Submitted by the AGC
Construction spending in June climbed 0.1% from May rate and 8.2% from June 2020 to a seasonally adjusted annual rate of $1.55 trillion, the Census Bureau reported today. Because project shutdowns depressed spending in the spring of 2020, it is more useful to compare year-to-date figures for January-June combined in 2020 and 2021 than June rates alone. Year-to-date, total spending increased 5.4% but there was a huge disparity between strong residential spending growth and diminishing nonresidential activity. Private residential construction spending jumped 25% year-to-date: single-family, 36%; multifamily, 19%; and owner-occupied improvements, 12%. Private nonresidential construction spending declined 9.4% year-to-date, with decreases in all 11 components. The largest private nonresidential segment (ranked by year-to-date spending)—power—slumped 6.3% (including electric power, -4.0%, and oil and gas field structures and pipelines, -14%), followed by commercial, -4.7% (including warehouse, 7.5%, and retail, -20%); manufacturing, -3.8%; and office, -12%. Lodging had the largest decrease, -29%. Public construction spending slumped 7.1% year-to-date. The largest public segment, highway and street construction, slid 6.0%. Public education construction declined 8.7% (primary/secondary, -4.0%, and higher education, -20%). Public transportation construction fell 6.8%. (Census includes data centers in office construction and does not break them out. Nonresidential combines renovation and new construction.) As usual in August, Census posted annual state totals for private and state/local nonresidential spending, and updated length-of-construction-time studies.
Wages and salaries in the construction industry rose 1.4 %, seasonally adjusted, in the second quarter (Q2) of 2021, up from 0.9% in Q1 2021 and 1.1% in Q2 2020, the Bureau of Labor Statistics (BLS) reported on Friday. The increase was the largest 3-month gain since the series began in 2000, Total compensation (wages, salaries, and benefits, including required employer payments) in construction rose 1.2% in Q2 2021, up from 0.9% in both Q1 2021 and Q2 2020,. Over 12 months, compensation increased 3.0%, vs. 3.3% in the previous 12 months, while wages and salaries rose 3.2%, down from 3.9% in the previous 12 months. BLS does not break out benefit costs for construction, but the fact that total compensation increased less than wages (3.0% vs. 3.2%) indicates that benefit costs rose less rapidly than wages. For all private industry employees, employer costs over the past 12 months increased 3.1% for total compensation, 3.5% for wages and salaries, and 2.0% for total benefits (including 0.4% for health insurance, the least since 1997).
Construction employment, not seasonally adjusted, decreased from February 2020—the pre-pandemic peak month for seasonally adjusted employment—to June 2021 in 80 (22%) of the 358 metro areas (including divisions of larger metros) for which BLS posts construction employment data, increased in 257 (68%) and was unchanged in 21, according to an analysis AGC released on Wednesday. The share of metros with employment increases was far below the typical share—on average, 92% of metros added construction jobs between February and June 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 16 months occurred in Houston-The Woodlands-Sugar Land (-33,400 construction jobs, -14%), followed by New York City (-22,000 combined jobs, -14%); Midland, Texas (-9,300 combined jobs, -25%); and Odessa, Texas (-7,900 combined jobs, -38%). Odessa had the steepest percentage decline, followed by Lake Charles, La. (-34%, -6,700 construction jobs), Laredo, Texas (-25%, -1,000 combined jobs) and Midland. The Chicago-Naperville-Arlington Heights division added the most jobs (14,300 construction jobs, 12%), followed by Minneapolis-St. Paul, Minn.-Wis. (13,800 combined jobs, 18%) and Indianapolis-Carmel-Anderson (10,700 construction jobs, 20%). Fargo, N.D.-Minn. had the highest percentage increase (50%, 3,700 combined jobs), followed by Sierra Vista-Douglas, Ariz. (48%, 1,200 combined jobs) and Bay City, Mich. (500 combined jobs, 45%). Seven areas set new lows for June and 48 set new highs, in series dating in most cases to 1990.
Inflation-adjusted gross domestic product (real GDP)rose 6.5% at a seasonally adjusted annual rate in Q2 2021, the Bureau of Economic Analysis (BEA) reported on Thursday, following a 6.3% gain in Q1. Real residential investment in permanent-site structures rose 4.8% (single-family structures, 2.6%; multifamily, 16%). There was a 7.0% decrease in real gross private domestic investment in nonresidential structures, (commercial and health care, -11%; manufacturing, -10%; power and communication, -14%; wells and mining structures, 33%; other non-mining structures, -14%). Real government gross investment in structures declined 25%, including federal investment for defense structures, -6.9%; nondefense structures, -36%; and state and local structures investment, -12%. The GDP price index increased 6.0%, with price indexes for nonresidential structures investment up 8.8%; residential investment, 14.5%; and government investment in structures, 10%.
Steel remains problematic. Steel Market Update reported on Tuesday that hot-rolled coil averaged $1860, more than four times the August 2020 low point of $440. Contractors report mills are quoting 11-12 month lead times for bar joists. New South Construction Supply reported on Tuesday, “Rebar remains in extremely high demand and tight supply. All four major rebar manufacturers in the southeast are reporting large backlogs, little to no sitting inventory, and a continual flow of incoming purchase orders for more material. Lead times are running at a month’s time after purchase order is placed….Wire rod availability remains a major issue and production is outpacing the arrival of more raw materials. Lead times are out to almost four months, depending on gauge and size.”
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