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Employment inches higher overall and for construction; orders climb but so do prices

August 9, 2004
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Nonfarm payroll employment inched up 32,000 (0.02%), seasonally adjusted, in July, the Bureau of Labor Statistics (BLS) reported.

Nonfarm payroll employment inched up 32,000 (0.02%), seasonally adjusted, in July, the Bureau of Labor Statistics reported. The June increase was revised down to 78,000 from an initial estimate of 112,000, and the gain for May was trimmed to 208,000 from 235,000.

Construction employment edged up by 4,000 to a record 6,916,000. In the year since July 2003, overall construction employment increased 195,000 (2.9%), nearly half of the total nonfarm gain of 454,000. Among BLS's three construction categories, employment in construction of buildings rose 4% in the past year but remains 2% below the high of 2000; heavy and civil engineering construction employment rose 1% in the last 12 months but is 4% below the 2000-01 peak; and employment among specialty trade contractors rose 3% to a record.

Average hourly earnings in construction rose just 1.3% in the past 12 months to $19.24 in July (not seasonally adjusted), 23% above the average for all nonfarm private production workers. Average weekly earnings in construction rose 1.8% to $754 as average weekly hours inched up.

Other early indicators for July were a little sunnier than the employment report. Same-store sales (sales at stores open at least 13 months) rose 3.3% compared to July 2003, a slight pickup from the 3% gain in June, according to a compilation of 73 chains by Michael Niemira of the International Council of Shopping Centers (ICSC).

Auto and light truck sales rebounded to a near-record level in July from a weak June. The Wall Street Journal reported that Chrysler announced plans for a $1.2 billion factory expansion in Toledo, and the mayor announced a new supplier industrial park nearby. Both monthly surveys of purchasing executives by the Institute for Supply Management (ISM) were positive for July. On Wednesday, ISM said executives in nonmanufacturing industries reported a higher rate of business activity than in June. Construction was listed among the industries reporting the highest rates of: growth in employment (first) and backlog of orders (fourth) and highest rates of increase in price paid (second). Among 39 items reported higher in price were such construction inputs as aluminum, building materials, copper (also reported down in price), diesel fuel, lumber, roof shingles and roofing materials, and steel and steel products. PVC material, fittings, and pipe were reported down in price. Cement/concrete, steel, and steel products were reported in short supply.

Norbert Ore of ISM said, “The manufacturing sector continues to grow at a rapid rate as the [purchasing index] has now been above 60 for nine consecutive months. This is the longest period of growth above 60” since 1972-73. The lists of items used in construction that were up in price and in short supply were similar to those named by nonmanufacturing executives.

Orders for construction machinery rose 0.6% in June after dropping 4.7% in May and 3.4% in April. Year-to-date orders are up 48%, more than for any other manufacturing category. Orders for construction materials and supplies slipped 1% in June and 4.5% in May but have risen 15% so far this year compared to the first half of 2003. A portion of the rise reflects price increases.

The value of construction put in place slipped 0.3% to a seasonally adjusted annual rate of $985 billion in June from the record set in May. The totals for June and the first six months of 2004 were nearly 9% higher than in the same periods of 2003, but much of this increase reflects higher materials costs. Compared to the first half of 2003, private residential construction rose 14%, private nonresidential rose 2%, and public construction rose 4.6%.

Construction of outdoor “lifestyle” shopping centers, including conversion of enclosed malls into outdoor centers, is contributing to nonresidential construction, according to articles in The Journal and USA Today. The latter reported, “The centers have grown form just a few dozen based in mostly warm climates just two years [ago] to about 100 centers today in cities more likely to have indoor shopping venues….The number of lifestyle centers is set to double over the next few years, according to the [ICSC]. Just three new enclosed malls are on the drawing board this year. And projections are for eight new enclosed malls next year.”

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