Employment hits 10-year high in July; unemployment, job openings set series records

Nonfarm payroll employment in July increased by 157,000, seasonally adjusted, from June and by 2,400,000 (1.6%) year-over-year (y/y), the Bureau of Labor Statistics (BLS) reported today. The unemployment rate edged down to 3.9% from 4.0% in June. Construction employment rose by 19,000 for the month and 308,000 (4.4%) y/y to 7,242,000 (the most since May 2008 but 6.3% below the July 2006 peak). Average hourly earnings in construction rose 3.2% y/y to $29.86, or 10% more than the private-sector average ($27.05, up 2.7% y/y). The unemployment rate in construction, not seasonally adjusted, fell from 4.9% in July 2017 to 3.4%, the lowest since the series began in 2000. (Not-seasonally-adjusted data may be affected by normal weather and holiday patterns and thus should not be compared to levels in other months.)

Construction spending totaled $1.317 trillion at a seasonally adjusted annual rate in June, down 1.1% from the upwardly revised May rate but up 6.1% from June 2017, the Census Bureau reported on Wednesday. Public construction slumped 3.5% for the month but increased 4.9% y/y. Of the three largest public segments, highway and street construction slid 1.3% for the month but increased 6.3% y/y; educational construction plunged 11% for the month and 6.6% y/y; and transportation dipped 0.8% from May but rose 12% y/y (+22% y/y for state and local airport construction and 2.0% for other public transportation—port, transit and passenger rail). Private residential spending declined 0.5% in June but rose 8.8% y/y. New multifamily construction decreased 2.8% for the month but increased 1.8% y/y; new single-family construction, -0.4% and 6.8%, respectively; and residential improvements, 0.1% and 14%. Private nonresidential construction spending slipped 0.3% for the month but increased 3.7% y/y. Of the four largest components, power (electric power plus oil and gas pipelines and field structures) edged down 0.3% for the month but climbed 7.7% y/y; commercial fell 2.2% in June but rose 0.8% y/y (comprising retail, -8.8% y/y, and warehouse, 15% y/y); office, 0.3% and 9.5%, respectively; and manufacturing, 1.2% and -5.1%­.

There were 263,000 job openings in construction at the end of June, up sharply from 183,000 in June 2017 and the highest June total in the series' 18-year history, BLS reported today in its latest Job Openings and Labor Turnover Survey (JOLTS) release. The jump occurred even though the industry hired 426,000 employees in June, not seasonally adjusted, the highest June total since 2012. These figures, along with the positive July employment report, suggest contractors are still eager to hire more workers but are having difficulty finding ones who have construction experience.

Issi Romem, chief economist of construction data firm BuildZoom, published a study on July 31 that analyzes the construction worker shortage by state, using data from Greenwich.HR on job listings that are posted for 45 days or longer. Among the findings: "Job posting data indicate that the relative severity of the shortage is greater in expensive states such as Massachusetts, New Jersey, and California, although it is also severe in a few lower cost states, such as Pennsylvania and Michigan. Although construction employment rates have recovered to pre-bust levels circa 2005, the size of the construction workforce has diminished since then, both nationally and in most states. The current severity of the shortage in different states corresponds to the decline in the ranks of young construction workers, but not the overall construction workforce. States whose home values were hit harder by the bust incurred greater declines in the share of young construction workers, yet states whose home values have recovered more vigorously have failed to see a corresponding recovery in the share of young workers."

Consultancy McKinsey & Company and the International Road Federation published a study and summary on Monday on "Improving the delivery of road infrastructure across the world." Among the findings: "Research shows that road-sector investment needs to be approximately $900 billion per year to keep pace with projected growth—currently, it falls short by $180 billion per year. Additionally, experience shows that, to significantly and sustainably improve a country's road network, the whole delivery system must be taken into consideration. It is not enough simply to increase funding....The solutions are complex, and there is no single quick fix. However, we have identified five best practices that should inform every country's improvement journey. Maintain rigorous, fact-based, and transparent project selection....Streamline delivery....Make ­the most of existing infrastructure....Ensure effective sector governance....Enhance funding and finance frameworks."

Construction consultancy FMI today issued a report on "Managing Risk in the Digital Age" based on a survey of participants in AGC's 2018 Surety Bonding and Risk Management Forum. "Key findings include: 88% of respondents had encountered risks related to shortage of craft workers and 67% had encountered risks related to the shortage of field supervisors; 92% of respondents had found design documents to be less complete than they were in the past; and nearly 40% of respondents planned to bring design work in-house, and of those, over 80% had either completed the process or planned to do so within the next three years. Two-thirds of respondents expect to see more change in the construction industry over the next five years than in the last 50; respondents predict that health care, commercial/office space and education will experience the most disruption over the next five years; and the more specific areas of disruption will include or involve concrete, curtain walls (envelope and glazing), electrical work, steel erection and mechanical and structural engineering. More specifically relating to risk management, the study finds: Respondents consider fee erosion and cost escalation to be the most significant of the 'soft costs' of risk; and risk management has to evolve, for many of the significant risks confronting today's contractors are not insurable."

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