Employment Stalls but New Low for April Jobless Rate, Record Openings Imply Demand Remains Strong

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Employment Stalls but New Low for April Jobless Rate, Record Openings Imply Demand Remains Strong

Construction employment, seasonally adjusted, totaled 7,628,000 in April, a decrease of 2,000 from March but a gain of 235,000 (3.2%) year-over-year (y/y) from April 2021, according to AGC’s analysis of Bureau of Labor Statistics (BLS) data posted on Friday. Residential construction employment, comprising residential building and specialty trade contractors, rose by 3,800 in April and 113,200 (3.7%) y/y. Nonresidential construction employment—at building, specialty trades, and heavy and civil engineering construction firms—dipped by 2,000 for the month but climbed by 122,200 (2.8%) y/y. The number of unemployed jobseekers with construction experience dropped 40% y/y to 464,000, and the industry’s unemployment rate, not seasonally adjusted, declined from 7.7% in April 2021 to 4.6% last month, the lowest April rate in the 23-year history of the series.

There were 415,000 job openings in construction, not seasonally adjusted, at the end of March, a jump of 69,000 (20%) from March 2021, BLS reported on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. That was the largest total for any month in the 22-year history of the series. Hires decreased by 34,000 (8%) y/y to 388,000. Openings exceeded hires for the fourth month in a row, a formerly rare occurrence. Layoffs and discharges fell by 35,000 (-29%) y/y to 87,000, the fewest in series history. Quits soared by 64,000 (38%) y/y to 232,000, a new high for March. Together, the record-low layoffs and unemployment rate and the record high for job openings, rather than a slump in demand, may account for the flattening of hiring and total employment.

Construction spending (not adjusted for inflation) totaled $1.73 trillion in March at a seasonally adjusted annual rate, up 0.1% from the upwardly revised February total and up 12% y/y, the Census Bureau reported on May 2. However, without a deflator, it is impossible to say how much of the gain is in units vs. price. Many nonresidential construction categories declined for the month but topped year-ago levels, while residential segments mostly posted both monthly and y/y gains. Private nonresidential construction spending skidded 1.2% for the month but climbed 8.5% y/y. The largest private nonresidential segment—power—slipped 1.2% for the month and 0.3% y/y (including electric power, down 2.3% for the month and 1.8% y/y, and oil and gas field structures and pipelines, up 2.4% in March and 5.0% y/y); followed by commercial, down 1.9% for the month but up 14% y/y (including warehouse, -0.9% and 19%, respectively, and retail, -3.6% and 14%); manufacturing, down 1.6% in March but up 32% y/y (including chemical and pharmaceutical, -3.2% and -5.9%, respectively, and computer/electronic/electrical, -0.5% and 237%); and office, 0% and 4.9%. Public construction spending decreased 0.3% for the month but rose 1.7% y/y. The largest public segment, highway and street construction, lost 0.4% for the month but climbed 7.5% y/y. Public education construction declined 0.8% and 6.2%, respectively. Public transportation construction fell 0.5% and 1.2%. Private residential construction spending increased 1.0% for the month and 18% y/y. Single-family spending climbed 1.3% and 19%, respectively; owner-occupied improvements jumped 1.1% and 22%; and multifamily declined 0.5% in March but rose 3.9% y/y.

Three new private surveys suggest demand for projects remains strong. The Dodge Momentum Index rose 6% in April from a downwardly revised March reading and 17% y/y, Dodge Construction Network reported on Friday. 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. In April, the commercial component of the Momentum Index rose 9%” and 15% y/y, “while the institutional component moved 2% higher” for the month and 22% y/y.

“Economic activity in the services sector grew in April for the 23rd month in a row,” the Institute for Supply Management reported on Wednesday. Construction is listed first among 17 out of 18 services sectors that reported growth in April, first among 10 that reported increases in employment, and is among 18 that reported paying higher prices for materials and services, 16 that reported slower supplier deliveries, and 13 that reported an increase in orders. But construction respondents did not report a change in order backlogs, unlike 11 that reported an increase (and one that reported a decrease). Items reported up in price that are significant for construction included aluminum products (5 months in a row); copper (2 months); diesel fuel (17 months); freight (12 months); heating, ventilation, and air conditioning equipment; polyvinyl chloride (PVC) products (8 months); and steel products (16 months). Items listed in short supply included appliances (2 months), construction labor, and PVC products.

“Demand for apartments continues to exceed supply,” National Multifamily Housing Council Chief Economist Mark Obrinsky stated in a release NMHC issued on May 2, covering its latest quarterly survey. “Yet, even as rent growth and occupancy remain elevated, developers are struggling to build more housing due to the increasing cost of materials, a lack of available labor, continued obstructionism from NIMBYs, and, because of rising interest rates, an increasing cost of capital.”

There are mixed signs about future input prices. “Worries that new economic lockdowns will erode demand from [China, due to the pandemic’s resurgence] have dragged aluminum and tin down more than 17% from their recent records,” the Wall Street Journal reported on Wednesday. Copper “has lost 12% since its March record.” In contrast, the national retail average price of highway diesel fuel jumped to a record $5.51 per gallon on May 2, up 35 cents in a week and $2.37 (75%) y/y, the Energy Information Administration reported. Readers are invited to submit reports on materials costs and supply to ken.simonson@agc.org.

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