Job Openings

Job Openings, Hires Rates Slip in May; Dodge Momentum Index Declines In June but Remains Elevated

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Submitted by the AGC

There were 299,000 job openings in construction, seasonally adjusted, at the end of May, the Bureau of Labor Statistics (BLS) reported on Wednesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. That was a 6.4% increase from a year earlier. However, as a share of filled and unfilled jobs, the job openings rate of 3.9% matched the year-earlier rate and fell short of the rates in April (4.5%) and March (4.3%). Hires in May totaled 311,000 or 4.2% of the employment total for the month—the lowest May hires rate in the 21-year history of the series. The declines in the hires and job openings rates are consistent with BLS’ employment report on July 2 that seasonally adjusted construction employment dropped by 22,000 in May and 7,000 in June. Layoffs and discharges totaled 157,000 or a rate of 2.1%, tying the lowest May rate in series history and suggesting that contractors are not aggressively downsizing. Contractor readers are invited to take the 2021 AGC/Autodesk Workforce Survey.

“Following six months of consecutive gains, the Dodge Momentum Index fell [5% in June] from the revised May reading,” Dodge Data & Analytics reported on Thursday. The index “is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year….The decline in June was the result of losses in both institutional planning, which fell 7%, and commercial planning, which lost 4%. Uncertain demand for some building types (such as retail and hotels), higher material prices, and continued labor shortages are weighing down new project planning. Even with June’s decline, however, the Momentum Index remains near a 13-year high and well above last year. Compared to a year earlier, both commercial and institutional planning were significantly higher than in June 2020 (39% and 46%, respectively). Overall, the Momentum Index was 41% higher….June’s retreat in planning activity is another sign that the recovery from the pandemic-led recession will be nonlinear. The current level of the Momentum Index and its underlying components, however, continue to signal that a more broad-based recovery in nonresidential construction starts will occur in 2022.”

Lumber futures prices tumbled 58% from a record close of $1686 on May 7 to $716 on June 30 before rebounding to close on Thursday at $774.60. “In contrast, prices paid by builders since late May have declined by a fraction of that impact,” National Association of Home Builders economist David Logan explained in an “Eye on Housing” article on Tuesday. “As the price declines began grabbing headlines, however, the price of lumber packages quoted to builders held at record highs. In economics jargon, prices paid by builders—or ‘street’ prices—were ‘sticky.’ This dynamic is primarily due to dealers’ inventory carrying costs and potentially large differences between the price at which inventory is bought and sold….Wholesalers tend to be ‘trigger happy’ when prices skyrocket. As the cost of their inventory is low relative to cash prices during these periods, they will quote at or near current market prices. The environment is one in which wholesalers are assured to buy low and sell high. However, wholesalers cannot predict when a bull market is going to end and buy their lumber according to how likely they believe it will last. As different buyers may have different forecasts, disparities in purchasing behavior can arise. A wholesaler that assumes lumber prices will keep rising for two months will buy more inventory than one assuming the run will last for two weeks. Retailers generally have less buying power than wholesalers have selling power. In such a scenario, the retailer (e.g., lumberyard) is said to be a ‘price taker.’ As a result, their inventory costs tend to increase in step with market prices. These higher costs are passed on to builders in order to maintain positive operating margins. Thus, lumber retailers are less likely than wholesalers to realize outsized profits when prices are rising.”

“On average, pricing [for aggregates] is up 3-6%, depending upon the market and product mix,” investment research firm Thompson Research Group (TRG) reported on Thursday. There “are additional pricing actions in the works for [the second half of 2021. For cement, a] price increase in the range of 6-9% was implemented across most markets in April. A second price increase of roughly the same magnitude is being implemented in July/August. Texas cement is on allocation, as is California. Now, even the Mississippi River region has a kink, with the Holcim cement plant only producing ~50% of capacity. This plant has been running to help make up for capacity that is currently down in the [Dallas/Fort Worth (DFW)] market (awaiting a scrubber fix, which likely won’t be completed in 2021). From DFW to Houston, Texas has remained allocation given 1) 1.5 million tons of Holcim capacity offline; 2) congested ports limiting the amount of cement entering Texas and 3) overall increased demand. While the California cement market has improved relative to 2020, availability remains tight.”

Door manufacturers also announced price hikes recently. Clopay notified its dealers on Wednesday that, effective July 9, “All residential and commercial sectional models[, ]rolling steel doors[, parts,] and heavy hardware will increase 22%. All entry doors will increase 10%.” All freight rates will increase by 6%.” TRG reported on Tuesday, “We recently obtained a pricing letter from Masonite…, which indicates pricing going up 6-12% (varies by product) and surcharges being added on Asian import products. These prices will be implemented on orders received from August 9 onward….The company continues to have customers on allocation for interior doors. Masonite noted that key suppliers in the Texas Gulf Coast region are not operating at normal capacity levels, and the shortage is exacerbated by elevated demand.” Readers are invited to send cost and supply-chain information to ken.simonson@agc.org.

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Construction employment falls in May; hourly earnings premium, hires decline in April; openings soar

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Construction employment, seasonally adjusted, totaled 7,423,000 in May, a drop of 20,000 from April and the third decline in the past four months, according to AGC’s analysis [ https://AGCA.informz.net/AGCA/data/images/Employment table_May_PDF.pdf ] of Bureau of Labor Statistics (BLS) data posted [ https://www.bls.gov/news.release/empsit.nr0.htm ] on Friday The May total was 225,000 (-2.9%) 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, edged up by 1,900 in May, putting the total 35,000 (1.2%) higher than in February 2020. Nonresidential construction employment—building, specialty trades, and heavy and civil engineering construction—shrank by 21,800 in May and was 260,000 (-5.6%) below the February 2020 level. A total of 642,000 former construction workers were unemployed in May, a sharp decline from May 2020 but the second-highest May level since 2014. The industry’s unemployment rate in May was 6.7%, compared to 12.7% in May 2020.
 
The BLS report also covers average hourly earnings by industry, with a one-month lag for subsectors. For total construction, hourly earnings in April averaged $32.59, 8.0% more than the average for the nonfarm private sector. However, over the past two years this premium shrank by 2.2 percentage points from 10.2% in April 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 (-4.5 points, from 16.0% above the private-sector average in April 2019 to 11.5% in April 2021), followed by residential building firms (-2.7 points, from an 8.8% premium to 6.0%), specialty trade contractors (-1.0 points, from a 6.1% premium to 5.0%), and nonresidential building firms (-0.9 points, from a 25.4% premium to 24.5%).
 
There were 357,000 job openings in construction, seasonally adjusted, at the end of April, BLS reported [ https://www.bls.gov/jlt/ ] on Tuesday in its latest Job Openings and Labor Turnover Survey (JOLTS) release. Hires in April totaled 335,000 or 4.5% of the employment total for the month. Apart from the pandemic-depressed 3.1% rate in 2020, the rate was the lowest rate of hires for April in the 21-year history of the series, while the job openings rate (4.6% of filled and unfilled jobs) was the second-highest total for any month since the series began in December 2000. That is consistent with reports from many contractors that they are having a very hard time hiring workers. (JOLTS data combines nonresidential construction with residential, and it is not possible to tell if the demand and openings are coming from both segments of the industry.)
 
The Dodge Momentum Index jumped 9.1% in May from the revised April reading, Dodge Data & Analytics reported [ https://www.construction.com/news/Dodge-Momentum-Index-Increases-In-April-2021 ] on Monday. The index “is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year….May’s jump was the result of a large increase in commercial planning activity, which posted its strongest month-over-month increase since October 2017. Institutional planning, meanwhile, fell by less than one percentage point. Commercial planning had been in a holding pattern over the last four months, but broke out in May due to several sizable data center, office, and warehouse projects that peaked in a 13-year high for the commercial component of the Momentum Index. While essentially flat in May, institutional planning remains at levels not seen since 2009. On a year-over-year basis, both commercial and institutional planning were up from May 2020 (38% and 47% respectively). The Momentum Index overall was also 41% higher than in May 2020….The rising trend in planning activity is a good sign that the economic recovery is starting to spread into the construction sector. However, these projects are unlikely to have an impact on construction starts this year. Rising material prices and a continued shortage of skilled labor have led to project delays. On the upside, construction starts are shaping up for a healthy increase in 2022.”
 
Readers continue to report materials price increases, some immediate or retroactive, and supply-chain disruptions. A reader received a notice on June 5 from a structural steel supplier that “Effective with orders received after 8:00 pm EST, Friday June 4, [m]erchant products will be increased by…$70 ton.” A commercial furniture supplier notified customers on June 8, “Foam shortages persist, and foam pricing continues to rise[, making] it necessary to adjust pricing on select pieces[, ]effective June 7.” A Texas concrete supplier wrote to customers on June 4, “Effective August 1,…we will be increasing the price of all concrete products by $3.00 per cubic yard[, ] due to labor shortages.” Readers are invited to send information to ken.simonson@agc.org [ http://ken.simonson@agc.org ] .
Steel-industry newsletter Steel Market Update [ https://www.steelmarketupdate.com/ ] reported today, “Hot-rolled coil prices charged higher yet again even as lead times stretched into August, a typically slower time of the year….Hot-rolled coil prices have hit a new all-time high of $1,675 per ton, up $55 per ton compared to a week ago and up $1,235 per ton from August of last year. Cold-rolled coil prices were up $65 per ton week-over-week, galvanized base prices gained $20 per ton, and Galvalume prices were up $70 per ton. The increases came after June prime scrap prices settled up $60 per gross ton. Plate prices, meanwhile, were unchanged….SMU’s Price Momentum Indicators, in the meantime, continue to point toward higher prices for the next 30 days.”
 
Lumber-product prices have shown mixed trends recently. Futures contracts for lumber have declined sharply for four weeks in a row, while trade publication Random Lengths [ https://randomlengths.com ] reported further record weekly highs for oriented strand board and lumber prices.

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