Tag Archive for 'non-residential'

ABC Reports: Nonresidential Construction Growth on Pace with Strong July Jobs Report

1291931467352794367The U.S. construction industry has rebounded strongly, adding 14,000 net new jobs in July according to an analysis of Bureau of Labor Statistics data released today by Associated Builders and Contractors (ABC). This gain comes after the construction sector lost a combined 27,000 jobs from April to June. The construction industry’s unemployment rate inched lower in July, shedding a tenth of a percentage point to reach 4.5 percent, the industry’s lowest unemployment rate since October 2006.

The nonresidential sector accounted for a majority of July’s gains, adding 11,500 net new jobs. The residential sector remained stagnant for the month, adding only 700 net new positions. Heavy and civil engineering employment, which lost 8,800 jobs from January to June, experienced a modest rebound in July by adding 1,900 net new jobs.

“After several months of disappointing construction spending and employment data, today’s release was most welcome,” said ABC Chief Economist Anirban Basu. “If there is a slowdown in construction, it appears to be in residential as opposed to nonresidential activity. Today’s release provides evidence that the nonresidential construction recovery has not yet stalled.

“While hiring in July was strong both in the broader economy and in key nonresidential construction segments, ongoing job creation exacerbates the issue of rampant skilled labor shortage,” said Basu. “The construction employment rate is now down to 4.5 percent. The implication is that wage pressures continue to build. Therefore, contractors will likely need to more aggressively pass along cost increases to purchasers of construction services in order to simply maintain their current level of profitability.

“For now, America’s economic recovery remains in place,” said Basu. “Not only does the economy continue to add jobs, but labor force participation has begun to rise again. This should position America’s ongoing consumer-led expansion to continue, creating demand for commercial construction and other forms of construction in the process.”

The economy-wide unemployment rate remained unchanged at 4.9 percent. The nation’s labor force expanded by 407,000 persons for the month. This represents the largest growth for the month of July since the labor force expanded by 587,000 persons in July 1996.

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Additional ABC Economic Analysis:

Construction Spending

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ABC Reports: Nonresidential Construction Spending Down Again in June, First Annual Decline Since 2013

1291931467352794367Nonresidential construction spending dipped 1 percent in June and has now contracted for three consecutive months according to analysis of U.S. Census Bureau data released today by Associated Builders and Contractors (ABC). Nonresidential spending, which totaled $682 billion on a seasonally adjusted, annualized rate, has fallen 1.1 percent on a year-over-year basis, marking the first time nonresidential spending has declined on an annual basis since July 2013.

“On a monthly basis, the numbers are not as bad as they seem, as May’s nonresidential construction spending estimate was revised higher. However, this fails to explain the first year-over-year decline in nearly three years,” said ABC Chief Economist Anirban Basu. “There are many forces at work, most of them negative, with the noteworthy exception of construction materials prices, which are down on a year-over-year basis. To the extent that savings are being passed along to purchasers of construction services, spending would appear lower in dollar terms than when measured in physical terms such as square footage.

“Thanks in part to the investment of foreign capital in America, spending related to office space and lodging are up by more than 16 percent year-over-year,” said Basu. The global economy is weak, and international investors are searching for yield and stability. U.S. commercial real estate has become a popular destination for foreign capital. However, the weakness of the global economy may also help explain the decline in manufacturing-related construction spending of nearly 5 percent for the month and more than 10 percent year-over-year.

“Though many contractors continue to report extensive backlog, the data suggest that average firm backlog may begin to retrench,” warned Basu. “The only significant driver of economic growth in America presently is consumer spending. Corporate profits remain stagnant and business investment remains underwhelming. Public sector spending does not appear positioned to accelerate anytime soon despite the passage of a federal highway bill last year.”

Precisely half of the 16 nonresidential subsectors expanded in June. Two of the largest subsectors—manufacturing and commercial—experienced significant contractions in June, however, and were responsible for a majority of the dip in spending.

Tepid spending by public agencies also continues to shape the data. Despite a monthly pick-up in spending, water-supply construction spending is down 14 percent on a year-over-year basis. Public safety construction spending is down 8.4 percent from a year ago, sewage and waste disposal by nearly 15 percent, highway and street by about 6 percent, education by 4 percent and transportation by more than 3 percent.

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ABC Reports: Nonresidential Construction Hiring Surges

CEU2“The U.S. economy added an average of 289,000 jobs per month during the final three months of 2014, indicating that momentum is surging as we transition into 2015.”—ABC Chief Economist Anirban Basu.

Construction employment december 2014The U.S. construction industry added 48,000 jobs in December, including 22,800 jobs in nonresidential construction, according to the Bureau of Labor Statistics (BLS) preliminary estimate released Jan. 9. November’s estimate was unchanged in this release, remaining at 20,000 net new construction jobs, but nonresidential construction’s November jobs figure was upwardly revised to 7,100 jobs.

“The U.S. economy added an average of 289,000 jobs per month during the final three months of 2014, indicating that momentum is surging as we transition into 2015,” said Associated Builders and Contractors Chief Economist Anirban Basu. “This represents good news for the construction industry in 2015 and perhaps beyond, particularly with respect to office construction, retail construction, and other segments that benefit directly from accelerating job growth and decreasing unemployment. Overall, the economy has built steady momentum since the end of last winter adding an average of 246,000 jobs per month in 2014, an increase of more than 50,000 jobs added per month compared to 2013.”

According to the BLS household survey, the national unemployment rate fell to 5.6 percent in December. This represents the lowest level of unemployment since June 2008. The declining unemployment rate is most likely a result of a labor force that shrank by 273,000 persons in December, after expanding in the previous two months. The labor force participation rate fell by .02 percent and now sits at 62.7 percent.

“One of the most interesting aspects of the report is that construction unemployment ended the year at 8.3 percent on a non-seasonally adjusted basis,” said Basu. “While construction firm executives have been worried for years about the specter of construction skills shortages, the BLS data indicate there are plenty of people looking for jobs in construction. It is likely that many of these prospective workers lack the skills necessary to fill the openings construction firms are seeking to fill or live in areas where construction employment growth is much slower. Normally, high construction unemployment would imply slow rates of wage and compensation increases; however, ABC believes this is not the case. Because of the presence of skills mismatches, wage gains are likely to be sizeable in 2015 even in the presence of lofty rates of construction unemployment.”

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

  • Nonresidential building construction employment expanded by 10,000 for the month and is up by 23,400 jobs, or 3.4 percent, since December 2013.
  • Residential building construction employment expanded by 800 jobs in December and is up by 44,500 jobs, or 7 percent, on an annual basis.
  • Nonresidential specialty trade contractors added 12,800 jobs for the month and employment in that category is up by 76,900 jobs, or 3.7 percent, from the same time one year ago.
  • Residential specialty trade contractors gained 12,700 jobs in December and have added 87,600 jobs, or 5.6 percent, since December 2013.
  • The heavy and civil engineering construction segment gained 11,600 jobs in December and job totals are up by 57,900, or 6.6 percent, on a year-over-year basis.

To view the previous employment report, click here.

ABC Reports: Nonresidential Fixed Investment Expands 5.5 Percent During Robust Second Quarter

CEU2“The robust second quarter growth was primarily driven by higher consumer and business spending, ” —ABC Chief Economist Anirban Basu.

GDP_Q2_2014Nonresidential fixed investment expanded 5.5 percent and residential fixed investment expanded 7.5 percent during the second quarter of 2014 according to a July 30 release by the Bureau of Economic Analysis. Overall, real gross domestic product (GDP) increased 4 percent (seasonally adjusted annual rate) during the second quarter of 2014 following a 2.1 percent decrease (revised from -2.9 percent) in the first quarter.

“The robust second quarter growth was primarily driven by higher consumer and business spending,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Today’s 4 percent reading on second quarter GDP blew away consensus expectations of 3 percent, and the first quarter wasn’t quite as bad as suspected either. Viewed collectively, the data indicate that the U.S. recovery should exhibit decent momentum through the balance of the current year and into 2015.

“Nonresidential fixed investment expanded even more briskly than the broader economy,” said Basu. “However, the rebound from the dismal first quarter was broad-based; federal government spending was the only segment that contracted during the second quarter.”

Estimates for 2013 were revised to 2.2 percent growth, up from 1.9 percent in previous estimates. However, the revisions also show that the economy grew at a slower pace from 2009 to 2012 than previously thought. “This recovery was already the weakest in U.S. history,” said Basu. “Since the recession ended in the second quarter of 2009, the economy has grown at an average annual rate of just 2.3 percent (revised down from 2.4 percent in previous estimates).

“Despite the slow and laborious recovery, there is reason for optimism,” said Basu. “Today’s announcement marks the nonresidential fixed income segment’s strongest quarter since the beginning of 2012. In light of this positive data, expect nonresidential employment growth and construction spending—both of which will be released on Friday—to continue to trend higher.”

The following segments expanded during the second quarter and/or contributed to GDP.

Personal consumption expenditures added 2.5 percent to GDP after contributing 1.2 percent in the first quarter.

Spending on goods grew 6.2 percent.

Real final sales of domestically produced output—minus changes in private inventories—increased 4.3 percent after a 0.4 percent increase in the first quarter.

National defense spending expanded 1.1 percent after falling 4.0 percent in the first quarter.

State and local government spending expanded 3.1 percent during the second quarter after falling 1.3 percent in the first quarter.

Two key segments did not experience quarterly growth.

Federal government spending fell 0.8 percent in the second quarter following a 0.1 percent decrease in the prior quarter.

Nondefense spending fell 3.7 percent after gaining 6.6 percent in the previous quarter.

To view the previous GDP report, click here.

ABC Reports:Nonresidential Construction Gains Jobs In January

CEU2“The hope is that the lull in employment expansion will end shortly as temperatures begin to rise.” —ABC Chief Economist Anirban Basu.

Spending_2 3The construction industry gained 48,000 jobs in January, according to the Feb. 7 employment report by the U.S. Department of Labor (DOL). Nonresidential construction gained 21,000 jobs, representing a significant rebound from the 14,100 jobs lost by the segment in December. Nonresidential construction accounted for 47.7 percent of January’s total construction industry job gain and 28.1 percent of the construction industry job gain in the past year.

The national construction unemployment rate expanded to 12.3 percent on a non-seasonally adjusted basis in January, compared with 11.4 percent in December. This was due to a combination of seasonal factors and may be impacted by the end of the government’s long-term unemployment benefits program, which may have induced people look for work in construction—an industry generally known to be in recovery.

“The fact of the matter is that we simply do not know with any conviction what is transpiring in the U.S. labor market,” said Associated Builders and Contractors Chief Economist Anirban Basu. “With respect to construction, January’s employment recovery is likely attributable in large measure to the fact that December construction employment was suppressed by weather. While January was also associated with bitter cold, large snowfalls and ice storms, the week during which the data was gathered last month represented a period of relative meteorological calm.”

According to the Bureau of Labor Statistics’ household survey, the national unemployment rate decreased a tenth of a percent in January to 6.6 percent. This represents the lowest unemployment rate since October 2008. The labor force participation rate increased from its historic low of 62.8 percent to 63 percent in January.

“Based on data regarding backlog, architectural billings and other leading indicators, the nonresidential construction outlook remains benign,” said Basu. “However, the last two months have not been good ones for job creation, according to this release. The hope is that the lull in employment expansion will end shortly as temperatures begin to rise.”

Nonresidential building construction employment expanded by 8,300 jobs for the month and is up by 21.9 jobs (3.3 percent) since January 2012.

Residential building construction employment rose by 13,200 jobs in January and is up by 52,200 jobs (8.8 percent) on an annual basis.

Nonresidential specialty trade contractors gained 12,900 jobs for the month and employment in that category is up by 28,400 jobs (1.4 percent) from the same time last year.

Residential specialty trade contractors gained 3,600 jobs in January and have added 69,200 jobs (4.6 percent) since January 2013.

The heavy and civil engineering construction segment gained 10,100 jobs in January and job totals are up by 6,800 (0.8 percent) on a year-over-year basis.

To view the previous Employment report, click here.