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No April Fools' joke-construction springs ahead in activity, jobs, earnings, orders
April 1, 2005

By Ken Simonson
April 1, 2005
The value of construction put in place totaled $1.047 trillion at a seasonally adjusted annual rate in February, the Census Bureau reported today. The total was the 13th straight monthly record and marked a gain of 0.4% from the downwardly revised total for January and 10% from February 2004. For the first two months of 2005 compared to January-February 2004, the overall increase of 10% was well balanced among private residential, +13%, private nonresidential, +8%, and public, +6%. There were large increases for several private nonresidential subcategories: manufacturing, +32%, communication, +30%, lodging, +26%, and amusement & recreation, +14%. There were moderate increases in commercial, +8%, health care, +7%, and office, +6%, but power continued to slump, down -7%. The two largest public subcategories, educational and highway & street, rose 6% and 17%, respectively. These figures are not adjusted for inflation.

Last week, the Bureau of Labor Statistics (BLS) reported that the producer price index for construction materials and components rose 9.9% from February 2004 to February 2005. That index appears likely to go up again in March. Today the Institute for Supply Management reported that manufacturing purchasing executives listed price increases for a range of construction inputs from February to March: aluminum, copper, diesel fuel, freight charges, petroleum-based products, steel, and wood, although steel was listed by some as having dropped in price. Steel products were listed in short supply.

Construction contributed nearly one-quarter (26,000) of the 110,000 gain in seasonally adjusted nonfarm payroll employment in March, BLS reported today. Employment gains for January and February were trimmed slightly overall but boosted for construction. In the past 12 months, construction employment has risen 3.6% to a record 7,147,000, more than twice as fast as the 1.6% gain in all nonfarm employment. All five BLS subcategories of construction employment shared in the gains since March 2004: residential building, +7.1%, nonresidential building, +3.7%, heavy and civil engineering, +0.8%, residential specialty trades, +3.4%, and nonresidential specialty trades, +3.6%. The large employment gains do not seem to be triggering a surge in construction wages, however. Average hourly earnings of construction workers rose just 1.1%, seasonally adjusted, from March 2004 to March 2005. At $19.37 per hour, construction wages last month were 21% higher than the average for all nonsupervisory or production workers.

Construction employment increases have been widespread among states, according to Thursday's BLS report on February employment by state. Compared to January, seasonally adjusted construction employment rose in 30 states, fell in 13, and was unchanged (or within 100 jobs) in seven states plus the District of Columbia. Compared to February 2004, construction employment rose in 44 states, fell in five plus DC, and was within 100 of prior-year totals in Rhode Island. The largest year-over-year percentage gains were in Nevada (+18%), Arizona, Delaware, and Utah (+9% each), and Hawaii, Idaho, and Oregon (+8% each). Over the 12-month span, total nonfarm employment rose in 49 states and DC, and decreased only in Michigan.

Construction contributed disproportionately to earnings growth by state in the fourth quarter, according to Tuesday's release from the Bureau of Economic Analysis (BEA) on state per capita personal income. Earnings (wage and salary disbursements, supplements to wages and salaries, and proprietors' income) rose 1.5% overall and 1.7% in construction from the third quarter of 2004 to the fourth quarter. Total earnings grew in every state and DC, with growth ranging from 3.2% in South Dakota and 3.1% in Iowa to 0.9% in Connecticut and 0.6% in Rhode Island and Washington. Construction earnings fell 0.3% in Nebraska, were unchanged in Michigan, and rose everywhere else, led by Nevada (+4.9%), Alabama and Montana (+4.5% each). Earnings are not seasonally adjusted; construction earnings are likely to be weaker in states subject to seasonal construction slowdowns in the fourth quarter.

Construction also outstripped overall manufacturers' new orders in January and February, Census reported Thursday. Overall orders (excluding semiconductor manufacturing) rose 9% from the first two months of 2004. Orders for construction machinery rose 14% and construction materials and supplies rose 10%. The figures are adjusted for “trading day” differences (such as Leap Day 2004) but not for price changes.

BLS on Tuesday provided perspectives on the types of lost-worktime injuries and illnesses that workers in different industries and occupations incurred in 2003 (www.bls.gov/iif). Construction accounted for 155,000 nonfatal cases involving days away from work, 12% of the total for all private industries. The report distributes cases by nature and source of injury of ilness, contributing event or exposure, and part of body affected, among other characteristics.

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Chief Economist, Associated General Contractors of America 703-837-5313; fax -5406; www.agc.org

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