Employment takes record plunge in April; project cancellations spread, AGC survey finds


Submitted by the AGC

Nonfarm payroll employment in April plummeted by an unprecedented 20.5 million (13%), seasonally adjusted, from March, based on the payroll period of April 12, the Bureau of Labor Statistics (BLS) reported on Friday. The unemployment rate soared to 14.7% from 4.4% in March. Construction employment in March totaled 6,631,000, a four-year low and a record one-month decrease of 975,000 (-13%). Employment slumped by 14% among employees of residential building and specialty trade contractors and nonresidential building firms, 11% among nonresidential specialty trade contractors, and 7.2% among heavy and civil engineering firms—possibly indicating more work for highway, airport and utility projects than building projects. The unemployment rate in construction, not seasonally adjusted, jumped from 4.7% in April 2019 to 16.6%, and the number of unemployed jobseekers with construction experience rose from 439,000 to 1,531,000. These were the highest April levels since 2011 and 2010, respectively. (Not-seasonally-adjusted levels vary with normal weather and holiday patterns and thus may not accurately show economic trends for different months within a year.)

In AGC’s latest online survey, conducted May 4-7, 37% of the 817 respondents reported that a project owner had canceled a scheduled project (compared to 28% of respondents in the April 20-23 survey). The most frequently cited reasons were “owner’s concern about covid-19 danger surrounding project” (37% of respondents), “owner’s expectation of reduced demand for project” (31%), and complying with “state/local order to halt ‘non-essential’ activity” (30%). In addition, 52% of respondents reported an owner had ordered a halt to a current project (up from 50%). There were some positive signs, however. Of the 733 who answered a question about PPP loans, 80% reported receiving approval: 73% were using the funds, 5% had been approved but had not received funds, and 2% had received funds but were considering returning them. The share of respondents who reported they had added workers jumped to 23% (from 13% in the April 20-23 survey and 4% of respondents in AGC’s April 6-9 survey), and the share that reported they had furloughed or terminated workers declined to 34% (from 35% and 40%, respectively), perhaps partly as a result of the PPP loan funds. The share of respondents reporting they had begun working on new or expanded projects increased to 21% from 18% in each of the two previous surveys.

Construction technology firm Procore released an analysis of the decline in construction work hours since March 1 by week, state, project type and contractor revenue size during an AGC media call on Friday, based on hours tracked by Procore clients. Hours totaled 14.0 million (representing roughly 400,000 employees) during the week of March 1. “The data shows worker hours have decreased 13% since the week of March 1st and held flat since the last [shelter-in-place] ordinances.” As of the week of April 26, the change in hours relative to the March 1 week ranged from -69% in Michigan (a state with some of the earliest and strictest shutdown orders) to +19% in Montana (possibly reflecting seasonal weather patterns as well as government or project owners’ decisions). “The numbers reveal that small businesses saw a greater decline in worker hours [-19% as of the April 26 week] than enterprise [-13%] or mid-sized [-12%] companies.” In contrast to the BLS data, transportation and energy projects had a steeper decline in hours than healthcare or non-infrastructure projects.

The increased use of home computers for work, education and entertainment has spurred investment in fiber-optic cable, cell towers and 5G connectivity. “Crown Castle International Corp….has invested $14 billion in fiber over the past five years and plans to invest around $2 billion annually in the coming years, said CEO Jay Brown,” the Wall Street Journal reported on April 28. Noelle Dilts, analyst for investment firm Stifel, reported on Sunday, “T-Mobile added 1,600 sites to its 5G footprint in the [first] quarter, while DISH started on its 5G network deployment planning process. CenturyLink reiterated its investment thesis on fiber deployment. Overall, we continue to believe that the fiber upgrade of wireline infrastructure in the U.S. and the 5G upgrade cycle represent significant, multi-year opportunities for the contractors.”

“After 41 consecutive monthly increases, engineering and construction costs fell in April,” IHS Markit and the Procurement Executives Group reported on April 29. “The current headline…index registered 34.9 in April, after staying barely neutral in March….any figure below 50 indicates falling prices. The materials and equipment sub-index registered 35.2, recording both the second consecutive month of falling prices and an all-time low. Survey respondents reported falling prices for 11 out of the 12 components with only ready-mix prices coming in at neutral. Index figures for all categories dropped relative to March, indicating that a greater proportion of the respondents are observing lower prices. With the exception of exchangers, all equipment categories moved from increasing prices in March to falling prices in April. For categories such as fabricated steel, alloy steel pipe and carbon steel pipe, April’s diffusion index reading was the lowest since the survey started in 2012. This does not mean that respondents saw the lowest prices in April, merely that most companies surveyed observed falling prices….The sub-index for current subcontractor labor costs came in at 34.3 in April. Responders had noted rising prices in March, with an index figure of 52.0.”

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