Supply House Times

Jan. 4, 2008 ― Job Growth Slows Overall

January 4, 2008
Nonresidential jobs appear to flatten but spending soars.

Nonfarm payroll employment edged up 18,000 in December, seasonally adjusted, the Bureau of Labor Statistics (BLS) reported today. The gain was a record-setting 52nd in a row but was the smallest monthly rise since 2003. For the year, employment increased 1.3 million (1.0%), or about 110,000 per month, vs. 2.1 million or more in each of the three prior years.

The unemployment rate climbed from 4.7% in November to 5.0%, the highest level in two years. Total construction employment fell 49,000 for the month to 7,489,000 and 195,000 (2.5%) over 12 months. Residential building and specialty trades employment accounted for all the job losses (from 3,344,000 to 3,150,000) and fell 5.8% over the year. Yet the BLS numbers appear to understate the residential job loss. Census figures on residential construction spending show a drop of 17.5% from November 2006 to November 2007, and it seems likely that employment is down by a similar percentage, implying a drop of 585,000 jobs, not 195,000. The difference may be the number of specialty trade contractors whose companies formerly did residential wiring, plumbing, concrete finishing, etc., but are now doing nonresidential work. Adding those 390,000 jobs to the 4,339,000 nonresidential building, specialty trade and heavy and civil engineering contractors counted by BLS would produce a 12-month employment gain of 9%, a more plausible number than BLS’s zero change in light of the 18% increase in nonresidential spending over the past year. Such an increase would also help explain why average hourly earnings in construction rose 4.4% last year (to $21.33 per hour), vs.3.7% for all private-sector production or nonsupervisory workers. Architectural and engineering services employment rose again in December and was up 3.9% for the year, a positive sign for future nonresidential construction.

Construction spending inched up 0.1% in November to $1.165 trillion at a seasonally adjusted annual rate, the Census Bureau reported on Wednesday. That total was 0.1% less than in November 2006. The year-to-date (YTD) change for January-November 2006 vs. 2007 was -2.5%. Once again, the totals mask huge differences between residential construction spending (down 2.4% for the month and 17% YTD) and nonresidential (up 2.1% and 16%). Of Census’ 16 nonresidential categories, all were up YTD except religious structures (-1.4%), the type most closely linked to new housing. Leading growth categories for private nonresidential: lodging (2.1% and 63%); power (7.1%, 28%); educational (mainly higher ed; 1.2%, 22%); office (1.1%, 21%); communication (-2.0%, 20%); commercial (retail, warehouse, farm; 0.7%; 14%). The two largest public categories were educational (mainly K-12; 3.3%, 13%) and highway and street (1.9%, 7.1%). Private single-unit residential spending fell 5% and 27%; multi-unit rose 0.6% for the month but fell 6.0% YTD; and improvements rose 0.5% and 2.9%.

New orders for U.S. manufactured goods (excluding semiconductor manufacturing) rose 1.5%, seasonally adjusted, in November, the fifth increase in six months, Census reported on Thursday. January-November YTD orders were up just 0.9%. Orders for construction materials and supplies climbed 0.2% in the month but fell 1.2% YTD. Orders for construction machinery leaped 30% in November but sank 29% YTD.

Purchasing executives who responded to the Institute for Supply Management’s monthly surveys of manufacturers (released on Wednesday) and nonmanufacturing sectors (released today) listed the following items important to construction as up in price in December: diesel fuel and freight fuel surcharges; steel, stainless steel and carbon steel pipe. Lumber was the only item down in price. Construction was listed fourth out of five nonmanufacturing sectors reporting growth in business activity but was not among the six reporting growth of new orders or increases in employment.

Despite the growth in retail construction through November, signs continue that it may slow. BLS reported today that retail employment rose 0.3% in the 12 months through December, half as much as a few months earlier. In the past month, Circuit City said it would spend $150-200 million on stores in 2008, down from $250 million in 2007. CompUSA said it would close any of its remaining 103 stores that can’t be sold. Levitz Furniture said it was closing its 76 remaining stores. D.C.-based Scan Furniture will close its five stores.

Consumer electronics and furniture retail weakness reflects the ongoing slump in housing sales. The government reported on December 28 that new single-family home sales in November fell 9%, seasonally adjusted, from October and 34% from November 2006. The supply of unsold new houses shrank 6.8% from a year before but equaled 9.3 months at current selling rates, up from 6.5 months in November 2006. The National Association of Realtors reported on Monday that existing-home sales, including single-family, townhouses, condos and co-ops, rose 0.4% in November but fell 20% from a year earlier.