“The Federal Open
Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4%,” the
Federal Reserve has reported.
One
sign of slower growth was the report on Friday from the Bureau of Labor
Statistics (BLS) that nonfarm payroll employment
increased 94,000 in November, seasonally adjusted, well below the 12-month average
gain of 127,000 (1.1% per year). The unemployment
rate remained at 4.7%. Total construction
employment fell 24,000 in the month and 121,000 (1.6%) over 12 months. Residential
building and specialty trades employment dropped 20,000 and 158,000 (4.7%),
respectively. Nonresidential building, specialty trades and heavy and civil
engineering employment fell 3,500 in November but rose 37,000 (0.9%) over 12
months. However, based on the 17% drop in residential construction spending
that the Census Bureau reported for October, it is likely that as many as
400,000 “residential” specialty trade contractors are actually doing
electrical, plumbing, drywall, concrete and other work in nonresidential
projects. Adding those workers to the nonresidential total would imply job
gains of 10%, much closer to the 15% gain in nonresidential spending over the last
year. Strong growth in nonresidential employment is more consistent with the
rise in average hourly earnings in
construction to $21.27, up 21 cents in the past month and 90 cents (4.4%) over
12 months, outpacing the 3.8% rise for all private production or nonsupervisory
workers. Architectural and engineering
services employment, a harbinger of demand for construction, rose 48,000
(3.4%) over 12 months.