Category Archives: Construction

CR: Construction Spending increased in February

Construction Spending increased in February

by Bill McBride on 4/01/2013 

Catching up …

The Census Bureau reported that overall construction spending increased in February:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2013 was estimated at a seasonally adjusted annual rate of $885.1 billion, 1.2 percent above the revised January estimate of $874.8 billion. The February figure is 7.9 percent above the February 2012 estimate of $820.7 billion.

Both private construction and public construction spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $613.0 billion, 1.3 percent above the revised January estimate of $605.2 billion. Residential construction was at a seasonally adjusted annual rate of $303.4 billion in February, 2.2 percent above the revised January estimate of $296.9 billion. …

February, the estimated seasonally adjusted annual rate of public construction spending was $272.1 billion, 0.9 percent above the revised January estimate of $269.6 billion.

Private Construction Spending Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 55% below the peak in early 2006, and up 36% from the post-bubble low. Non-residential spending is 25% below the peak in January 2008, and up about 37% from the recent low.

Public construction spending is now 16% below the peak in March 2009 and just above the lowest level since 2006 (not inflation adjusted).

Private Construction SpendingThe second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 20%. Non-residential spending is up 6% year-over-year mostly due to energy spending (power and electric). Public spending is down 1.5% year-over-year.

A few key themes:
1) Private residential construction is usually the largest category for construction spending, but there was a huge collapse in spending following the housing bubble (as expected).  Private residential is now about even with private non-residential, and residential will probably be the largest category of construction spending in 2013.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time, mostly related to energy and power – but the key sectors of office, retail and hotels are still at very low levels.

3) Public construction spending has declined to 2006 levels (not adjusted for inflation).  This has been a drag on the economy for 4 years.

Read more at http://www.calculatedriskblog.com/2013/04/construction-spending-increased-in.html#Eg0Yro8gR0suq4mr.99

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Eye on Housing: JOLTS: Rising Job Openings in Construction

JOLTS: Rising Job Openings in Construction

by Robert Dietz Eye on Housing

Recent government employment data suggest a pickup in construction sector job openings over the last half year. While consistent with the uptick in construction sector activity, particularly in home building, the data reflect only modest increases in employment thus far.

For the construction sector, Job Openings and Labor Turnover Survey (JOLTS) data from the Bureau of Labor Statistics (BLS) indicate that hiring levels continue to be strong enough to create net jobs (hiring minus separations). Hiring in construction totaled 319,000 in January 2013. Hiring for the sector has exceed 300,000 per month for 22 of the last 24 months.

const labor mkt_mar13

The number of open positions in the construction industry remained relatively high in the current report. At 98,000 open positions, the month of January had the second highest number of unfilled positions in the last 17 months. Successfully filling open positions with qualified workers is a top concern for home builders in 2013.

Measured as a three-month moving average, the openings rate (the blue line above) has been reflecting strength for the last six months. Combined with a declining sector layoff rate (nonseasonally adjusted), charted as a 12-month moving average in the graph above, these factors suggest good news for construction hiring in the months ahead.

Monthly employment data for February 2013 (the employment count data from the BLS establishment survey are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.109 million, broken down as 578,000 builders and 1.531 million residential specialty trade contractors.

res const employment_mar13

According to the BLS data, over the last 12 months, the home building sector has added only 64,000 jobs. Since the point of peak decline of home building employment, when total job losses for the industry stood at 1.466 million, 125,000 positions have been added to the residential construction sector.

An outstanding puzzle remains the fact that the increase in building has outpaced employment growth for the industry. This could be due to increased hours for existing workers, but if true, it is not a sustainable situation. Expected increases in building should lead to significant growth in home building employment in 2013.

For the economy as a whole, the December JOLTS data indicate that the hiring rate remained at 3.1% of total employment. The hiring rate has been in the 3.1% to 3.4% range since January 2011. The job openings rate was also relatively unchanged at a rate of 2.7% in January. The openings rate has now been in the 2.5% to 2.7% range for more than one year.

labor market_mar13

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Eye on Housing: Residential Construction Spending Flat in January

Residential Construction Spending Flat in January

from Eye on Housing by Robert Dietz

Private residential construction spending was relatively unchanged for the first month of 2013 due to declines in the volatile remodeling spending category. Nonetheless, total residential construction spending remains near post-2009 highs and has experienced growth in 15 of the last 17 months according to data from the Census Bureau.

Spending on new single-family homes continued to expand, rising 3.6% over December’s pace. On a year-over-year basis, the nominal value of spending on new single-family homes has risen over 30%. Since bottoming out around the midway point of 2009, construction spending has surged 65%. The current NAHB forecast calls for single-family housing starts to grow in 2013, with a slower pace of expansion anticipated during the first quarter of this year.

Constr Spending Feb

Construction spending on new multifamily projects also increased in January, growing 1.7% from December 2012. Gains in spending have occurred in each of the last 16 months. On a year-over-year basis, the level of apartment spending has increased almost 55% and has – as of January – more than doubled from the cyclical low set in August 2010.

Offsetting the gains in single-family and multifamily construction, January saw a 4% drop in improvement spending that resulted flat headline growth for total private residential category.  The 3-month moving average of remodeling spending was down almost 2% but remains near post-2007 highs.

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CR: More Research on Construction Employment

More Research on Construction Employment

by Bill McBride on 2/12/2013  

A key economic question this year is how many construction jobs will be added. Here are a few excerpts from analysis Kris Dawsey and Hui Shan at Goldman Sachs: Housing Sector Jobs Poised for a Comeback

Although many indicators of housing activity improved during 2012, employment in the sector remains close to post-bubble lows. Looking only at residential construction jobs, employment declined by 1.5 million (-42%) from its peak in 2006 to its recent trough in early 2011 and edged up only a modest 100 thousand since then. However, direct residential construction employment is only a part of all residential investment-related employment. Adding in housing-related employment in manufacturing, wholesale trade, retailing, and finance & real estate, employment dropped by 2.8 million (-31%) from its peak, and gained a bit less than 300 thousand from its trough to the present …

[R]eal residential investment declined somewhat more sharply than housing-related employment in the downturn, resulting in a decline in real value added per residential investment-related worker, according to our proxy measure, from more than $80,000 in 2006 to a bit less than $60,000 in Q4:2012, in chained 2005 dollars. This pattern of declining productivity during a downturn is called “labor hoarding” by economists (although labor hoarding is probably not what most people think of during a period of sharp job cuts) and reflects businesses’ reluctance to fire workers at a rate commensurate with the decline in their sales.

The flip side of this phenomenon is more sluggish employment growth than would otherwise be the case once business activity turns around. On top of the only modest turnaround in activity, this secondary effect also argues for only a modest rebound in residential investment-related employment early on in the recovery. However, this effect may shortly be coming to an endHours per worker in the construction industry now exceed pre-crisis highs, suggesting that room to increase output on the “intensive margin” (i.e. more hours per worker) is diminishing, and that pushing on the “extensive margin” (hiring more workers) will likely account for a larger share of future increases in residential investment output.

Given that we expect real residential investment to continue growing at a roughly stable 10%-15% rate in 2013 and 2014, and that the effects of labor hoarding should be dissipating, what is our forecast for residential investment-related employment growth over the coming several years? In order to answer this question, we estimated two different econometric models: (1) an error correction model of national-level real residential investment and residential investment-related employment, and (2) a state-level panel analysis of the relationship between construction activity and employment. Both models suggest an increase in the rate of housing-related employment growth in 2013 and 2014 relative to 2012, probably to a rate around 25 to 30k per month.
emphasis added

So there analysis suggests construction companies have been increasing hours worked for current employees, but now they need to hire more workers.

Read more at http://www.calculatedriskblog.com/2013/02/more-research-on-construction-employment.html#OKpbAfueQS5EPVGs.99

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Eye on Housing: Open Construction Jobs, But No Hiring Surge Yet

Open Construction Jobs, But No Hiring Surge Yet

by Robert Dietz

Eye on Housing

Despite the expansion of home building activity in 2012, construction sector employment growth remains positive if tepid, according to government statistics.

For the construction sector, Job Openings and Labor Turnover Survey (JOLTS) data from the Bureau of Labor Statistics (BLS) indicate that hiring levels continue to be strong enough to create net jobs (hiring minus separations). However, December hiring was notably weak,with the hiring total for the construction sector at only 287,000 positions, down from 380,000 in November.

While it seems likely that this low number will be revised up next month, December still marked the seventh consecutive month for which the three-month moving average of hiring remained above 300,000.

const labor mkt

The number of open positions in the industry remained relatively high. At 92,000 open positions, the month of December had the second highest number of unfilled positions for 2012. Successfully filling open positions with qualified workers is a top concern for home builders going into 2013.

After benchmark revisions, monthly employment data for January 2013 (the employment count data from the BLS establishment survey are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.091 million, broken down as 575,000 builders and 1.516 million residential specialty trade contractors.

res construction

According to the BLS data, over the last 12 months, the home building sector has added only 53,000 jobs. Since the point of peak decline of home building employment, when total job losses for the industry stood at 1.466 million, 107,000 positions have been added to the residential construction sector.

An outstanding puzzle remains the fact that the increase in building has outpaced employment growth for the industry. This could be due to increased hours for existing workers, but if true, it is not a sustainable situation. Expected increases in building should lead to significant growth in home building employment in 2013.

For the economy as a whole, the December JOLTS data indicate that the hiring rate dipped slightly to 3.1% of total employment from 3.3% in the previous month. The hiring rate has been in the 3.1% to 3.4% range since January 2011. The job openings rate was also relatively unchanged at a rate of 2.6% in December. The openings rate has now been in the 2.5% to 2.7% range for more than one year.

labor market

The ongoing weakness in hiring has several potential explanations. One, challenges in housing markets are preventing workers from relocating to labor markets with open positions. However, this “house lock” effect was recently challenged by a paper from economists at the New York Federal Reserve. A second possible explanation is a skills mismatch between available workers and open positions. This explanation is also hotly debated among various proponents of structural or cyclical explanations of post-Great Recession unemployment.

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Positive Run Continues for Residential Construction Spending

The post Positive Run Continues for Residential Construction Spending appeared first on Eye on Housing.

Private residential construction spending jumped 2.2% on a month-to-month basis during December 2012. The initial estimate of a 0.4% gain for November was moved up slightly to a 0.6% increase, but the October number was pushed appreciably higher from 1.3% to 3.2%. Spending has registered nine uninterrupted months of growth, as well as 16 of the last 17 months showing expansion. The nominal dollar level of spending has now reached its highest point since late 2008 and the average from the last three months is 32% above the cyclical low.

Spending on new single-family homes decelerated to its slowest pace of month-to-month growth since the first quarter of 2012, rising 0.8% versus November. On a year-over-year basis, the nominal value of spending on new homes has risen over 28%. In addition, since bottoming out around the midway point of 2009, construction spending has surged 59%. The current NAHB forecast calls for single-family housing starts to expand for the entirety of the outlook period, but a slower pace of growth is anticipated during the first quarter of this year. They are expected to re-accelerate over the remainder of 2013, and thus we anticipate a similar pattern will likely occur for construction spending.

construction spending

Construction spending on new multifamily projects jumped 6.2% during December 2012. Moreover, the initial estimate for November was revised higher from 0.5% to 1.8%, indicating spending activity finished the year strong. Of the three main categories of residential construction, multifamily has experienced the strongest rebound from its cyclical trough. Gains in spending have occurred in each of the last 15 months, with the latest month available representing the second largest percentage increase over this time period. On a year-over-year basis, the level of spending has skyrocketed more than 57% and has gained 97% from the bottom in August 2010.

Remodeling activity improved in December as spending climbed 2.9% from the prior month. Preliminary estimates for October and November were also revised higher, significantly higher in the case of October with a 1.9% decline turning into a 2.3% gain. The 3-month moving average points to a solid upward trend in home improvement spending and closed out 2012 at its highest nominal dollar value since September 2007. NAHB’s Remodeling Market Index (RMI) has offered a similar judgment on recent home improvement activity as the current and future market indicators have achieved their best readings since the first quarter of 2004.

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CR: Kolko: Here are the “Missing” Construction Jobs

Kolko: Here are the “Missing” Construction Jobs

by Bill McBride on 1/31/2013 

CR Note: This is from Trulia chief economist Jed Kolko:

Construction jobs are a big part of how housing recovery lifts the broader economy. But the construction rebound, so far, appears to be jobless. “Residential construction” jobs, as reported by BLS, were up just 1% in December 2012 from their lowest level since the housing bubble burst – even though new home starts in December 2012 were twice as high as their low point in 2009. Overlaying residential construction employment (monthly, in thousands, left axis) and construction starts (monthly, in thousands, right axis) data suggests a jobless housing recovery, with jobs struggling to turn around even as starts climbed sharply in 2012:

Construction JobsClick on graph for larger image.

Who is building all these new homes? If starts are now twice their lowest level, why aren’t residential building jobs also twice their lowest level, instead of up just 1%? The answer: this is the wrong way to look at construction jobs. It turns out that construction employment is approximately where it should be for the current level of construction activity. Here are three reasons why:

“Starts” aren’t the right measure of current construction activity. Units “under construction” is more relevant – especially now. The amount of construction activity this month depends not only on this month’s construction starts but also on construction starts in previous months. That’s because single-family construction takes 4-6 months between start and completion, and multi-unit-building construction takes 10-14 months, on average. Therefore, construction starts indicate what will happen to construction activity in the coming months – not necessarily where it is today. And, in this recovery, multi-unit buildings are an unusually high share of overall construction activity, so the typical new unit is under construction for longer, making starts an even-worse-than-usual proxy for current construction activity. Instead of starts, units “under construction” – also reported monthly by the Census – is the right measure of construction activity to compare with jobs. This changes the picture dramatically: while monthly starts in December 2012 were up 100% (that is, have doubled) since the bottom, monthly units under construction were up 32% from the bottom.

The “residential building” jobs category understates growth in residential construction jobs. The BLS “residential building” category covers general contractors and construction management firms but not subcontractors, which are covered under another category the BLS tracks, “residential specialty trade contractors.” Importantly, residential construction jobs have been shifting steadily from general contractors to specialty trade contractors throughout the boom, bust, and recovery, so the narrower “residential building construction” category understates recent growth in construction jobs. “Residential building” jobs in December 2012 were up just 1% from the bottom, while “residential specialty trade contractor” jobs were up 4%. The combined series is up 3% from the bottom. Of course, some construction workers might not be officially counted if they’re off the books, and others might work on both residential and non-residential projects and not fit neatly into one reporting category. Still, looking at both the “residential building” and “residential specialty trade contractors” gives a clearer picture than looking only at “residential building.”

Construction jobs do not move one-for-one with construction activity. Looking at the right measures over time – units under construction and the sum of the two jobs categories – jobs move up and down less than construction activity does. For every 10% increase (or decrease) in the number of units under construction, construction employment increases (or decreases) by a little more than 4%. One reason might be what economists call “labor hoarding” – firms hold onto more workers than they need in temporary downturns if the cost of firing and re-hiring is high relative to keeping them on. Therefore, firms might increase or reduce workers’ hours instead of hiring or firing. Another reason is other construction activities, like remodeling, might move differently with the business cycle than new construction and possibly even soften the ups and downs of demand for construction workers.

Overlaying these two series – “units under construction” (Census) and the sum of “residential building construction” and “residential specialty trade contractors” (BLS), we get:

Construction JobsUsing these measures, jobs track construction activity pretty closely, with a slight lag. Taking this lag into account, a simple time-series model suggests that construction employment is now just 2% lower than it should be for the current level of construction activity.

The picture might change tomorrow in the January jobs report. As part of tomorrow’s report, the BLS will release its annual benchmark revision of previously reported employment figures. The preliminary revision announced in September suggested that employment for construction overall (including non-residential) would be revised up 1.6% for the benchmark month (March 2012). If tomorrow’s official revision to residential employment is in that range, the jobless construction recovery might not be missing any jobs at all.

What does this mean for construction employment in 2013? Suppose starts rise another 20% in 2013 relative to 2012 – a bit slower than the 28% increase in 2012 relative to 2011. Recent trends suggest that the number of units under construction should be a hair over 20% higher in December 2013 than in December 2012. Even though units under construction didn’t grow as fast as starts in 2012, much of the effect of the increase in starts in 2012 will be on construction activity in 2013, not in 2012. As a result, construction jobs – residential building plus residential specialty trade contractors – could grow 8% in 2013. The sharp increase in construction starts in 2012 should mean more construction jobs in 2013.

Read more at http://www.calculatedriskblog.com/2013/01/kolko-here-are-missing-construction-jobs.html#OtwpdYi7sTG21o6K.99

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