Vol. 16, No. 21 · June 3-9, 2016
Employment falls in April, May but April openings rise; various materials prices increase
Nonfarm payroll employment in May increased by 38,000, seasonally adjusted, from March and by 2,398,000 (1.7%) over 12 months, the Bureau of Labor Statistics (BLS) reported on Friday. The unemployment rate declined to 4.7% from 5.0% in April. Construction employment dropped by 15,000 for the month (to 6,645,000) but increased by 219,000 (3.4%) year-over-year (y/y). The estimated change for April was revised from +5,000 to -1,000. Residential construction employment (residential building and specialty trade contractors) decreased by 4,400 for the month but rose by 127,700 (5.2%) y/y. Nonresidential employment (nonresidential building, specialty trades, and heavy and civil engineering construction) shrank by 10,300 for the month but increased by 91,400 (2.3%) y/y. Seasonal adjustment removes the monthly variation due to normal weather or holiday patterns but does not show if changes are due to exceptional circumstances, underlying economic trends or other factors. Actual (not seasonally adjusted) construction employment increased by 205,000 in April and 135,000 in May but the seasonally adjusted changes were negative because contractors normally add even more workers in those months. The mild weather in much of the nation in early 2016 may have meant contractors retained or hired more workers than usual early in the year and thus finished projects earlier or did not need to hire as many in the spring. The number of unemployed jobseekers who last worked in construction declined from 569,000 in May 2015 to 461,000, and the unemployment rate for such workers dropped from 6.7% to 5.2%, the lowest May figures for these series since 2000. (Industry unemployment data are not seasonally adjusted and should only be compared y/y, not across months.)
There were 200,000 construction industry job openings, seasonally adjusted, at the end of April, BLS reported on Wednesday in its monthly Job Openings and Labor Turnover Survey. This was the highest April total since 2007, although it was down slightly from the March level of 215,000. In contrast, the 339,000 employees hired in April, seasonally adjusted, was close to the monthly average in the previous six years. The ratio of end-of-month openings to monthly hires was the highest for April since 2001, suggesting that the dip in employment that month may have resulted from difficulty finding qualified applicants.
Consultancy IHS and the Procurement Executives Group (PEG) reported on May 25 that "construction costs fell again in May....The headline current IHS PEG Engineering and Construction Cost Index...registered 49.3 this month, up from 48.5 in April. The headline index has consistently trailed the neutral mark [in which a reading higher than 50 represents upward pricing strength; below 50, downward pricing strength] for the past 17 months. However, the current headline figure has steadily risen since hitting 41.3 in February and is now the closest it has been to the neutral mark since January 2015, indicating that the bottom is forming for material prices. The current materials/equipment price index hit the neutral mark in May after recording falling prices for 16 months. The sub-index moved up to 50.0 from 47.5 in April....Fabricated steel and copper-based wire and cable posted the highest change relative to last month, driven by the recent rally in iron ore and steel prices." The index for "subcontractor labor prices fell in May, moving to 47.7" from 50.7 in April. "The sub-index figure has moved down since the beginning of the year and fell below 50 for the first time in six months."
Investment research firm Thompson Research Group reported on Wednesday that its latest monthly survey of building products companies found, "Core demand for steel studs remains positive with 80% of contacts reporting an increase in YOY [year-over-year] volumes during the month of May and all contacts expect improved volumes over the next 30-60 days. The meteoric rise in steel pricing over the past 4-6 weeks has been the focal point in the steel stud industry. The spike in pricing in recent weeks has been driven by tighter mill supply after the successful passage of tariffs on low priced imports in late 2015/early 2016. Several distributors suggested this month that they are open to additional price increases....In an industry that saw double-digit declines in steel stud pricing in 2015 is now seeing strong double-digit increases. Supplies at mills have increasingly tightened, with certain locations on allocation." Following a 10-15% increase in wallboard prices in March/April, "36% of survey respondents this month reported a complete acceptance of the March/April price increase, while 12% reported a partial acceptance, 32% reported a failed increase and the balance remained 'undecided'."
Distributor New South Supply reported in its newsletter on May 31, "Several polyethylene sheeting manufacturers increased prices by approximately 5% in May, due to their increased costs for resins and those that have not increased prices are expected to do so by the first week in June. If resin manufacturers are able to get the $.04-per-pound June price increase, polyethylene sheeting manufacturers have indicated they will increase prices again by another 4% in late June or early July....Concrete reinforcing wire mesh prices have risen by approximately 11% since the end of March and another [4-6%] price increase is probable in July....May offerings for imported rebar for delivery in late August or early September remained at or about the same prices as they were in April, so at least for now, imported rebar prices seem to have stabilized, despite a modest increase in the price of scrap steel."
The Census Bureau released first-quarter 2016 results from its Quarterly Services Survey on Wednesday. Total revenue for architectural and related services firms increased 0.6% from the fourth quarter of 2015 and 1.9% from the first quarter of 2015. Total revenue for engineering services firms decreased 1.7% and 2.4%, respectively.
The Data DIGest is a weekly summary of economic news; items most relevant to construction are in italics. All rights reserved. Sign up at http://store.agc.org.