Nonresidential Construction Logs Another Employment Decline in June, Spending Decrease in May

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Submitted by the AGC

Construction employment, seasonally adjusted, totaled 7,410,000 in June, a drop of 7,000 from May and the fourth decline in the past five months, according to AGC’s analysis of Bureau of Labor Statistics (BLS) data posted on Friday The June total was 238,000 (-3.1%) below the pre-pandemic peak in February 2020. The gap widened between residential and nonresidential employment gains. Residential construction employment, comprising residential building and residential specialty trade contractors, increased 15,200 in June, putting the total 51,000 (1.7%) higher than in February 2020. Nonresidential construction employment—building, specialty trades, and heavy and civil engineering construction—shrank by 22,600 in June and was 289,000 (-6.2%) below the February 2020 level. A total of 730,000 former construction workers were unemployed in June, a sharp drop from June 2020 but nearly twice the June 2019 total of 390,000. The industry’s unemployment rate in June was 7.5%, compared to 10.1% in June 2020 and 4.0% in June 2019.

Construction spending in May dipped 0.3% from an upwardly revised April rate but rose 7.5% from May 2020 to a seasonally adjusted annual rate of $1.55 trillion, the Census Bureau reported on Thursday. Because project shutdowns depressed spending in the spring of 2020, it is more useful to compare year-to-date figures for January-May combined in 2020 and 2021 than May rates alone. Year-to-date, total spending increased 4.6% but there was a huge disparity between strong residential spending growth and diminishing nonresidential activity. Private residential construction spending jumped 24% year-to-date: single-family, 33%; multifamily, 20%; and owner-occupied improvements, 13%. Private nonresidential construction spending declined 9.5% year-to-date, with decreases in all 11 components. The largest private nonresidential segment (ranked by year-to-date spending)—power—slumped 7.4% (including electric power, -4.7%, and oil and gas field structures and pipelines, -16%), followed by commercial, -5.9% (including warehouse, 7.7%, and retail, -22%); manufacturing, -5.3%; and office, -13%. Lodging had the largest decrease, -28%. Public construction spending slumped 7.1% year-to-date. The largest public segment, public education construction, slid 8.7% (primary/secondary, -4.0%, and higher education, -20%). Highway and street construction declined 6.1%. Public transportation construction fell 7.0%. (Census includes data centers in office construction and does not break them out. Nonresidential combines renovation and new construction.) As usual on July 1, Census posted revisions in unadjusted data back to January 2019 and seasonally adjusted data back to January 2014.

The BLS report also covers average hourly earnings by industry, with a one-month lag for subsectors. For total construction, hourly earnings in May averaged $32.75, 8.1% more than the average for the nonfarm private sector. However, over the past two years this premium shrank by 2.0 percentage points from 10.1% in May 2019, implying that the financial attractiveness of construction may be diminishing as other sectors that are expanding faster raise pay to attract more workers. The premium diminished the most for employees of heavy and civil engineering construction firms (-3.2 points, from 15.5% above the private-sector average in May 2019 to 12.3% in May 2021), followed by residential building firms (-3.0 points, from a 9.1% premium to 6.1%) and specialty trade contractors (-1.8 points, from a 6.0% premium to 4.2%). The premium rose 0.3 points for nonresidential building firms (from 25.3% to 25.6%).

Construction compensation data firm PAS reported on Thursday, “Based on our survey data, contractors are projecting 2021 construction staff wages to increase an average of 3.23% (excludes 0% projections), reported by over 290 companies in this 39th edition of the Construction/Construction Management Staff Salary Survey. For pay increase comparison – according to WorldatWork, across all industries exempt professionals saw 2020 increases of 2.9% and they are projecting 2021 increases of 2.9%. For construction, WorldatWork reported a 3.4% increase in 2020 and are projecting 3.3% for 2021.”

Construction employment, not seasonally adjusted, decreased from February 2020—the pre-pandemic peak month for seasonally adjusted employment—to May 2021 in 91 (25%) of the 358 metro areas (including divisions of larger metros) for which the Bureau of Labor Statistics (BLS) posts construction employment data, increased in 243 (68%) and was unchanged in 24, according to an analysis AGC released on Wednesday. The share of metros with employment increases was far below the typical share—on average, 90% of metros added construction jobs between February and May from 1990 through 2019. (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 over 15 months occurred in Houston-The Woodlands-Sugar Land (-30,500 construction jobs, -13%), followed by New York City (-21,200 combined jobs, -13%); Midland, Texas (-9,600 combined jobs, -25%); and Odessa, Texas (-8,300 combined jobs, -40%). Odessa had the steepest percentage decline, followed by Lake Charles, La. (-36%, -7,200 construction jobs) and Midland. Minneapolis-St. Paul, Minn.-Wis. added the most jobs over 15 months (11,100 combined jobs, 14%), followed by Indianapolis-Carmel-Anderson (10,900 construction jobs, 21%) and the Chicago-Naperville-Arlington Heights division (10,300 construction jobs, 9%). Fargo, N.D.-Minn. had the highest percentage increase (45%, 3,300 combined jobs), followed by Sierra Vista-Douglas, Ariz. (44%, 1,100 combined jobs) and Bay City, Mich. (400 combined jobs, 36%). Six areas set new lows for May and 52 set new highs, in series dating in most cases to 1990.

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