Plumbing and Mechanical

Construction hiring powers employment jump; A/E activity suggests more to come

April 13, 2007

Nonfarm payroll employment, led by a 56,000-job jump in construction, rose 180,000 in March, seasonally adjusted, the Bureau of Labor Statistics reported. The construction gain nearly reversed a weather-aggravated drop of 61,000 in February. Since March 2006, total employment climbed 1.4%, compared to 0.3% for construction employment. But nonresidential employment (nonresidential building, specialty trades, and heavy and civil engineering), added 146,000 jobs or 3.4%, more than double the overall nonfarm rate, while residential building and specialty trades shed a combined 129,000 jobs or 3.6%. Average hourly earnings in construction increased to $21.07, seasonally adjusted, a gain of 5.2% over 12 months, compared to a 4% increase for all private production or nonsupervisory workers.

Architectural and engineering (A/E) activity, a precursor for nonresidential construction, remains positive. A/E employment rose 57,000 (4.2%) over 12 months, BLS reported. The American Institute of Architects (AIA) reported on March 23 that its index of billings at 300 architectural firms slipped in February but remained above neutral.

“Growth in the commercial/industrial and institutional sectors fell slightly this month, but remains elevated overall,” AIA Chief Economist Kermit Baker commented. As for residential billings, “The score indicates that the sector is no longer in freefall, but instead has moderated to a more stable level.”

Total revenue of A/E and related services firms rose 1.6% in the fourth quarter, up from a 0.9% gain in the third quarter, the Census Bureau reported in a March 14 release on quarterly revenue for selected services (www.census.gov/qss).

Census and BLS issued updates on population and job change by metro area, two important indicators of construction opportunities. The population of the St. George, Utah, metro area grew 6% from July 2005 to July 2006 and 40% since April 2000, putting it first among the nation’s 361 metro areas for both intervals, according to Census tables. Bend, Oregon, was second for the 2005-2006 period (5.6%), followed by Cape Coral-Fort Myers, Florida (5%), Myrtle Beach-Conway-North Myrtle Beach, South Carolina, and Baton Rouge (4.8% each). Of the 68 areas that lost population, the three hardest hit were in the path of Hurricane Katrina: Pascagoula (-2.8%), Gulfport-Biloxi (-10.5%) and New Orleans-Metairie-Kenner (-22%). But post-hurricane construction made these areas leaders in employment growth from February 2006 to February 2007, BLS reported: Gulfport-Biloxi, 14%; New Orleans, 8.7%; Houma-Bayou Cane-Thibodaux, Louisiana, 8.1%.

Next in job growth were two of the population leaders: Myrtle Beach, 7.6%, and St. George, 7.2%. Out of 43 metro areas with falling employment, the biggest percentage drops were in Lima, Ohio (-1.9%); Weirton-Steubenville, West Virginia-Ohio (-2.1%); Elkhart-Goshen, Indiana, and Flint, Michigan (-2.3% each); and Anderson, Indiana (-3.9%).

New orders for U.S. manufactured goods (other than semiconductor manufacturing) rebounded 1% in February, seasonally adjusted, after tumbling 5.7% in January, Census reported. Orders for construction materials and supplies fell 1% in February and 0.4% in January. Orders for construction machinery plunged 9.2% and 37%.

Respondents to the Institute for Supply Management (ISM)’s March survey of purchasing executives in nonmanufacturing organizations listed building materials, construction services/contractors, construction materials and glass bottles/containers as items in short supply, the Institute reported. Items relevant to construction that were reported up in price included diesel fuel, freight/shipping and stainless bar. ISM’s survey of purchasing executives in manufacturing listed aluminum, copper, diesel, stainless and steel as being up in price. Neither survey listed any items as down in price; both had much higher percentages of respondents reporting price increases than in February, with fewer reporting declines or no change.

Other reports suggest that freight rates and fuel surcharges may be changing, however. “A loosening of the tight capacity for freight hauling now makes the fuel-surcharge programs-upon which motor carriers depend to insulate them from fuel price spikes-vulnerable to demands for change by shippers,” the online version of trucking newspaper Transport Topics reported. “Thomas Sanderson, chief executive officer of Transplace Inc., a third-party logistics provider, said that the ‘trucking capacity-and-demand balance has changed. Trucks are in plentiful capacity.’”

The paper reported, “Rail and intermodal traffic continued a downward trend of the past few weeks, with intermodal falling 2.5% last week and rail carload traffic declining 8.7% compared with a year ago, the Association of American Railroads said.” In addition, the paper said that the American Trucking Associations’ truck tonnage index declined 1.7% in February, the eighth straight monthly decline, following a 3.1% drop in January. Both rail and trucks haul construction inputs.