Submitted by the AGC
Contractors’ input costs declined on balance in July, while bid prices accelerated, according to Bureau of Labor Statistics (BLS) data posted on Thursday. Specifically, the producer price index (PPI) for material and service inputs to new nonresidential construction slid 1.3% for the month, while the PPI for new nonresidential building construction—a measure of the price that contractors say they would bid to build a fixed set of buildings—jumped 5.4%. The input index climbed 14.6% year-over-year (y/y), but that was the smallest y/y rise since March 2021. The bid-price index rose by a record 23.9% y/y. Several materials contributed to the slowing of input costs. The PPI for diesel fuel plunged 16.3% in July but soared 71.3% y/y. Indexes for metals fell for the month: copper and brass mill shapes -9.7% (and -7.9% y/y); aluminum mill shapes, -4.0% (but up 12.5% y/y); and steel mill products, -3.7% (up 6.4% y/y). Other inputs with small declines in July include lumber and plywood, -0.5% (and -7.7% y/y); truck transportation of freight, -0.3% (but up 21.7% y/y); and asphalt felts and coatings, -0.2% (up 17.8% y/y). Prices increased in July for several inputs, including insulation materials, 3.3% (and 19.0% y/y); concrete products, 2.2% (and 14.3% y/y); and plastic construction products, 1.0% (and 22.4% y/y). AGC posted tables of construction PPIs. Readers are invited to send cost and supply-chain information to firstname.lastname@example.org.
Construction employment, seasonally adjusted, totaled 7,706,000 in July, an increase of 32,000 from June and 311,000 (4.2%) y/y, according to AGC’s analysis of data BLS posted on August 5. Residential construction employment, comprising residential building and specialty trade contractors, rose by 14,100 in July and 120,800 (4.0%) y/y. Nonresidential construction employment—at building, specialty trades, and heavy and civil engineering construction firms—climbed by 10,300 for the month and 190,800 (4.4%) y/y. The number of unemployed jobseekers with construction experience fell 39% y/y to 359,000, and the industry’s unemployment rate, not seasonally adjusted, declined from 6.1% to 3.5%. Average hourly earnings for production and nonsupervisory employees in construction rose 5.7% y/y, less than the 6.2% rate for the overall private nonfarm sector.
Wages and salaries in the construction industry rose 1.7%, seasonally adjusted, in the second quarter (Q2) of 2022 and 4.4% y/y, up from 3.2% a year earlier, BLS reported on July 29. The y/y increase was the steepest since 2001. Wages for the total private sector increased 1.5% in Q2 and 5.7% y/y, the most in the 22-year history of the series and up from 3.5% a year ago. Total compensation (wages, salaries, and benefits, including required employer payments) in construction rose 1.5% in Q2 and 4.0% y/y, up from 3.0% a year earlier. Total private industry compensation increased 1.5% in Q2 and 5.5% y/y, up from 3.1% the year before. The steeper increases in sectors other than construction for these measures, as with average hourly earnings, may be one reason contractors are having trouble filling jobs despite raising pay more steeply than in past years.
There were 330,000 job openings in construction, not seasonally adjusted, at the end of June, an increase of 8,000 (2.5%) from June 2021, BLS reported on August 2. That was the largest June total in the 22-year history of the series and the 16th consecutive month of rising y/y openings. Hires dipped by 12,000 (-2.8%) y/y to 412,000. Layoffs and discharges fell by 30,000 (-21%) y/y to 116,000, and the layoff rate, 1.5 per 100 employees, was the lowest for June in series history. Quits held nearly steady at 183,000 (down 2,000 or 1.1% y/y).
Construction spending (not adjusted for inflation) totaled $1.76 trillion in June at a seasonally adjusted annual rate, down 1.1% from May but up 8.3% y/y, the Census Bureau reported on August 1. However, without a deflator, it is impossible to say how much of the gain is in units vs. price. Declines for the month were widespread. Private nonresidential construction spending dipped 0.5% for the month but climbed 1.7% y/y. The largest private nonresidential segment (based on spending year-to-date in January through June)—power—slumped 1.8% for the month and 15% y/y (including electric power, -2.0% for the month and -18% y/y, and oil and gas field structures and pipelines, -1.1% and -4.2%, respectively); followed by commercial, -0.6% for the month but up 11% y/y (including warehouse, -0.7% and 14%, respectively, and retail, -1.7% and 6.4%); manufacturing, -0.1% in June but up 20% y/y (including chemical and pharmaceutical, -4.2% and -9.2%, respectively, and computer/electronic/electrical, -0.1% and 149%); and office, 0.5% and -2.1%. Public construction spending decreased 0.5% for the month but edged up 0.4% y/y. The largest public segment, highway and street construction, lost 2.7% for the month and 1.1% y/y. Public education construction declined 0.7% and 4.8%, respectively. Public transportation construction fell 1.0% and 2.7%. Private residential construction spending declined 1.6% for the month but climbed 16% y/y. Single-family spending shrank 3.1% in June but rose 8.4% y/y; owner-occupied improvements slipped 0.3% for the month but leaped 33% y/y; and multifamily increased 0.4% in June but inched down 0.1% y/y.
Total construction starts in current dollars (i.e., without adjusting for inflation) soared 48% in July at a seasonally adjusted annual rate Dodge Construction Network reported today. “This gain results from the start of three large manufacturing plants and two [liquefied natural gas] export facilities. However, even without these projects, total construction starts would still have increased 7%. Nonresidential building starts rose 79% in July, and nonbuilding starts jumped 120%….residential starts decreased 8%.