Plumbing and Mechanical

July 6 - Nonresidential, A&E jobs outpace overall gains; ISM says contractors in short supply

July 16, 2007
Nonfarm payroll employment increased 132,000 in June, seasonally adjusted, in line with the gain of  2,008,000 (1.5%) from June 2006 to June 2007, the Bureau of Labor Statistics (BLS) reported. The unemployment rate remained steady at 4.5%.

Nonfarm payroll employment increased 132,000 in June, seasonally adjusted, in line with the gain of  2,008,000 (1.5%) from June 2006 to June 2007, the Bureau of Labor Statistics (BLS) reported. The unemployment rate remained steady at 4.5%.  Construction employment rose 12,000 for the month to 7,681,000 but was down 10,000 (-0.1%) from June 2006. Among BLS’s five construction categories, residential building and specialty trades employment was unchanged for the month and down 118,000 (-3.5%) over 12 months. Nonresidential building, specialty trades and heavy and civil engineering employment climbed 12,400 for the month and 108,000 (2.6%) over 12 months. The actual swing from residential to nonresidential employment was probably even greater, because many specialty trade contractors that were listed as residential may have been doing nonresidential work recently without changing their industry code for reporting purposes. Average hourly earnings for construction workers reached $20.95 in June, seasonally adjusted, an increase of 92 cents (4.6%) from a year earlier, and 21% higher than the average for all private-sector production and nonsupervisory workers, whose wages rose 3.9% over the 12-month span to an average of $17.38 per hour. Architectural and engineering (A&E) services employment, a harbinger of future construction demand, increased 2,700 for the month and 51,000 (3.7%) over 12 months.

Construction services/contractors were the only commodity reported in short supply in June by nonmanufacturing purchasing executives replying to the monthly survey of the Institute for Supply Management (ISM) that was released recently. Among inputs that are significant to construction, building materials, copper wire, diesel fuel and fuel surcharges, and roofing were listed as up in price; diesel was also listed as down in price in June. Construction was listed first among 14 industries reporting growth in June but was also among five industries reporting contraction of new orders and among six reporting lower backlog of orders. On Monday, ISM reported that its survey of manufacturing purchasing executives reported the following construction inputs up in price in June: aluminum (also reported down in price), copper-based products, steel and stainless steel. Commodities prices posted mixed messages. Crude oil hit a 10-month high in early July, and copper closed up for the fifth straight day. But scrap steel prices, which rose sharply early this year, have been flat for three months. Nickel, used to make stainless, retreated from record levels a month ago.

New orders from U.S. manufacturers (excluding semiconductor manufacturing) slid 0.5% in May, seasonally adjusted, offsetting an 0.5% gain in April, the Census Bureau reported. For the first five months of 2007 combined, factory orders were off 0.6% from the same period of 2006. Orders for construction materials and supplies climbed 1.9% in May but were down 3.7% year-to-date. Orders for construction machinery  slumped 17% in May and 31% year-to-date.

“Office rents are skyrocketing across the nation,” the Wall Street Journal reported, citing figures from real-estate research firm Reis Inc. that showed “effective rents-the amount tenants pay after concessions-jumped an average of 3.1% during [the] first quarter, up from gains of 2.8% in the first quarter and 2.1% in the year-earlier period….That was the sharpest quarterly increase since the third quarter of 2000…Net absorption-a measure of the space taken up by commercial tenants-increased markedly during the latest quarter…, says Sam Chandan, chief economist for Reis. Nationwide, the office-vacancy rate, at 12.7%, is the lowest since the third quarter of 2001….In the strongest markets, which include Seattle and west Los Angeles as well as New York and Washington, fewer new office buildings are being built these days than during previous peaks in the commercial real-estate market. That is because of both high construction costs and a condominium boom that has gobbled up building sites….But rents are jumping even in markets such as Boston, San Francisco and downtown Los Angeles, where office-space supplies aren’t quite as tight….Relatively cheap space is still up for grabs in most markets in the Midwest and South. [Rents] in Chicago…are actually slightly below what they were in 2000 because so many new office buildings are going up in the city, says Michael Flynn, executive vice president of NAI Hiffman, a real-estate services firm.”

The number of businesses without employees-mainly one-person proprietorships but also some partnerships and corporations-increased 4.4% in 2005 to more than 20 million for the first time, Census reported on June 25. The number of nonemployer construction businesses rose 5.8% to 2,530,000. Construction is heavily represented among nonemployers: 12% of the businesses and 16% of the revenues of such firms. In contrast, construction employees account for just 5.5% of the nonfarm payroll workforce. Specialty trade contractors made up 73% of the construction nonemployers and 60% of the receipts, followed by residential building (21% and 33%), nonresidential building (3%, 4%) and heavy and civil engineering (2%, 4%).