Metro employment gains spread widely; material costs are mixed but pay accelerates

            Construction employment, not seasonally adjusted, rose from June 2017 to June 2018 in 272 (76%) of the 358 metro areas (including divisions of larger metros) for which the Bureau of Labor Statistics (BLS) provides construction employment data, fell in 44 (12%) and was unchanged in 42, according to an AGC analysis today. (BLS combines mining and logging with construction in most metros to avoid disclosing data about industries with few employers. Not-seasonally-adjusted data can be compared for a given month between years but month-to-month variations may be due to normal holiday and seasonal patterns rather than real trends.) More metros added construction jobs than in any 12-month period since February 2015. Two metro areas set new lows for June; 64 areas achieved record June highs, in series that date to 2000 for most metros. The largest percentage gain was in Merced, Calif. (28%, 700 combined jobs), followed by Midland, Texas (24%, 6,700 combined jobs). The most jobs were added in Houston-The Woodlands-Sugar Land (19,300 construction jobs, 9%), followed by Phoenix-Mesa-Scottsdale (13,100 construction jobs, 11%). The largest percentage losses (-10% each) were in Hanford-Corcoran, Calif. (-100 combined jobs) and Columbia, S.C. (-2,100 combined jobs). The most losses were in Middlesex-Monmouth-Ocean, N.J. (-3,300 combined jobs, -8%), followed by the Newark, N.J.-Pa. division (-3,900 combined jobs, -8%).

             Construction materials prices appear to have peaked for now, with some markdowns. "Unlike prior months in 2018, few manufacturers of construction materials we distribute increased prices or announced price increases in July," distributor New South Construction Supply reported on Monday. "Dimensional [southern yellow pine and spruce, pine and fir] lumber and plywood prices fell modestly in July....For the third consecutive month, domestic rebar prices were unchanged in July....Concrete reinforcing wire mesh manufacturers are holding the line on pricing after increasing prices by double digits on July 2 even for jobs with multiple truckloads....The current lead time is from one to six weeks depending on the gauge of wire and varies by manufacturer. One manufacturer is currently sold out of all types of concrete reinforcing wire mesh until the second week of September....Several more manufacturers and wholesalers of construction products began adding a fuel surcharge to orders in July and many [less-than-truckload] carriers either increased their freight rates in July or notified their customers that they will increase their rates in August." The Wall Street Journal reported on Friday, "Steel prices in the U.S. have eased after hitting their highest level in a decade in early June...Like steel, aluminum has pulled back...The price moves for copper have been even more drastic, with the red metal down 15% from a four-year high reached June 8."

             The employment cost index—a measure of compensation (wages, salaries and benefits, including required payments), which BLS released today for the second quarter of 2018 (2018Q2), accelerated markedly from prior periods. In the private sector as a whole, compensation increased 0.6%, seasonally adjusted, from March to June (down from 1.0% in Q1) and 2.9%, not seasonally adjusted, from June 2017 to June 2018 (up from 2.4% the year before). Compensation for all employees in the construction industry increased 1.0% in Q2 (vs. 0.9% in Q1) and 3.0% over 12 months (vs. 2.2% in the prior year). The 12-month increases for construction and all private industry were the largest in a decade. Wages in construction increased 1.0% in Q2 (vs. 1.1% in Q1) and 3.2% over 12 months (vs. 2.3% in the prior year).

            Inflation-adjusted gross domestic product (real GDP)—the value of all goods and services produced in the U.S., net of imports—increased at a 4.1% seasonally adjusted annual rate in 2018Q2, following a 2.2% rise in Q1, the Bureau of Economic Analysis reported on Friday. Real private fixed investment in new nonresidential structures gained 14% in both Q2 and Q1. The category includes mining exploration, shafts, and wells, which soared 97%; in contrast, investment in other private nonresidential structures declined 3.2% (commercial and health care, -3.8%; manufacturing, -19%; power and communication, 4.7%; and other, 0.9%. Other "consists primarily of religious, educational, vocational, lodging, railroad, farm, and amusement and recreational structures, net purchases of used structures, and brokers' commissions on the sale of structures.") Real investment in new residential structures increased 1.2% (after slipping 0.6% in Q1), with single-family down 4.5% and multifamily up 11%. Real government gross investment in structures climbed 2.6% (and 1.5% in Q1), with federal investment up 1.2% (national defense structures, down 12%; nondefense structures, up 5.4%) and state and local investment up 2.7%. These estimates are adjusted for inflation, unlike the Census Bureau's spending put-in-place data. The GDP price index rose 3.0% (vs. 2.0% in Q1). The price index for private new nonresidential structures investment increased 4.6% (vs. 3.0% in Q1). The price index for new residential investment increased 7.9% (vs. 6.7% in Q1). The price index for gross government structures investment increased 7.5% (vs. 4.5% in Q1). BEA introduced several refinements and revised past estimates.

             "Verizon will be aggressively deploying fiber and fixed wireless infrastructure," Noelle Dilts, securities analyst for Stifel, reported on Friday in summarizing Verizon's investor call. "Verizon discussed plans to deploy fiber in more than 50 cities, indicating a much larger opportunity set from Verizon OneFiber than originally anticipated. [A Verizon official said,] 'We are moving over to much more small cells than making our bigger towers and macrocells. And I will say, if you go back a couple of years ago, our majority of all our investment was on macro towers and today the majority is on densification with small cells.'"


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