McGraw-Hill reports jump in starts; construction jobs, revenues shrink in most states

The value of new construction starts climbed 12% in October, at a seasonally adjusted annual rate (SAAR), McGraw-Hill Construction (MHC) reported on Friday, based on data it compiled. "The upward push came from double-digit gains for nonresidential building and nonbuilding construction (public works and electric utilities) . At the same time, residential building in October was unchanged from its September pace." Real (net of inflation) gross domestic product (GDP) increased 2.8% (SAAR) in the third quarter, the Bureau of Economic Analysis announced yesterday, as it revised its initial estimate down from 3.5%. Real investment in private nonresidential structures dropped 15% after falling 17% in the second quarter and 43% in the first quarter. Real residential investment jumped 19.5%, breaking a string of 14 quarterly declines. Real government gross investment in structures rose 10%, following a 24% leap in the second quarter. The price index for private nonresidential structures dropped 10% (SAAR) in both quarters; the price index for residential investment, -2.6% in the third quarter and -5.2% in the second; the price index for government structures, -5.2% and -4.3%, respectively. Seasonally adjusted nonfarm payroll employment increased in 28 states and the District of Columbia in October, decreased in 21 states and was unchanged in Alaska, the Bureau of Labor Statistics (BLS) reported on Friday. Compared to October 2008, employment declined in every state but rose in D.C. Construction employment rose for the month in 17 states plus D.C., fell in 31 and was unchanged in Alaska and New Hampshire. Compared to October 2008, construction employment fell everywhere except in North Dakota, which had a rise of 400 jobs (1.9%). The largest 12-month percentage declines were in Nevada, 27%; Arizona, 24%; Tennessee, 22%; Kentucky, 21%; and Connecticut, 19%. "Preliminary tax collection data for the July-September quarter of 2009 show continued widespread and sharp declines for most states for all three major sources of tax revenue, as well as for overall taxes," the Rockefeller Institute (www.rockinst.org) reported on Monday. Overall tax revenue declined by 11% in the third quarter compared to the same quarter of 2008. "Total tax revenue declined in all 44 states for which comparable early data are available. While in recent quarters North Dakota was the only state showing growth in tax revenues, the state reported a 17% decline in total tax collections...Texas reported a year-over-year increase in revenue, but is not included in this flash report because of complications interpreting year-to-year changes involving the Property Tax Relief Fund and other elements of the state's financial picture." The Center on Budget and Policy Priorities (www.cbpp.org) reported on Thursday, "New shortfalls have opened up in the budgets of at least 35 states for the current fiscal year (FY 2010, which began July 1 in most states). In addition, initial indications are that states will face shortfalls as big as or bigger than they faced this year in the upcoming 2011 fiscal year." These shortfalls are likely to mean cuts to state-funded construction; several state departments of transportation (DOTs) have already made additional cuts. The Federal Highway Administration on November 2 distributed internally a spreadsheet that showed state DOTs have obligated (committed to specific projects) 77% of the $20 billion in stimulus money for highway construction they received. (An additional $7 billion of highway funding was sent to local agencies.) About 14% had been expended (payments made to contractors for work completed and billed). Wyoming had obligated 100% of its funds, followed by Utah, 97%; Maine, 95%; and Nevada, 93%. Maine led in percent expended, 56%; followed by Iowa, 46%; Utah, 44%, Vermont, 42%; and Wyoming, 41%. In a Federal Reserve survey of senior large-bank loan officers, with replies sent by October 20, 57 "domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households," the Fed reported on November 9. "However, the net percentages of banks that tightened standards and terms for most loan categories continued to decline from the peaks reached late last year.... A [significant] net fraction of [23] branches and agencies of foreign banks continued to tighten standards on CRE [commercial real estate] loans. Demand for most major categories of loans at domestic banks reportedly continued to weaken, on balance, over the past three months. This weakening was somewhat less widespread than in the July survey for C&I loans, CRE loans, and nontraditional mortgages...Demand for C&I and CRE loans at foreign banks continued to weaken, on balance, but the weakening was somewhat less widespread than that in the July survey."