Job Openings Set Record; Many Lead Times Worsen
Construction employment, seasonally adjusted, totaled 7,719,000 in September, an increase of 19,000 from the downwardly revised August rate and 292,000 (3.9%) year-over-year (y/y), according to AGC’s analysis of data the Bureau of Labor Statistics (BLS) posted today. Residential construction employment, comprising residential building and specialty trade contractors, rose by 6,400 in September and 110,500 (3.60%) y/y. Nonresidential construction employment—at building, specialty trades, and heavy and civil engineering construction firms—climbed by 13,100 for the month and 181,500 (4.2%) y/y. Average hourly earnings for production and nonsupervisory employees in construction (craft and office) rose 6.7% y/y to $32.83 per hour. That was the steepest y/y increase in 40 years and exceeded the 5.8% increase for all such private-sector employees. The “premium” for hourly construction workers narrowed rose to 18.2% over the private sector average of $27.77 but remained considerably below the average premium in 2000-2019 of 21.5%. The number of unemployed jobseekers with construction experience fell by 98,000 (22%) y/y to 346,000, and the industry’s unemployment rate, not seasonally adjusted, declined from 4.5% to 3.4%, the second-lowest rate in the 23-year history of the series.
There were 437,000 job openings in construction, not seasonally adjusted, at the end of August, an rise of 47,000 (12%) from August 2021, BLS reported on Tuesday. That was the largest August total in the 22-year history of the series and the 18th consecutive month of rising y/y openings. Hires rose by 4,000 (1.1%) y/y to 378,000. Layoffs and discharges decreased by 33,000 (20%) y/y to 129,000, the lowest level yet for August. Quits jumped by 46,000 (20%) to 281,000, the highest for any month in series history.
Of the 602 respondents to AGC’s 2022 Buy America Materials Survey, posted on Thursday, 93% reported they were “currently experiencing long lead times and/or allocations (less-than-full shipments) for construction materials.” For all 24 categories of materials and manufactured products, a majority reported longer lead times in the past year than before. Most firms believe that meeting new Buy America requirements will be a difficult task. Steel, nonferrous metal, plastic products, electrical equipment, and heating, ventilation, and air conditioning (HVAC) systems were the materials most likely to have been chosen by respondents as unlikely to be able to be sourced domestically. Those same materials were also the most common answers in which the answer of “Lead time was longer than before” was chosen, indicating that there has been no improvement in their availability. For each of these materials, over 75% of respondents indicated they were experiencing longer delivery lead times compared to a year before.
Every aggregates and concrete supplier reported they had “been able to gain additional price increases over the past 2-3 months,” investment research firm Thompson Research Group reported on Thursday in its Q3 Heavy Materials Survey. “Fall price increases (the third for the year) now is a mixed bag. Fall aggregate price increases are now being implemented on a market-by-market basis. Fall cement pricing actions have now been pushed to early 2023 (January)….Supply chain remains challenging – All we can say is it’s not much better. Sure, lead times for certain categories of equipment have improved. But on whole, managing supply chain has become an exercise of being pretty happy with ‘less bad’.”
“Economic activity in the services sector grew in September for the 28th month in a row,” the Institute for Supply Management reported on Wednesday. All 18 sectors reported an increase in prices paid. Construction (including homebuilding) is among those that reported growth (15 sectors), employment growth (10), growth in order backlogs (10), and slower supplier deliveries (16 sectors). Construction was one of two industries reporting no change in business activity, new orders, and supplier deliveries. Items significant for construction reported up in price included concrete, drywall, electrical equipment, construction labor (2 months in a row), pipe and fittings, steel products (21 months but also reported down for 2 months), and transformers. Diesel fuel, lumber, and polyvinyl chloride (PVC) products also were listed as down in price. Items listed in short supply included appliances; HVAC equipment; plastic pipes and fittings; and transformers.
Construction delays affected 90% of the 41 multifamily owners and developers in the National Multifamily Housing Council’s Q3 survey, posted on September 29. There were large increases in the shares of respondents listing as reasons for a delay in starts “project is not economically feasible at this time” (53% of respondents, vs. 38% in the Q2 survey), “economic uncertainty” (41% vs. 19%), and “availability of construction financing” (31% vs. 15%). There was little change in the share of respondents listing “materials sourcing and delivery” (53% vs. 58%) or “staffing shortages” (31% vs. 27%). Compared to three months ago, respondents reported median price increases for electrical components (panels and items with chips) of 10%; exterior finishes and roofing, 6%; appliances and insulation, 5% each. (Half of the panel reports increases above, and half below, the median.) The Dodge Momentum Index rose 5.7% in September from August and 26% y/y, Dodge Construction Network reported today. The index “is a monthly measure of the initial report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year.” The institutional component of the Momentum Index rose 12% for the month and 28% y/y. The commercial component increased 2.9% and 25%, respectively.