State job trend depends on starting point; factory output, housing bounce back in July
Construction employment by state continued to show widespread year-over-year gains but had less momentum from June to July. Compared to June 2004, seasonally adjusted construction employment rose in 24 states, fell in 15 plus DC, and was unchanged in 10 states. But compared to July 2003, construction employment rose in 44 states plus DC, fell in just three, and was within 100 of prior-year totals in two. The largest year-over-year percentage gains were in Nevada (+11%), Idaho (+10%), Arizona (+9%), and Kentucky (+7%). Construction employment dipped year-over-year only in Colorado (-3%), Louisiana (-1%), and California (-0.1%). (BLS does not report monthly construction employment for Hawaii and combines construction with the small mining sector in Delaware, DC, and Maryland.)
Industrial production at factories, mines, and utilities move up 0.4% in July, the Federal Reserve reported Tuesday, following a revised drop of 0.5% (initially estimated at 0.3% in June. Manufacturing output jumped 0.6%, following a drop of 0.2%. The Fed noted, “Increases in the output of farm equipment, medical equipment and supplies, and construction machinery contributed to a rise in the index for industrial and other equipment.” Output of construction supplies edged up 0.1% in July after dropping 0.3% in June. Capacity utilization in manufacturing reached a new post-recession high of 76.3% of capacity after dropping from 76.2% in May to 75.9% in June. The 1972-2003 average is 80% of capacity. Together, continuing growth in output and capacity utilization can lead to demand for factory construction.
Building permits were issued at a seasonally adjusted annual rate of 2.05 million in July, the government reported Tuesday, up 6% from June and second only to May's 2.1 million. For the first seven months of 2004, total permits are 11% higher than in January-July 2003, with similar increases for single- and multi-family permits. Housing starts rose 8% to match the May level; for the year to date, starts are up 10% from the same period of 2003. The average interest rate for new 30-year fixed-rate mortgages fell this week to 5.81%, Freddie Mac reported yesterday, well below the year-ago rate of 6.24%, which should encourage continued home buying and construction.
The consumer price index for all urban consumers (CPI-U) declined 0.1% in July, seasonally adjusted, BLS reported, bringing the 12-month change to 3%. The CPI for urban wage earners and clerical workers (CPI-W), which is used to adjust many construction and other labor contracts, also rose 3% from July 2003 to July 2004. The CPI-U decelerated from a 3.3% change in the June 2003-June 2004 period as energy costs fell 1.9% in July. Since then, the closing price of crude-oil futures has set a new record nine times in August. Thursday's close was $48.70 per barrel, up 50% from a year ago. As a result, retail gasoline prices may head up soon, after dropping 9% since May in the Energy Information Administration (EIA)'s weekly survey, to a nationwide average of $1.92 on Monday. The national average price of on-highway diesel fuel rose for the seventh straight week to a record $1.825, 33 cents higher than a year ago, EIA reported.
Real (net of inflation) average weekly earnings for nonsupervisory or production workers increased 0.7% from June to July and 2.3% over the past 12 months, seasonally adjusted, BLS reported. Real average weekly earnings in construction fell 1.2% in the July 2003-July 2004 interval. Average hourly earnings in construction rose 1.3% to $19.24 (23% higher than the average for all private industry) and average weekly hours rose slightly, but neither measure increased enough to offset inflation.
“The net percentage of domestic banks that experienced an increase in demand for commercial real estate loans moved up from 20% in April to 25%” in a July survey of senior loan officers at 56 domestic and 19 foreign banking institutions, the Fed reported. “In contrast, demand for such loans at foreign institutions was reportedly unchanged, on net, over the past three months.” In addition, “On net, 9% of domestic banks [but none of the foreign institutions, on net] reported that they had eased lending standards on commercial real estate loans over the past three months, a slightly lower net fraction than in the April survey.”
State tax revenue grew by 11.4% in the April-June 2004 quarter compared to the year before, according to preliminary data collected by the Rockefeller Institute of Government (www.rockinst.org) and released last week. This was the third straight quarter of real, adjusted state tax revenue growth, which should make it easier for legislatures meeting next spring to increase construction and other spending.