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Nov. 2, 2007 ― Nonresidential Construction Employment, Pay, Spending Rise Despite Housing Slump

November 2, 2007
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Employment rose 166,000 in October and 1.6 million over 12 months, the Bureau of Labor Statistics reported today. The unemployment rate held steady at 4.7%.

Seasonally adjusted nonfarm payroll employment rose 166,000 in October and 1,676,000 (1.2%) over 12 months, the Bureau of Labor Statistics (BLS) reported today. The unemployment rate held steady at 4.7%. Construction employment slipped by 5,000 for the month to 7,601,000, and by 106,000 (-1.4%) over 12 months. Nonresidential construction jobs expanded again in October, by 16,000, and by 42,000 (1%) over 12 months. Residential building and specialty trade employment fell by 22,000 and 148,000 (4.4%). In fact, as many as 400,000 employees of “residential” specialty trade contractors are likely working on nonresidential jobs, based on the 16% drop in residential spending and 17% gain in nonresidential spending in the past year (see Census report below). Architectural and engineering services employment-a harbinger of future construction work, rose 7,000 and 52,000 (3.7%). Seasonally adjusted average hourly earnings in construction fell 4 cents for the month to $21.05 but rose 4% over 12 months, compared to 3.8% for all “production” workers.

Total compensation-wages and salaries and benefits-for construction workers rose 0.8% in the third quarter, seasonally adjusted, matching the increase for both private industry and state and local government, BLS reported on Wednesday. Over the past 12 months, compensation rose 3.8% in construction, 3.1% in private industry overall, and 4.3% in state and local government. Although data is not broken out for nonresidential workers, presumably their pay rose more, as many residential construction workers probably received no raises. Compensation of private industry union workers, who are concentrated in depressed auto and related manufacturing and trucking, rose 2%, vs. 3.2% for non-union workers.

PAS, Inc. (, a construction compensation research and consulting firm, recently projected that open-shop construction contractors will increase craft wages by around 5.5% nationally and up to 7% in the Gulf Coast area. In 2006, actual increases averaged 4.9%, or 5% when zero-increases are excluded. PAS projected that construction executive, exempt professional and other staff salaries will rise 4.7-4.8% in 2007-08.  In 2006-07, non-craft construction staff received an average salary increase of 4.0% and construction executives received an average increase of 5.0%, according to PAS reports.

Construction spending increased 0.3% in September to a seasonally adjusted annual rate (SAAR) of $1.16 trillion, the Census Bureau reported on Wednesday. July and August estimates were revised downward. Nonresidential spending jumped 1.8% for the month and 17% compared to September 2006. All 16 Census categories were up for the month and all but religious structures were up from a year earlier. Private nonresidential spending rose 1.5% for the month and 17% from September 2006; public spending rose 1.9% and 16%; and private residential fell 1.4% and 16%. For the first nine months of 2007 combined, private nonresidential was up 17% from the same span of 2006, led by lodging, 62%; power, 24%; office, educational and communication, 20% each. Of the two leading public categories, educational was up 13%; highways and streets, 5%. New single-family residential was down 27% year-to-date; multifamily, -4.1%.

Two reports on Wednesday showed differing outlooks for lodging and office construction. Lodging Econometrics (, a hotel realty research and consulting firm, announced the “new construction pipeline in the United States set a record at 5,011 projects/654,503 rooms, making Q3 the fifth consecutive record-setting quarter.” President Patrick Ford said, “the much-discussed credit crisis has not-as yet-significantly affected those hotels already in the pipeline or impacted developers announcing new projects.” Projects and rooms under construction, those scheduled to start in the next 12 months, and new project announcements all set records. “The amount of sublease office space available to tenants increased nationally for the first time in five years, an indication that commercial leasing is slowing in many markets across the U.S.,” the Wall Street Journal reported, “The increase demonstrates that many businesses related to home-mortgage lending have returned space to the market….The increase in sublease space, combined with a national vacancy rate that remained flat or barely budged downward over the quarter (depending whose data are used), indicates the market could be softening, says Bob Bach, senior vice president of research for Grubb & Ellis….Sublease space increased over the third quarter in 29 of the 47 markets that Grubb & Ellis monitors.”

Real (net of inflation) investment in private nonresidential structures rose even faster than real gross domestic product (GDP) in the third quarter (12% vs. 3.9% SAAR), the Bureau of Economic Analysis reported on Wednesday. It was the eighth straight quarter in which private structures investment outpaced GDP growth, the longest span since the mid-1950s. Real investment in residential structures fell for the seventh quarter in a row, by 20%. The GDP price index rose 0.8% in the third quarter, 2.6% in the second; the price index for nonresidential structures, +0.2% and -1.1%; the index for residential structures fell 0.8% both times.

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