Construction Spending Declines in September

Employment Rises Over 12 Months In Most Metros

Submitted by the AGC.

Construction spending declined by 0.5% between August and September, but increased 7.8% year-over-year (y/y) from September 2020 to a seasonally adjusted annual rate of $1.57 trillion, the Census Bureau reported on Monday. Year-to-date spending in the first nine months of 2021 rose 7.1% from the total for January-September 2020. Private residential construction spending decreased by 0.4% for the month but soared 25% year-to-date (single-family, 37% year-to-date; multifamily, 18%; and owner-occupied improvements, 12%). Nonresidential activity slipped 0.6% for the month and 5.8% year-to-date, with a gain in only one of the 16 nonresidential categories (sewage and waste disposal, up 4.1%). Public construction spending fell 0.7% for the month and 2.4% year-to-date. The largest public segment, highway and street construction, slid 0.7% from the prior month and 1.3% year-to-date. Public education construction increased 0.9% for the month but slumped 8.3% year-to-date. Public transportation construction fell 0.7% from August and 6.8% year-to-date. Private nonresidential construction spending declined 0.6% for the month and 6.0% year-to-date. The largest private nonresidential segment (ranked by year-to-date spending)—power—fell 1.2% and 4.0%, respectively (including electric power, -2.7% year-to-date, and oil and gas field structures and pipelines, -8.3% year-to-date), followed by commercial, up 0.2% for the month and 0.6% year-to-date (including warehouse, 12% year-to-date, and retail, -13% year-to-date); manufacturing, -1.6% for the month and -0.2% year-to-date; and office, 0.1% and -9.3%, respectively. Lodging had the largest year-to-date decrease, -32%.

Construction employment, not seasonally adjusted, rose y/y from September 2020 to September 2021 in 258 (72%) of the 358 metro areas (including divisions of larger metros) for which BLS posts construction employment data, fell in 67 (19%) and was unchanged in 33, according to an analysis AGC released on Wednesday. (BLS reports combined totals for mining, logging, and construction in most metro areas, to avoid disclosing data about industries with few employers; AGC assumes the construction-only changes in these areas match the combined change.) The largest losses occurred in the Nassau County-Suffolk County, N.Y. division (-6,000 combined jobs, -8%), followed by New York City (-5,500 combined jobs, -5%); New Orleans-Metairie (-3,100 construction jobs, -12%); and the Calvert-Charles-Prince George’s counties, Md. division (-3,100 combined jobs, -9%). The steepest percentage decline, -18%, occurred in Evansville, Ind.-Ky. (-1,800 combined jobs), followed by New Orleans-Metairie; Fairbanks, Alaska (-10%, -300 construction jobs) and Knoxville, Tenn. (-10%, -1,800 combined jobs). Sacramento–Roseville–Arden-Arcade added the most jobs (9,000 construction jobs, 13%), followed by the Seattle-Bellevue-Everett division (7,800 construction jobs, 8%); the Chicago-Naperville-Arlington Heights division (6,700 construction jobs, 5%) and San Diego-Carlsbad (6,700 combined jobs, 9%). Beaumont-Port Arthur, Texas had the highest percentage increase (20%, 3,300 combined jobs), followed by Sierra Vista-Douglas, Ariz. (19%, 600 combined jobs); Waterbury, Conn. (17%, 500 combined jobs); Albuquerque, N.M. (15%, 3,700 combined jobs); and Fargo, N.D.-Minn. (15%, 1,400 combined jobs). Six areas set new lows for September and 49 set new highs, in series dating in most cases to 1990.

Wages and salaries in the construction industry rose 0.3%, seasonally adjusted, in the third quarter (Q3) of 2021, compared to 1.4% in Q2 2021 and 0.3% in Q3 2020, the Bureau of Labor Statistics (BLS) reported on Friday. Total compensation (wages, salaries, and benefits, including required employer payments) in construction also rose 0.3% in Q3 2021, compared to 1.2% Q2 2021 and 0.3% in Q3 2020. For all private industry employees, employer costs over the past quarter increased 1.6% for wages and salaries and 1.4% for total compensation. Over 12 months, compensation in construction increased 3.0%, vs. 2.4% in the previous 12 months, while compensation for the total private sector accelerated from 2.4% a year ago to 4.1% in the latest 12 months. The steeper increases in other sectors may be one reason contractors are having trouble filling jobs.

Inflation-adjusted gross domestic product (real GDP) rose 2.0% at a seasonally adjusted annual rate in Q3 2021, the Bureau of Economic Analysis (BEA) reported on Thursday, following a 6.7% gain in Q2. Real residential investment in permanent-site structures slumped 8.4% (single-family structures, -9.4%; multifamily, -3.5%). There was a 3.0% decrease in real gross private domestic investment in nonresidential structures (commercial and health care, -8.9%; manufacturing, -14%; power and communication, -13%; other non-mining structures, -14%; but wells and mining structures, up 22%). Real government gross investment in structures declined 6.8%, including federal investment for defense structures, up 11%; nondefense structures, -2.4%; and state and local structures investment, -7.7%. The GDP price index increased 5.7%, with price indexes for nonresidential structures investment up 10.4%; residential investment, 14.0%; and government investment in structures, 9.8%.

Announcements continue to appear for materials cost increases. Nucor Buildings Group announced on October 28 that it “will increase pricing, effective November 9th, by approximately 7% +/-. Projects with buyout items such as IMP, joists, etc., will likely increase by more.” Cemex Construction Materials Houston LLC notified customers on October 26 that it “will increase our base ready-mix price by approximately $7 per cubic yard,” effective January 1. Oregon-based distributor Johnson Air Products notified customers on October 21 that several manufacturers were raising prices on ducts and other air-handling components by 5-19% between mid-October and January 1.

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