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Construction Hiring Plans Are Stronger Than Most; Inflation, Housing Numbers Are Mixed

Manpower Inc.'s quarterly survey of employers' hiring expectations for the second quarter, released today, finds that 8 out of 10 sectors have reduced their expectations from the first quarter, but 7 of 10 increased plans from a year ago. "Mining and Construction are the only categories [out of 10 sectors] that foresee increases over both last year and last quarter."

Reports last week from the Bureau of Labor Statistics showed a complex pattern of price changes. The consumer price index (CPI), increased by a seasonally adjusted 0.3 percent in January and by 2.6 percent for the past 12 months, the highest annual rate in more than a year. However, the "core" rate, which excludes food and energy prices, was up by only 0.1 percent. Average weekly earnings after accounting for seasonal adjustment and inflation were unchanged from December to January. The producer price index (PPI) for finished goods shot up 1.6 percent, seasonally adjusted, in January, BLS reported. The core PPI was up by 0.9 percent, although the major reason for that exceptionally high number was a cutback in manufacturers' incentives on new vehicles. The message from both of these reports appears to be: there is no overall deflation (falling price level), as some had speculated last fall; the underlying inflation rate is still very mild and probably not increasing; but sharp increases in petroleum prices are likely to eat into consumers' ability to spend on other items.

BLS Reported:

The [PPI] for materials and components for construction advanced 0.3 percent in January, after showing no change in December. Prices for plastic construction products jumped 2.6 percent, following a 0.3 percent increase in the prior month. The index for heating equipment also rose more quickly in January than in December. Prices for fabricated structural metal products and for air conditioning and refrigeration equipment moved up, after showing no change in December.

The January indexes for wiring devices, mineral wool for structural insulation, and paving mixtures and blocks turned up, after falling a month earlier. On the other hand, the softwood lumber index declined 1.9 percent in January, compared with a 0.5 percent decrease in December. Prices for gypsum products and nonferrous wire and cable also fell more quickly in January than they did in the preceding month.

The indexes for treated wood, plumbing fixtures and brass fittings, and architectural coatings moved down, after rising in the previous month."

Average hourly earnings of construction workers, not seasonally adjusted, rose 2.2 percent before inflation over the year ended in January but fell by 0.5 percent after inflation. Average weekly earnings rose 1.4 percent before inflation and fell 1.2 percent after inflation, as weekly hours fell over the year. Construction lagged the private sector as a whole.

Building permits, seasonally adjusted, slipped 5.6 percent from December to January due to a 30 percent drop in permits for buildings with 5+ units. Single-family permits edged up 0.3 percent, thanks to a 10 percent jump in the West; permits fell in the Northeast, Midwest and South.

Housing starts inched up 0.2 percent to 1.85 million, the highest rate in 16 years, with the highest single-family start rate in 24 years. The National Assn. of Home Builders reported that its Housing Market Index "was down two points to a still-healthy 62 reading in February, where any number over 50 indicates that more builders view sales conditions as good than poor."

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