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April 29, 2008 ― Metro, State Job Gains Get Spottier As Budgets Tighten

April 29, 2008
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ABI slumps, but hotel boom goes on.

In March, 221 metropolitan areas had increases in nonfarm payroll employment compared to March 2007, 82 reported decreases and seven had no change, the Bureau of Labor Statistics (BLS) reported today. Unlike the state employment data BLS released on April 18, metro data does not show construction employment, but areas with rising total employment provide the best prospects for construction activity.

The largest over-the-year employment increases were posted in Houston-Sugar Land-Baytown, 80,100; New York-Northern New Jersey-Long Island, 65,500; Dallas-Fort Worth-Arlington, 58,200; and Seattle-Tacoma-Bellevue, 35,700. The largest over-the-year percentage increases in employment were reported in Pascagoula, Mississippi, 13.9%; Coeur d’Alene, Idaho, 5.7%; Kennewick-Pasco-Richland, Washington, and Odessa, Texas, 5.2% each. Falling employment or rising unemployment rates can indicate an area has surplus construction workers. The largest over-the-year decreases in employment occurred in Detroit-Warren-Livonia, -45,300; Los Angeles-Long Beach-Santa Ana, -35,300; Riverside-San Bernardino-Ontario, California, -21,700; and Miami-Fort Lauderdale-Pompano Beach, -20,800.

The largest unemployment rate increases from a year earlier were in Cape Coral-Fort Myers, Florida, 3.0 percentage points; and Punta Gorda, Fla., 2.9 points. The state report showed that construction employment increased in only 16 states from March 2007 to March 2008, decreased in 33, and remained within 100 jobs of prior levels in the District of Columbia and New Hampshire.

The largest year-over-year percentage gains in construction employment were in Wyoming, 5%; and Hawaii, Montana, North Dakota and Oklahoma, 4% each. The largest percentage declines were in Florida, -13%; Arizona, -10%; California and Nevada, -9% each; and Rhode Island, -8%. State data, unlike the national report, do not distinguish between residential and nonresidential employment.

“At least 28 states, including several of the nation’s largest, faced or are facing shortfalls in their fiscal year 2009 budgets,” which begins July 2008 in most states, the Center on Budget and Policy Priorities (www.cbpp.org) reported today. Most states have a constitutional requirement to balance their budgets, making it likely they will cut construction, among other expenditures. The combined deficits “are expected to total at least $40 billion….Some mineral-rich states-such as New Mexico, Alaska and Montana -are seeing revenue growth as a result of high oil prices. Other states’ economies have so far been less affected by the national economic problems. This does not mean, however, that local governments in those states will escape fiscal stress.”

The Wall Street Journal reported on Friday, “local governments across the U.S. are raising property-tax rates….Oak Ridge, Tennessee, near Knoxville, is preparing to raise its rate 5%, in part to cover the rising cost of items, such as gasoline for police cars and asphalt to surface streets….Local-government costs have been growing more quickly than in other parts of the economy because municipalities spend disproportionately more on fast-rising items such as building materials, fuel and health insurance.”

“Business conditions at architecture firms continued to weaken in March,” the American Institute of Architects reported on Friday, “with the Architecture Billings Index [ABI] recording 39.7, its lowest score since it was instituted in 1995. (Any score above 50 indicates growth.) While this score is not unexpected, given the weakness in the broader economy, it is nevertheless a sign that firm billings are continuing to soften at firms across the country.

Inquiries for new work also slowed in March, falling below 50 for only the second time in the history of the index. Clients seem to be delaying projects until they see some sign of a turnaround….Considering business conditions by practice sector, only firms with an institutional specialization reported a score above 50 in March.

The residential sector continues to slump (it is down by nearly 20 points from March 2007) while the commercial/industrial sector is also reporting a serious slowdown.”

An “unsurpassed 51,864 [hotel] rooms started construction in the first quarter, the highest total of all quarters recorded this decade,” hotel-development tracking firm Lodging Econometrics (www.lodgingeconometrics.com) reported on Thursday. The firm listed an 11% increase in projects and 8.0% increase in rooms under construction from the fourth quarter of 2007 to the first quarter of 2008, 4.7% more rooms scheduled to start construction in the next 12 months and a 16% jump in rooms at an “early planning” stage.

The Bureau of Economic Analysis today released advance estimates of 2007 gross domestic product (value added) by industry. “Construction’s value added declined 12% in 2007 after falling 6.0% in 2006….growth in the value-added price index for construction slowed sharply, increasing 1.6% in 2007 after an increase of 10.3%” in 2006.

Construction costs have accelerated sharply since last year. Yesterday, May futures contracts for natural gas-the raw material for polyvinyl chloride pipe, insulation and other construction plastics-closed on the New York Mercantile Exchange (Nymex) at a record $11.28 per million British thermal units, 43% higher than a year ago.

April copper closed at $3.98, up 12% from a year ago and just shy of the record set in May 2006. June crude oil closed at a record $118.75, up 81% from a year ago.

The Energy Information Administration reported that the national average retail price of diesel fuel yesterday hit a record $4.18, up 3.4 cents from last week and up $1.37 (49%) from a year ago. The Nymex “is considering launching its own U.S. steel-futures contract by year’s end…based on a finished slab product called hot-rolled coil,” the Journal reported. The London Metals Exchange also is planning a steel-futures contract by  then.

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