Jobs increase in 41 states through October; input costs rise faster than building prices

            Seasonally adjusted construction employment rose in 41 states year-over-year (y/y) from October 2016 to October 2017 and declined in nine states and the District of Columbia, an AGC analysis of Bureau of Labor Statistics (BLS) data released today showed. The largest percentage gains were in Nevada (14%, 10,600 jobs), Rhode Island (12%, 2,200) and Oregon (12%, 10,700). California again added the most jobs (44,400, 5.7%), followed by Florida (35,600, 7.4%); Texas (17,200 jobs, 2.4%) and Oregon. Iowa had the steepest percentage loss (-6.6%, -5,300 jobs), followed by Missouri (-4.8%, -5,800) and North Dakota (-3.9%, -1,300). Missouri lost the most construction jobs, followed by Iowa, Illinois (-3,500, -1.6%) and North Carolina (-3,300, -1.6%). For the month, employment rose in 26 states, fell in 23 states and D.C., and was flat in Kansas. Florida added the most jobs (and the highest percentage) for the month (23,800, 4.8%); there were also big gains in New York (5,700, 1.5%); Georgia (5,500, 3.2%) and Texas (4,500, 0.6%). These numbers probably reflect recovery from Hurricane Irma, which hit Florida and part of Georgia in September, and Harvey, which struck Texas in August. Louisiana lost the most jobs for the month (-3,300, -2.2%); Nebraska had the highest percentage loss (-3.4%, -1,800). (AGC's rankings are based on seasonally adjusted data, which in D.C., Nebraska and five other states is available only for construction, mining and logging combined.)

            The producer price index (PPI) for final demand in October, not seasonally adjusted, increased 0.5% from September and 2.8% y/y from October 2016, BLS reported on Thursday. AGC posted tables and an explanation focusing on construction prices and costs. Final demand includes goods, services and five types of nonresidential buildings that BLS says make up 34% of total construction. The PPI for final demand construction, not seasonally adjusted, rose 0.5% for the month and 3.1% y/y. The PPI for new nonresidential building construction—a measure of the price that contractors say they would charge to build a fixed set of five categories of buildings—climbed 3.2% y/y. Increases ranged from 2.7% y/y for health care and office buildings, 3.4% for warehouses, 3.6% for schools and 4.4% for industrial buildings. PPI increases for new, repair and maintenance work on nonresidential buildings ranged from 1.9% y/y for roofing contractors to 3.1% for concrete contractors, 3.5% for electrical contractors and 3.6% for plumbing contractors. The PPI for inputs to construction—excluding capital investment, labor and imports—comprises a mix of goods (59%) and services (41%). This index increased 3.9% y/y, which exceeded the 3.0% PPI increase for new nonresidential building construction, implying a cost squeeze for contractors. The PPI for all goods used in construction (including items consumed by contractors, such as diesel fuel) rose 4.3% y/y, as the sub-index for energy climbed 16%, while the PPI for goods less food and energy rose 2.7%. The index for services increased 3.4%. PPIs for inputs to seven types of new nonresidential structures had increases ranging from 3.6% for industrial structures and educational and vocational structures to 5.4% for power and communications structures. PPIs for inputs to new residential structures rose 3.9% y/y for single-family housing and 3.6% for multifamily. Materials important to construction that had notable one- or 12-month price changes include diesel fuel, 4.6% in October and 37% y/y; copper and brass mill shapes, -1.1% and 24%, respectively; aluminum mill shapes, 1.9% and 15%; steel mill products, -0.3% and 9.9%; lumber and plywood, 1.5% and 9.0%. Although steep, these increases are similar to those of earlier months and do not appear to show any impacts from recent storms.

            The value of U.S. nonresidential construction starts increased 5.1% from October 2016 to October 2017, the data-tracking firm ConstructConnect reported on Tuesday. The cumulative value of starts year-to-date (YTD) from January through October rose 10% from the same months of 2016. In descending order of 2017 size, heavy engineering starts jumped 28% YTD; commercial starts slid 5.5%; institutional starts edged up 0.4%; and the small industrial (manufacturing) category soared 84%.

            "After a stand-alone month of contracting demand for design services, there was a modest uptick in the Architecture Billings Index (ABI) for October," the American Institute of Architects (AIA) reported on Wednesday. The ABI score rebounded in October to 51.7, seasonally adjusted, up from 49.1 in September. The index measures the percentage of surveyed architecture firms that reported higher billings than a month earlier, less the percentage reporting lower billings; any score below 50 indicates a decline in billings. AIA says the index "provides an approximately 9-to-12 month glimpse into the future of nonresidential construction spending activity." Scores (based on three-month moving averages) for the four practice specialties were nearly identical for once, at slightly above 50 but down from September: commercial/industrial, 51.2 (vs. 53.2 in September); mixed practice, 50.7 (vs. 53.0); institutional, 50.7 (vs. 50.8); and residential (mainly multifamily), 50.7 (vs. 51.4). On November 2, Wells Fargo Economics issued a "primer" on the ABI, saying it "is most valuable as an early indicator of recovery in the construction sector but also may help identify a reacceleration in construction following a mid-cycle slowdown."

            Housing starts in October jumped 14% at a seasonally adjusted annual rate from the September rate, but were 2.9% below the October 2016 rate, the Census Bureau reported today. YTD starts for the first 10 months of 2017 combined rose 2.4% from the same months of 2016. Single-family starts climbed 5.3% for the month, 0.7% y/y and 8.4% YTD. Multifamily starts (in buildings with five or more units) soared 37% for the month but decreased 12% y/y and 9.9% YTD. Building permits, a fairly reliable indicator of near-term starts, increased by 5.9% for the month, 0.9% y/y and 5.8% YTD. Single-family permits increased 1.9% for the month, 7.7% y/y and 10% YTD. Multifamily permits leaped 13% for the month but fell 12% y/y and 2.5% YTD.

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