is up by 86,100 jobs (4 percent) from the same time one year ago.
  • Residential specialty trade contractors added 17,200 net new jobs in February and 122,500 total jobs (7.5 percent) since February 2014.
  • The heavy and civil engineering construction segment shed 3,700 jobs in February, but employment is by 35,700 positions (4 percent) on a year-over-year basis

To view the previous employment report, click here

ABC Reports: Nonresidential Construction Spending Flat in February

CEU2“Construction is impacted more by weather than just about any economic segment and the impact of February’s brutal weather is evident in the government’s spending figure.”—ABC Chief Economist Anirban Basu

Spending 4.1.15Blame it on the weather – that is what many economists have been doing over the past two months as economic data continue to disappoint. Retail sales, durable goods orders and other categories have not been as strong as anticipated.

Nonresidential construction has often proved an exception, with the industry’s momentum gaining steam recently. However, in February, nonresidential construction spending remained virtually unchanged inching down 0.1 percent on a monthly basis, according to the April 1 release from the U.S. Census Bureau. The February 2015 spending figure is 4.6 percent higher than February 2014, as spending for the month totaled $611.5 billion on a seasonally adjusted, annualized basis. The estimate for January spending was revised downward, from $614.1 billion to $611.9 billion, while the government revised December’s spending estimate upward from $627 billion to $629.3 billion.

“Construction is impacted more by weather than just about any economic segment and the impact of February’s brutal weather is evident in the government’s spending figure,” said Associated Builders and Contractors Chief Economist Anirban Basu. “ABC continues to forecast robust nonresidential construction spending recovery in 2015 despite the most recent monthly data, with the obvious exceptions of industry segments most directly and negatively impacted by declines in energy prices.

“The broader U.S. economy has not gotten off to as good a start in 2015 as many had expected with consumer spending growth frustrated by thriftier than anticipated shoppers,” said Basu. “With winter behind us and temperatures warming, the expectation is that economic growth will roar back during the second quarter, which is precisely what happened last year. To the extent that this proves to be true, nonresidential construction’s recovery can be expected to persist.”

Seven of 16 nonresidential construction subsectors posted increases in spending in February on a monthly basis.

  • Manufacturing-related spending expanded 6.8 percent in February and is up 37.9 percent on a year-over-year basis.
  • Conservation and development-related construction spending expanded 11 percent for the month and is up 19.8 percent on a yearly basis.
  • Office-related construction spending expanded 2.4 percent in February and is up 19 percent from the same time one year ago.
  • Amusement and recreation-related construction spending gained 2 percent on a monthly basis and is up 22.5 percent from the same time last year.
  • Education-related construction spending grew 0.3 percent for the month, but is down 0.6 percent on a year-over-year basis.
  • Construction spending in the transportation category grew 0.6 percent on a monthly basis and has expanded 9.3 percent on an annual basis.
  • Lodging-related construction spending was up 5 percent on a monthly basis and 10.4 percent on a year-over-year basis.

Spending in nine nonresidential construction subsectors failed to rise in February.

  • Health care-related construction spending fell 0.9 percent for the month and is down 4.5 percent for the year.
  • Spending in the water supply category dropped 7.8 percent from January, but is still 7.4 percent higher than at the same time last year.
  • Public safety-related construction spending lost 2.2 percent on a monthly basis and is down 9.6 percent on a year-over-year basis.
  • Commercial construction spending lost 1.9 percent in February, but is up 13.5 percent on a year-over-year basis.
  • Religious spending fell 4.8 percent for the month and is down 10.3 percent from the same time last year.
  • Sewage and waste disposal-related construction spending shed 1.4 percent for the month, but has grown 19.9 percent on a 12-month basis.
  • Power-related construction spending fell 4.5 percent for the month and is 17.2 percent lower than at the same time one year ago.
  • Lodging construction spending is down 4.4 percent on a monthly basis, but is up 18.2 percent on a year-over-year basis.
  • Sewage and waste disposal-related construction spending shed 7.5 percent for the month, but has grown 16 percent on a 12-month basis.
  • Power-related construction spending fell 1.1 percent for the month and is 13.2 percent lower than at the same time one year ago.
  • Communication-related construction spending fell 6.1 percent for the month and is down 15.5 percent for the year.
  • Highway and street-related construction spending was unchanged in February and is up 3.3 percent compared to the same time last year.

To view the previous spending report, click here.

ABC Economic Analysis of Construction Job Market & Unemployment Rate

NRRecently, Associated Builders and Contractors (ABC) launched its state-by-state economic analysis with the release of economist Bernard Markstein’s  analysis of construction’s contribution to each state’s gross domestic product. Below is Markstein’s analysis of the construction job market and unemployment rate in each state. This analysis will be produced monthly in addition to ABC’s existing national economic data and analysis

Overview

The construction industry has shown evidence of recovery and appears to be on a mild upward trajectory despite occasional backsliding. In 2014, construction spending for all the major areas rose faster than the rise in construction costs. Last year also marked the fourth year in a row that construction employment grew and the largest annual advance in construction employment since 2005.

This rebound in construction employment has been reflected in the construction unemployment rate. For the United States, that rate—which is reported on a not seasonally adjusted (NSA) basis—has been falling on a year-over-year basis for almost four and a half years. Much of that early decline was due to the exit of workers from the industry as they accepted work in other industries, sought training in a new field, or left the workforce. More recently, the decline in the construction unemployment rate has reflected rising employment in the industry.

The return of construction has been fairly widespread across the nation. On a year-over-year basis, the estimate of the January construction unemployment rate was down in 46 of the 50 states.

As would be expected, the January NSA construction unemployment rate for each state increased from December for all states. Only 11 of the 50 states had a rate below 10% in January, down from 21 states in December.

The one big surprise on a year-over-year basis was Louisiana where the rate jumped from 7.6% in January 2014 to 10.8% in January 2015. Note that even with this dramatic surge in the construction unemployment rate, Louisiana had the 16th lowest rate among the states. That is still quite a comedown from having the second lowest rate in the nation in January 2014. The jump in the rate may reflect the effects of lower oil prices on construction-related activity in the energy sector. There has also been a slowdown in the overall Louisiana economy as evidenced by a rise in Louisiana’s general unemployment rate.

Click here to see a ranking of states’ construction unemployment rankings.

Click here to see each states’ unemployment rate across all industries.

Click here to see a regional breakdown of states’ construction unemployment rates.

The Top Five States

Four of the top five states based on lowest January construction unemployment rates (or in the case of Maryland, Nebraska, and Hawaii, the construction and mining unemployment rate) remained the same as December, though the order was somewhat different. Maryland, which remained number one,   often has a low construction and mining unemployment rate as a result of being a small state with relatively few workers engaged in the construction and mining industries and in an area (bordering Delaware, Pennsylvania, Virginia, and Washington D.C.) where it is easy to move to find work in construction or in other industries.

Hawaii, another state where construction and mining employment are reported together, jumped to number two from number five. Utah, which was number two in December based on revised employment data, slipped to number three. Despite the drop in oil prices, Texas moved up from seventh to fourth in the rankings. That pushed Nebraska, again with a construction and mining unemployment rate, down from number four to number five.

Apparently due to the drop in oil prices and the resulting slowdown in the oil fields, North Dakota fell out of the top five, dropping from third in December to sixth in January.

The Bottom Five States

Four of the five states with the highest construction unemployment rates for January remained the same as in December, although not in the same order. Rhode Island had the highest rate in both January and December (revised up from the earlier estimate).

Illinois had the second highest rate in January, up from the third highest rate in December. Connecticut also moved up one slot in this less-than-desirable list, from fourth highest to third highest. Indiana, which ranked at the 41st lowest rate in December, fell to 47th in January, which is the fourth highest rate.

Michigan had the fifth highest rate in January after suffering from the second highest construction unemployment rate in December. Michigan’s December construction unemployment rate was originally reported as the highest in the country; however, revised data moved the rate down from 15% to 14.5%.

Finally, Georgia’s construction unemployment rate for December was revised down from 14% to 13.4%, dropping it from fifth highest to seventh highest for that month. For January, Georgia recorded a rate of 14.8%, ranking it 38th lowest or 13th highest.

Read more on ABC’s website