Employment, earnings climb in May; spending jumps in April; price increases continue

Nonfarm payroll employment in May increased by 223,000, seasonally adjusted, from April and by 2,363,000 (1.6%) year-over-year (y/y), the Bureau of Labor Statistics (BLS) reported on June 1. The unemployment rate dipped to an 18-year low of 3.8% from 3.9% in April. Construction employment rose by 25,000 for the month and 286,000 (4.1%) y/y to 7,210,000 (the most since June 2008 but 7% below the May 2006 peak). Average hourly earnings in construction rose 3.2% y/y to $29.65, or 10% more than the private-sector average ($26.92, up 2.7% y/y). The unemployment rate in construction, not seasonally adjusted, slid from 5.3% in May 2017 to 4.4%, the lowest May rate since the series began in 2000, and the number of unemployed jobseekers with construction experience fell from 502,000 to 415,000, the smallest number since 2001. (Not-seasonally-adjusted data may be affected by normal weather and holiday patterns and thus should not be compared to levels in other months.)

            There were 232,000 job openings in construction, not seasonally adjusted, at the end of April, nearly level with the April 2017 total of 233,000, which was the highest April total since 2001, BLS reported on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. The industry hired 485,000 employees in April, down from 525,000 in April 2017 and close to the average April level for the past 11 years. These figures, along with the strong May employment report (above), suggest contractors are still eager to hire more workers but are having difficulty finding ones who have construction experience.

            Construction employment, not seasonally adjusted, rose from April 2017 to April 2018 in 256 (72%) of the 358 metro areas (including divisions of larger metros) for which BLS provides construction employment data, fell in 63 (18%) and was unchanged in 39, according to an AGC analysis released on May 30. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers.) The largest percentage gains were in Midland, Texas (31%, 8,000 construction jobs) and Merced, Calif. (29%, 700 combined jobs). The most jobs added were in the Dallas-Plano-Irving division (12,400 combined jobs, 9%) and Houston-The Woodlands-Sugar Land (12,200 construction jobs, 6%). The largest percentage losses were in Bloomington, Ill. (-16%, -500 combined jobs) and Bismarck, N.D. (-15%, -800 construction jobs). The most losses were in St. Louis, Mo.-Ill. (-3,100 combined jobs, -5%) and Middlesex-Monmouth-Ocean, N.J. (-2,900 combined jobs, -7%).

            Construction spending totaled $1.285 trillion at a seasonally adjusted annual rate in April, up 1.8% from the March rate and up 7.6% from April 2017, the Census Bureau reported on June 1. Public construction skidded 1.3% for the month but increased 7.7% y/y. Of the three largest public segments, highway and street construction slipped 1.0% for the month and 2.0% y/y; educational construction was flat for the month and up 8.2% y/y; and transportation, -0.2% and 13%, respectively (+23% y/y for state and local airport construction and 7.3% for other public transportation—port, transit and passenger rail). Private residential spending jumped 4.5% in April and 9.5% y/y. New multifamily construction gained 3.6% for the month but fell 4.0% y/y; new single-family construction, 0 and 9.5%; and residential improvements, 12% and 14%. Private nonresidential construction spending rose 0.8% for the month and 5.3% y/y. Of the four largest components, power (electric power plus oil and gas pipelines and field structures) was up 2.4% for the month but declined 1.7% y/y; commercial, -2.8% and 5.2%; respectively (comprising retail, -3% y/y, and warehouse, +30%); manufacturing, 0.6% and -4.3%; and office, 1.8% and 6.3%.

            "Economic activity expanded moderately in late April and early May with few shifts in the pattern of growth," the Federal Reserve reported on May 30 in its latest "Beige Book." The report is a compilation of informal soundings of business conditions in each of the 12 Fed districts. The summary includes these comments relevant to construction: "Homebuilding and home sales increased modestly, on net, and nonresidential construction continued at a moderate pace....Shortages of qualified workers were reported in various specialized trades and occupations, including truck drivers, sales personnel, carpenters, electricians, painters, and information technology professionals....There were several reports of rising materials costs, notably for steel, aluminum, oil, oil derivatives, lumber and cement....Input cost increases, along with labor shortages in some sectors and strengthening demand, put upward pressure on prices in the transportation, construction and manufacturing sectors."

            "Price increases are largely flowing through the market for a wide range of products," investment research firm Thompson Research Group reported today in its May survey of building products makers and distributors. Following a 15% wallboard price increase in early January, producers announced a further 15% increase for July; "63% of respondents believe a mid-year wallboard price increase would be 'partially successful.'" Steel stud prices increased 10-15% in January and 10% each in February, March and April; "45% of respondents believe June steel stud price increases announced will be 'fully successful.'" One respondent commented, "The removal of tariff exemptions on steel from Canada, Mexico and the EU is already leading to tighter supply and higher steel prices. This will lead to higher prices and longer lead times in the next 30-90 days (or longer)." Regarding insulation, "71% of respondents reported 'up' pricing over the past 30-60 days. 2018 pricing actions include: May price increase – price increase for bat insulation of 9-10%; March price increase – price increase for blown in/loose fill insulation products of ~9-10%; January price increase – price increase for [residential and] commercial batt roll product, ranging from 8%-15%."

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