States are mixed on construction jobs in July; construction PPIs moderate

Seasonally adjusted construction employment in July increased in 26 states, dropped in 23 states plus D.C., and was unchanged in Alaska, the Bureau of Labor Statistics (BLS) reported today. Over the past 12 months, six states added construction jobs (Kansas, 6.9%, 500 jobs; New Hampshire, 5.0%, 1,100 jobs; Oklahoma, 2.8%, 1,900 jobs; West Virginia, 2.4%, 800 jobs; Alaska, 1.9%, 300 jobs; and Arkansas, 1.5%, 800 jobs). Nebraska had no change, while 43 states plus D.C. lost construction jobs, led by Nevada (-22%, -17,300 jobs). The producer price index (PPI) for finished goods rose 0.3% in July, not seasonally adjusted (0.2%, seasonally adjusted), and 4.2% over 12 months, BLS reported on Tuesday. The PPI for inputs to construction industries, a weighted average of the costs of all materials used in every type of construction plus items consumed by contractors, such as diesel fuel, dipped 0.2% for the month but climbed 4.5% over 12 months. Material PPIs contributing to the split result included gypsum products (-2.2% in July, 0.2% year-over-year); diesel fuel (-1.5% and 26%); steel mill products (-1.4% and 26%); lumber and plywood (-1.4%and 12%); aluminum mill shapes (-0.6% and 9.0%); plastic construction products (-0.5% and 2.7%); and copper and brass mill shapes (-0.1% and 16%). The PPI for asphalt paving mixtures was flat for the month and up 6.6% year-over-year. The PPI for concrete products was unchanged from June and down 1.9% from July 2009. BLS discontinued indexes for inputs to highway and street, other heavy, nonresidential and multi-unit residential construction; introduced new PPIs for inputs to commercial (and institutional) structures, industrial structures, other and total nonresidential construction; and renamed the "single-unit" residential index "residential" (noting that 90% of residential inputs go to single-unit as of mid-2010). PPIs for new building construction, which include contractors' labor, overhead and profit as well as materials costs, leveled off after falling early in the year. The index for new school construction climbed 0.3% for the month but fell 0.6% year-over-year; new warehouses, 0.2% and -0.6%; new industrial buildings, 0.1% and 0; and new offices, 0.1% and 0.6%. Subcontractors' prices for new and repair nonresidential work were mixed: roofing contractors, -1.5% and -2.9%; plumbing, -0.4% and 2.7%; electrical, -0.1% and -0.3%; and concrete, 0.6% and 0.1%. There are different ways of classifying the funds for construction in last year's stimulus legislation (AGC estimated $135 billion) but there is growing agreement that the money for construction is being spent more slowly than many had expected. "At the end of July, nearly 18 months after the stimulus passed, more than half of the $275 billion in investments [in infrastructure, health care and other areas] had yet to be spent," the Washington Post reported on Saturday. "Administration officials say the stimulus remains on schedule, with 70% expected to be spent by September 30....Many of the unspent funds lie in programs portrayed from the outset as true long-term investments, such as $8 billion for high-speed rail, $17 billion for health information technology and $10 billion for the National Institutes of Health. But other programs that had been viewed as quicker job-generators are also taking a while to get rolling." The $862 billion total included "$230 billion to fund an array of projects ranging from road repaving to modernizing the electricity grid to launching new high-speed rail services," the Wall Street Journal reported on Monday. "So far, $182 billion of the infrastructure money has been awarded, though the government has paid out only $66 billion. The biggest projects have been the slowest to start....A few recipients of $7.2 billion in grants allocated to the expansion of broadband Internet services have started laying cables, but the rest are still busy with preconstruction work." Industrial production (IP) in manufacturing increased 1.1% in July, seasonally adjusted, after a drop of 0.4% in June, the Federal Reserve reported on Tuesday. IP of construction supplies rose 0.5%, after slipping 0.1% in June. Capacity utilization in manufacturing climbed to the highest rate since October 2008, 72.2% of capacity, from 71.4%, but still far below the 1972-2009 average of 79.2%. Together, high capacity utilization combined with sustained increases in IP in manufacturing can indicate rising demand for factory construction. The Architecture Billings Index, a measure of the difference between architecture firms with rising billings and falling billings in the latest month compared with the previous month, climbed to 47.9 in July from 46.0 in June but still short of a breakeven level of 50, the American Institute of Architects reported on Wednesday. Sub-indexes by practice specialty, based on three-month moving averages of responses, were: commercial/industrial, 50.4; institutional, 47.9; multi-family residential, 47.5; and mixed practice, 42.9. A reading above 50 suggests more future construction starts eventually. Housing starts edged up 1.7% from June to July, seasonally adjusted, but were 7% below the anemic July 2009 level, the Census Bureau reported on Tuesday. Single-family starts fell 4.2% for the month and 14% year-over-year. Multi-family starts exceeded month-ago and year-ago levels by 33% and 31%, respectively, but remained very low by historical standards. Building permits, a reliable indicator of builders' near-term intentions, slipped 3.1% for the month and 3.7% year-over-year. Single-family permits fell 1.2% and 13%, whereas multi-family permits fell 8.0% from June but rose 28% from July 2009, "with new apartment construction beginning to show signs of life in parts of the South," Mark Vitner, senior economist for Wells Fargo Economics, commented.