Nonfarm payroll employment in August fell by 4,000 jobs, seasonally adjusted, the first drop in four years, the Bureau of Labor Statistics (BLS) reported on Friday. Employment gains reported earlier for June and July were revised down. Nevertheless, the 12-month gain in employment, 180,000 or 1.3%, was close to earlier periods.

Deputy BLS Commissioner Philip Rones commented, “Construction employment continued to trend down over the month (-22,000), with most of the decline among residential specialty trade contractors. Construction employment peaked last September; since then, 96,000 jobs have been lost.” Yet the report was full of good signs for nonresidential construction. The nonresidential building, specialty trades and heavy and civil engineering construction combined added jobs, both for the month and for the 12-month period (+65,000, or 1.5%). Moreover, that gain may understate the actual growth in nonresidential employment. Although residential building and specialty trade employment fell by a reported 155,000 or 4.5% over 12 months, it is likely the actual drop was closer to the roughly 16% decrease that has occurred in residential spending over that span. Such a change would imply that up to 400,000 “residential” specialty trade contractors are actually doing nonresidential work now, even though their companies still list their industry as residential. Architectural and engineering services employment, which typically leads to construction activity, increased for the 31st straight month and was up 2.9% over 12 months, double the rate of overall job growth. Average hourly earnings for construction rose 0.4% in August, seasonally adjusted, and 4.5% over 12 months, compared with a 3.9% increase for all private nonsupervisory or production workers, suggesting that contractors are still bidding up wages to attract workers. The unemployment rate in construction (not seasonally adjusted) fell from 5.9% in August 2006 to August 2007, while holding steady overall (at 4.6%).

Other less complete but recent information sources also suggest nonresidential construction is holding up well. The value of nonresidential construction starts from January through August 2007 climbed 19% year-to-date (YTD) from the same months of 2006, Reed Construction Data reported today, based on its proprietary database. Nonresidential building construction was up 20%; heavy engineering, 16%. Both figures were a bit less robust than the preliminary January-July YTD gains reported last month but still reflected increases in most major components.

On September 5, the Federal Reserve released its latest “Beige Book” summary of informal soundings of business conditions taken by the 12 regional Federal Reserve Banks, which are referenced by their headquarters cities. The cutoff date for the surveys was August 27. The Fed reported, “Commercial real estate and construction markets were generally stable to expanding across the Districts. Philadelphia, Minneapolis and San Francisco indicated continued expansion in nonresidential construction and commercial real estate. Dallas described the level of nonresidential activity as high, and St. Louis said commercial construction remained strong. New York, Cleveland, Richmond, Atlanta, Chicago and Kansas City indicated commercial construction and real estate markets were steady or stable. Vacancy rates are reported to be low or declining in most Districts, and rents are rising modestly in many. Boston, New York, Richmond, Chicago, Kansas City and Dallas noted some tightening of credit in the commercial real estate market.”

Similarly, most contractors who answered the “Question of the Week” about damage from the housing and credit problems that was attached to the September 4th Data DIGest said they had seen none. However, some developers said credit for projects has become unaffordably expensive or harder to obtain. Developers would be likely to hear earlier than contractors whether projects were being canceled.

“For the final months of 2007, construction employers report little change in hiring plans compared to Quarter 3; however, compared with last year, staffing plans are moderately weaker,” Manpower Inc. reported yesterday in its latest quarterly employment outlook survey of 16,000 U.S. employers (www.manpower.com). “Seasonally adjusted numbers indicate that this is the lowest measure of employer confidence in four years.”

The national average retail price of on-highway diesel fuel hit a 53-week high of $2.92 per gallon, the Energy Information Administration reported on Monday. For the first time in several months, the price was higher than in the same week of 2006. Year-over-year comparisons are likely to become more unfavorable for the rest of the year, because the average price last year fell steadily from $2.86 on September 11 to $2.60 on December 25. Today the price of crude oil on the New York Mercantile Exchange closed at an all-time high of $79.91 per barrel, an increase of roughly $5 per barrel or 12 cents per gallon in the past few days, making further diesel increases likelier. Contractors pay, directly or indirectly, for large amounts of diesel fuel for excavating, earthmoving and other offroad work; for operating concrete mixers, dump trucks and other vehicles; and for deliveries of equipment and materials and hauling away dirt, debris and equipment.