The producer price index (PPI) for finished goods spurted 1.2% in November, not seasonally adjusted (1.8%, seasonally adjusted), and 2.4% over 12 months, the Bureau of Labor Statistics (BLS) reported on Tuesday. A jump of 7% in the PPI for crude petroleum drove up both the finished-goods and construction indexes. Even aside from the oil-price leap, construction materials costs appear to have ended their slide, as shown by recent three-month trends. The PPI for inputs to construction industries, a weighted average of the cost of all materials used in residential and nonresidential construction plus items consumed by contractors, such as diesel fuel, climbed 0.6% for the month and was unchanged over three months despite falling 2.3% compared to November 2008. Inputs that contributed to these diverse 1-, 3- and 12-month patterns include the PPIs for diesel fuel (up 6.3% for the month, 6.4% over three months and down 3.7% over 12 months); copper and brass mill shapes (4.6%, 11.3% and 26%); steel mill products (-1.6%, 4.1% and -20%); aluminum mill shapes (0, 1.3% and -12%); insulation materials (0.3%, 0.6% and -1.4%); and lumber and plywood (1.1%, -0.1% and -2.9%). Materials that have continued to drop in price include gypsum products (-0.5%, -3.6% and -8.2%); asphalt paving mixtures and blocks (-0.3%, -1.0% and -16%); and concrete products (-0.1%, -0.6% and -1.2%).
Steel prices appear headed higher. Nucor wrote to customers on Thursday, "our transaction pricing for reinforcing bar, merchant bars and structural products will increase $65 per ton." CMC and Gerdau Ameristeel reportedly will follow suit.
Nonfarm job losses shrank to just 11,000, seasonally adjusted, the smallest decline in two years, and the unemployment rate fell to 10%, seasonally adjusted (9.4%, not seasonally adjusted) from 10.2% in October, BLS reported on December 4. Employment would have increased if not for a loss of 27,700 construction jobs (-0.5%). Nevertheless, the job loss in construction was only half of the 56,000-job drop in October, and one of the five construction categories increased for the first time in a year: heavy and civil engineering construction, up 5,200 (0.6%). Declines were moderate in three other categories: residential building, -1,100 (-0.1%); residential specialty trade contractors, -2,700 (-0.2%); and nonresidential building, 600 (-0.1%). But nonresidential special trades shed 28,500 jobs (-1.4%). The unemployment rate in construction rose to 19.4%, not seasonally adjusted, the highest of any industry. In a continuing bad omen for future construction, architectural and engineering services employment fell by 2,700 (-0.2%). Average hourly earnings in construction slipped 8 cents to $22.76, seasonally adjusted, up just 48 cents (2.2%) from November 2008.
The value of nonresidential construction starts in November was "more than a 20% increase after seasonal adjustment" from the October total (7.0% higher before seasonal adjustment), Jim Haughey, chief economist of Reed Construction Data, reported on December 9, based on data compiled by Reed. "November 2009 starts were about 8% higher than last November [and double the depressed June total...November starts increased 16% for nonresidential buildings but fell 6% for heavy construction projects. Nonetheless, the heavy market is much stronger with a year-to-date gain of 15% vs. a year-to-date decline of 16% for nonresidential buildings. Although commercial project starts increased 32% in November vs. October, this continues to be the weakest market...Current starts are well below the pre-credit-freeze level, especially for offices, hotels and retail projects. Starts for institutional building projects increased 13% in November from October."
Industrial production (IP) in manufacturing spiked 1.1% in November, seasonally adjusted, after slipping 0.2% in October, the Federal Reserve reported on Tuesday. IP for construction supplies rebounded 1.6%, offsetting a 1.5% drop in October. Capacity utilization in manufacturing moved up to 68.4% of capacity from 67.6% in October and September, but still far below the 1972-2008 average of 79.6%. Sustained increases in IP and capacity utilization are needed to spur factory construction.
Manpower Inc. reported on December 8 that, based on its latest quarterly survey of hiring plans of 28,000 employers, "When seasonal variations are removed from the data, the results suggest that employers expect a moderate increase in the rate of hiring when compared to Quarter 4 2009. However, the first-quarter Net Employment Outlook for the U.S. is weaker than one year ago...Employers in the construction and wholesale and retail trade sectors intend to slightly decrease staff levels, while financial activities employers expect staff levels to remain relatively stable" and employers in the 10 other sectors are more positive about employment prospects than in the fourth quarter.
BLS released employment projections for 2008-2018 on Thursday, projecting an increase in total employment of 10% (15,300,000), or 1.0% per year, up from 0.7% per year in 1998-2008. Surprisingly, construction employment is projected to rise by 19% (1,337,000), from 7,215,000 in 2008 to 8,552,000 in 2018, or 1.7% per year, compared to 1.6% annual growth from 1998 to 2008. Employment in the first 11 months of 2009 has averaged 6,270,000, implying growth through 2018 of 32% (3.1% per year for nine years). Among the 30 occupations projected to have the largest employment growth are construction laborers (11th, with an increase of 256,000 or 20%) and carpenters (19th, 165,000 jobs or 13%).
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