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Construction Job Losses Slow But Remain Widespread

By Ken Simonson
June 9, 2009
Spending rises; may slip soon.

The unemployment rate jumped to 9.4% in May, seasonally adjusted (9.1% not seasonally adjusted), from 8.9% in April and 5.5% in May 2008, the Bureau of Labor Statistics (BLS) reported today. Nonfarm payroll employment fell by 345,000 jobs, seasonally adjusted, about half the drop of recent months, and BLS estimated that losses for March and April combined were 82,000 smaller than had been reported last month. The decline in construction employment also moderated, to a loss of 59,000 jobs from an average twice as high in recent months. But the unemployment rate in construction rose to 19.2%, not seasonally adjusted, from 8.6% in May 2008. (BLS does not report seasonally adjusted unemployment rates by industry.) All construction job categories declined at double-digit rates over the past 12 months, including-for the first time-all three nonresidential categories. The 12-month losses totaled 990,000, or -14%, in construction, with declines of -16% in residential (specialty trade contractors, -16%; building, -17%), and -12% for nonresidential (specialty trade contractors, -13%; building and heavy & civil engineering construction, -10% each). Average hourly earnings rose to $22.66, seasonally adjusted, in construction, up 4.1% (94 cents) over 12 months, compared to $18.54 (+3.1% or 55 cents) for all private production workers.

Metro-area unemployment rates, not seasonally adjusted, “were higher in April than a year earlier in all 372 metropolitan areas,” BLS reported on Wednesday. Nonfarm employment fell compared to April 2008 in 291 of the 310 metro areas for which data were available, 17 reported increases and two had no change. According to an analysis by AGC (http://www.agc.org/galleries/econ/Metro%20empl%20409.pdf), metro-area employment in construction (combined with logging and mining in areas where at least one of these industries is small) fell in 287 metros, rose in 19 and was unchanged in four. The largest percentage gains were in Odessa, Texas, 8% (combined); Baton Rouge, Louisiana, 7% (construction only); and Decatur, Illinois, 6% (combined). The biggest 12-month percentage losses were in Pascagoula, Mississippi (combined), -39%; Redding, California, -32% (combined); and Merced, Cal., -31% (combined).

Construction spending in April totaled $969 billion at a seasonally adjusted annual rate, an increase of 0.8% from the downwardly revised March total but a loss of 11% compared to April 2008. Private residential construction finally turned up (0.7%, but -35% year-over-year) but the gain was attributable solely to the volatile and hard-to-estimate improvements component, which rose 8.9%, but fell 14% from a year earlier. New single-family construction was down 6.7% for the month and -53% over 12 months; new multi-family, -2.6% and -17%. Public construction fell 0.6% for the month but rose 3.3% over 12 months. Of the two largest public categories, educational dropped -1.8% for the month and rose 5.2% over 12 months; highway and street construction rose 0.9% and 0.2%. Private nonresidential construction climbed 1.8% and 2.0%. Two private categories stood out: manufacturing, 3.9% and 71% (“fueled” by several huge refinery upgrades) and power, 7.8% and 30% (“propelled” by large wind projects). In contrast, private categories that depend on bank financing have been tumbling: Commercial (retail, warehouse and farm) construction, -2.1% and -25%; office, -1.9% and -18%; and lodging, 2.4% and -8.6%. Respondents to the Data DIGest’s “question of the week” have reported no improvement in credit availability. 

The startling rise in manufacturing construction is likely to shrink soon. “Valero Energy Corp. is indefinitely suspending a $1.7 billion hydrocracker project at its Port Arthur [Texas] refinery after announcing plans to acquire a 45% interest in a refinery in the Netherlands with similar capability,” the Beaumont (Texas) Enterprise reported on Wednesday. “It will cost thousands of hoped-for contractor jobs in Southeast Texas and dents the much-touted economic expansion in the region. The San Antonio-based refiner said Tuesday it intended to acquire a 45% share of the TRN refinery in the Netherlands, which will cause the refiner to indefinitely postpone a hydrocracker project at the Port Arthur refinery. It also puts on hold a similar project at the St. Charles, La., refinery that would have been worth $1.25 billion.”

The Buy American provisions of the American Recovery and Reinvestment Act may be slowing or blocking the award of construction funds and costing jobs on net. A wastewater treatment project in Overland Park, Kansas, has reportedly been held up by uncertainty over whether a piece of Austrian-made cogeneration equipment qualifies for a waiver from the Buy American requirements of the Recovery Act. Other water or wastewater agencies reportedly have passed up stimulus funds over concern about delays or litigation stemming from the provisions. The Environmental Protection Agency has issued limited waivers but producers say they are not enough to resolve the issues. “The steel company Duferco Farrell… has cut about 600 jobs in Pennsylvania after it lost orders from its biggest customer because some of its goods are partly produced abroad,” the New York Times wrote in an editorial on Wednesday. “The Westlake Chemical Corporation of Houston has lost sales to a Canadian vinyl pipe maker that is cutting back production because it can’t bid for some American jobs. After Canadian companies were barred from bidding for American business, news reports say that some 12 Canadian cities passed ordinances against buying American. And the Federation of Canadian Municipalities is expected to discuss a possible coordinated response at its meeting this month.”

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

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