Katrina alters outlook after favorable construction employment, spending reports
Aug. 29 - Sept. 6
On Friday, the Bureau of Labor Statistics (BLS) reported that nonfarm payroll employment rose by 169,000, seasonally adjusted, in August, slightly less than the monthly average over the past year of 187,000. These data, like other statistics so far, are based on pre-storm activity. The unemployment rate slipped to a four-year low of 4.9%. Construction employment increased 25,000 to a record 7,262,000. That was a gain since August 2004 of 277,000 jobs (4%), more than double the 1.7% growth rate for the overall economy. All five of BLS's construction segments grew for the month and the 12-month interval: residential building, 5.3% over 12 months; nonresidential building, 2.6%; heavy and civil engineering, 4.8%; residential specialty trade contractors, 3.7%; and nonresidential specialty trade contractors, 3.8%. Average hourly earnings in construction slipped 2 cents, seasonally adjusted, from July to $19.50 in August. The latter figure was up 25 cents (1.3%) from a year before and was 21% higher than the average for all private production or nonsupervisory workers.
The value of construction put in place remained level from June to July at a seasonally adjusted annual rate of $1.10 trillion, up 6% from July 2004, the Census Bureau reported on Thursday. Census revised earlier months to reflect its return to a methodology that produced less volatile estimates of residential improvements. The revised data show essentially flat levels of construction rather than the 3% decline since February that last month's report indicated. For the first seven months of 2005, total construction exceeded the same period of last year by 9%, with private residential construction gaining 12%, private residential 5%, and public construction 6%. Growth was concentrated in manufacturing, up 27% year-to-date; multi-retail (general merchandise such as “big-box” and discount stores, shopping centers, and shopping malls), 23%; new multi-family, 20%; single-family and communication, 12% each; and residential improvements, 11%. The major public categories, educational and highways and streets, rose 7% and 8%, respectively.
The Institute for Supply Management (ISM) reported today that purchasing managers at 13 of 17 nonmanufacturing industries, including construction, reported growth in August. They reported price increases since July in these items important to construction: asphalt construction/products, copper/copper products, diesel fuel, freight charges/shipping and fuel-related surcharges, oil-based and petrochemical products, pipe/pipe fittings, as well as construction/construction services and contractors. Lumber and steel were listed as down in price; concrete and steel were reported in short supply. Last Thursday, ISM reported that manufacturing purchasing executives reported aluminum and ferrous scrap as up in price, with steel reported both up and down in price but not in short supply.
Two reports released on Thursday indicate that single-family home sales are still robust. The National Assn. of Realtors reported that its pending home sales index for July slipped 1% from June but was 3.5% higher than a year ago and the fifth-highest level ever. The Office of Federal Housing Enterprise Oversight (OFHEO) reported that the price of houses that resold or were refinanced with loans from Freddie Mac or Fannie Mae in the second quarter of 2005 increased 13.4% from the second quarter of 2004, the highest annual increase since 1979. The increase was 11% excluding refinancings (which have an upward bias in that owners with the largest appreciation are more likely to refinance than owners who will get little cash out of a new loan). “There is no evidence here of prices topping out,” said OFHEO Chief Economist Patrick Lawler. “On the contrary, house price inflation continues to accelerate, as some areas that have experienced relatively slow appreciation are picking up steam.” Appreciation by state ranged from 28% in Nevada and Arizona, 26% in Hawaii, 25% in California, and 24% in Florida and the District of Columbia to 5% in Oklahoma, Michigan, Ohio, Indiana, and Texas. Among 265 ranked metro areas, the leaders were Naples-Marco Island, Florida, 36%, Bakersfield and Merced, Calif., 34% and 33%, respectively, and Reno-Sparks, Nevada, 33%. Kokomo and Lafayette, Indiana, with 1% appreication, and Mansfield, Ohio, 0.4%, trailed.