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Construction employment climbs in December; broader economy appears to slow

January 9, 2004
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Construction employment rose for the 10th straight month, by 14,000 to 6,873,000, breaking the record set in March 2001. Since February the industry has added 173,000 jobs (+2.6%), while the rest of the economy has shed 285,000 jobs (-0.2%).

This month employment rose slightly in all three of BLS's construction segments. Over the past year, employment has risen 17,000 (+1%) in construction of buildings, 4,000 (+0.4%) in heavy and civil engineering construction, and 5,000 (+0.1%) among specialty trade contractors. Seasonally adjusted average hourly earnings in construction rose over the year by 29 cents (1.5%) to $19.10, 23% above the average for all private production or nonsupervisory workers. Average weekly earnings in the industry (not seasonally adjusted) rose 1.8% to $723.09, as average weekly hours remained nearly constant at 37.7.

A survey of office space in the top 50 U.S. markets by Reis Inc. showed positive absorption for only the second time in the past 12 quarters, “an unprecedented slide for the office sector,” the Wall Street Journal reported. However, “the vacancy rate edged up to 16.9% from 16.8% in the third quarter, as 9.2 million square feet in new buildings came online, adding more space than tenants could fill. Rents also declined for the 11th consecutive quarter, by 0.8%.

New construction will slow to 21.4 million square feet, the firm predicts, down about 18% from last year and 80% from 2001.

In individual markets Southern California continued to shine, with the Los Angeles and Orange County markets leading the country in absorption of space in 2003, and San Bernardino registering the largest rent increase -- 3.9%. Tech-heavy markets continued to fare the worst.

The five markets with the steepest rent declines in 2003 were San Jose [-14.8%], Boston, Austin, San Francisco, and Oakland.” Reports in the Wall Street Journal from various sources showed continued weakness in demand for industrial warehouse and research space but less of a decline than in recent years.

New orders for consturction machinery surged 17% after rising 4.1% and 4.2% respectively; the 11-month gain was 8.2%. New orders for construction materials and supplies dropped 1.1% following pickups of 1.3% and 1.7%; the 11-month gain was 0.5%.

Nonmanufacturing business activity rose at a slower rate in December than in November, the Institute for Supply Management (ISM) reported. In December, 12 industry groups grew, four contracted, including construction, and one reported no change.

In contrast, construction was one of three industries in the ISM survey that reported falling employment. Construction was one of six industries listed with the highest rates of slowing in supplier deliveries, and one of seven reporting the highest rates of increase in prices paid for purchased materials and services. Price increases were reported for these materials typically used in construction: copper cable, drywall, PVC/PVC pipe, and steel; diesel fuel was reported lower in price for the third straight month.

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