Construction employment fell 14,000 in September and was down 112,000 or 1.5% compared to September 2006. But that masks divergent trends in nonresidential and residential construction. Over the past 12 months, employment in the three nonresidential categories-nonresidential building, specialty trades, plus heavy and civil engineering-climbed 42,000 or 1%. Residential building and specialty trades employment shed 154,000 jobs or 4.5%. That gap, while large, may greatly understate the actual difference.

Census Bureau figures for August show residential construction spending was down 16% from a year before and nonresidential was up almost 15%. With all signs pointing to still less homebuilding ahead, it’s likely that residential employment is also down roughly 16%. That implies that about 400,000 ‘residential’ specialty trade contractors are now doing nonresidential electrical, plumbing and other work, and that the year-over-year growth in nonresidential employment is 10-11%.

Architectural and engineering employment, a harbinger of future construction work, rose 3% over the past 12 months. Average hourly earnings in construction rose to $21.08, a 4.5% increase and 20% higher than the average for all private nonsupervisory or production workers. That average went up 4.1% from September 2006.

BLS issued a short report on “Issues in Labor Statistics: Current Trends in Construction Employment” (www.bls.gov/opub/ils/pdf/opbils62.pdf). The report notes that “Job losses in construction appear subdued in comparison to the sharp declines in some of the housing indicators….It is possible that some firms classified as primarily engaging in residential construction have taken on more nonresidential construction projects…In addition, construction-related job losses are possibly occurring among groups that are not included in the…construction payroll series, such as the self-employed, workers in the temporary help industry and undocumented employees.”

Responses from contractors in the past two weeks to the “Question of the Week” attached to recent Data DIGests have been mixed as to whether recent credit-market turmoil is affecting demand for construction. From early August to mid-September, contractors reported almost no impact, although developers and investors have.

The Washington Post reported, “Sales of office buildings in the District tumbled in the third quarter to the lowest level in five years, as credit-market turmoil has started to affect the commercial property sector, according to a new report by…Cushman & Wakefield….The last time sales were this slow was in 2002, during the trough of the latest commercial real estate downturn, according to the report. Several commercial real estate brokers attributed the slowdown to suddenly higher debt costs and increased uncertainty about the future direction of interest rates…. Nationally, sales of office properties surpassed $13.1 billion in August, almost double the same month last year, according to New York-based Real Capital Analytics.

But most of those deals were in the pipeline before the credit crunch, and September is expected to rank as one of the slowest months nationally in years, Real Capital said.” The Wall Street Journal reported, “Nationwide, the office market has benefited from relatively restrained new construction. Completions of new office buildings brought 12.2 milion square feet of space onto the market in the third quarter, about average for the last year but well below the peak in 2001, when 47.1 million square feet opened in the fourth quarter. Yet, there are signs that the pace will quicken in the next several quarters as delayed projects are finished,” according to Sam Chandan, chief economist for Reis Inc., a New York-based real-estate research firm.

The monthly surveys of purchasing managers in manufacturing and nonmanufacturing sectors that the Institute for Supply Management released on October 1 and 3 were notable in that they listed far fewer items up in price than usual. Of items important to construction, the only ones up in price were fuel and stainless steel products (both on the nonmanufacturing survey). The only item in short supply was “construction contractors.” No relevant items were listed as down in price.

New orders from U.S. manufacturers (excluding semiconductor manufacturing) dropped 3.3% in August, seasonally adjusted, completely reversing the July increase, the Census Bureau reported on Thursday. Orders for the first eight months of 2007 combined were 0.2% higher than year-to-date (YTD) in 2006. Orders for construction materials and supplies slipped 1.2% in August and 2.1% YTD. Orders for construction machinery, a very volatile series, crashed 32% in August after soaring 57% in July, and were down 23% YTD.