State construction employment, housing starts, private reports show mixed outlook
Construction employment increased from February to March in 35 states, fell in eight plus DC, and was unchanged (or within 100 of prior levels) in seven. Compared to a year ago, construction employment climbed in 35 states, fell in 14, and was unchanged in DC and Vermont. The largest year-over-year percentage gains in construction employment were in Utah, 15%; Wyoming, 11%; Missisippi, North Dakota and Tennessee, 7% each. The largest percentage declines were in Michigan, -5%, followed by New Hampshire, -4%, and six states that shrank 2%, including formerly fast-growing Nevada. The steep drop in homebuilding probably explains the declines in Nevada, Florida (-0.5%) and several other states. On April 6, BLS reported that residential building and specialty trades employment fell 3.6% nationally year-over-year, while nonresidential jobs rose 3.4%.
Seasonally adjusted housing starts edged up 0.8% in March from a downwardly revised February estimate, the Census Bureau reported. Year-over-year, starts were down 23%. Single-unit starts were up 2% from February but down 25% year-over-year. Multi-unit starts were down 3.9% and 16%. Building permits, normally a reliable indicator of near-term starts, also rose 0.8% for the month but fell 26% compared to March 2006, with single-unit permits up 0.7% and down 28% while multi-unit permits were down 0.7% and 19%. The 1,218,000 single-family starts was far below the 1,329,000 completions, implying further job cuts ahead in homebuilding. Multi-unit starts (300,000) nearly matched completions (303,000).
Several construction-related indicators during this week remained positive. The American Institute of Architects’ index of billings at 300 architectural firms in March stayed modestly above breakeven overall and for all four subsectors-residential, commercial/industrial, institutional and mixed.
Reed Construction Data (RCD) announced that the year-to-date value of nonresidential construction starts through March, summarized from RCD’s database of all active projects, was 22% higher than during the same period of 2006.
“The growth of nonresidential starts has begun to slow, although starts are expected to trend higher through 2007,” said Jim Haughey, RCD’s Director of Research & Analytics. “The year-over-year increase in starts was 26% in January, 33% in February, but then fell to 16% in March….Hotels, offices, retail, education and nursing homes are the fastest-growing construction sectors so far this year.” Unlike Census, which measures construction spending month by month, RCD counts the full value of a project in the month it is added to the database. The January-February total was about 55% of Census’ total.
Lodging Econometrics, a hotel tracking and consulting firm, reported that “the acceleration of new project announcements over the last nine quarters…has quickened the pace for construction starts. For the last four quarters construction starts were reported at 138,590 rooms, up…22% from a year ago.” President Patrick Ford said, “New project announcements continue to accelerate as developers report a slowing in the rate of construction cost increases brought about by decreases in new home construction and less price pressure for building materials. The total construction pipeline escalated forward to 4,281 projects having 568,318 guest rooms at the end of the first quarter. The pipeline is now about 15% higher than the peak reached in 1999.” But, he warned, “The top 25 markets have one third of all open and operating guest rooms and account for approximately 43% of the industry’s revenue. In the compilation of industry-wide operating statistics these markets are truly the industry’s bellwether….12 of the 25 markets showed…declines in demand in 2006, as reported by Smith Travel. In 2007, 14 markets started the first two months with negative demand.”
The Rockefeller Institute of Government yesterday released “A Year and a Half after Katrina and Rita, an Uneven Recovery,” its second report on the subject. “By far, the one issue that dominates the recovery effort is housing - that is, the lack of it. In all of the hard-hit areas…what is under construction or in the planning stages now is not nearly enough to meet the demand….Demand for labor continues to outstrip supply….Still, there is progress…The construction industry is booming as the damaged communities rebuild and areas that took in large numbers of evacuees adjust to their increased population.” A special Census tabulation showed building permits in March in Katrina-devastated areas were nearly triple the 2004 monthly average in three Mississippi counties but 23% below the 2004 rate in five Louisiana parishes. Construction employment in the New Orleans-Metairie-Kenner metro area rose 50% from September 2005 to June 2006 but has been flat since, BLS data released show.