ARLINGTON, VA-Construction employment rose nationwide by
20,000 in September from the month prior, bringing employment in the sector to
a six-year September low of 8.5%. However, the Associated General Contractors
of America says the strenght of the month’s gains may not be repeated when the
October numbers come in, thanks in large measure to the government shutdown.
“The industry was
doing relatively well before the federal government shutdown forced many firms
to hit the pause button,” says Ken Simonson, the AGC’s chief economist. “But
the shutdown likely disrupted a wide variety of projects and may have caused
private investors and developers to delay decisions about new projects or plant
expansions. As a result, future spending and hiring gains may be weaker.”
Year over year,
the construction industry’s employment rate posted a sharp increase, with the
jobless rate falling from 11.9% in September 2012 to last month’s level, the
lowest September reading since 2007. Also up Y-O-Y was the aggregate weekly
hours of all construction employees, which rose faster than the sector’s
employment rate, indicating that companies are adding to existing workers’
hours along with hiring new employees.
Construction
spending for August, the most recent month for which figures are available, was
up 0.6% from an upwardly revised July figure and 7.1% Y-O-Y. Private
residential spending led the way by far, with a 1.2% increase for the month and
a Y-O-Y jump of 19%. Nonresidential construction spending by private
developers, by contrast, inched up just 0.1% from the prior month and 4.3% from
12 months earlier. Public spending rose 0.4% for the month but fell 1.8% from a
year ago.
“Only home- and
apartment construction is booming,” Simonson comments. AGC is urging passage of
water resources legislation that would spur “long-delayed repairs to our aging
ports and waterways,” says association CEO Stephen Sandherr.
Broadly speaking, IHS
Global Insights economists Stephanie Karol and Patrick Newport drew the same
conclusions, calling the August construction spending tally “a respectable
report” while noting that the headline figures “fall short of statistical
significance.” The market and economic information provider’s conclusions about
public-sector spending differed from the AGC’s, however, with IHS seeing a 3.2%
Y-O-Y gain. “This is the second straight month of gains—we could be seeing the
first signs of a turnaround in public construction,” write Karol and Newport.
Drilling down into
the nonresidential private construction numbers, Karol and Newport saw “a mixed
bag” for August. “As expected, spending in the healthcare sector has been
anemic (flat month-on-month; down 6.5% since last August), as hospitals and
medical buildings dithered ahead of the rollout of the Affordable Care Act,”
they write.
That’s to be
expected in ”a high-uncertainty environment,” according to Karol and Newport.
“Infrastructure investment is heavily pro-cyclical; in a recession, spending on
structures is often the first to take a hit, and the last to return. Hospitals
and medical buildings will wait to expand until it becomes clear that they must
do so in order to meet demand.” Accordingly, they predict, growth in this
sector is likely to remain “feeble” until 2015.
On the other hand,
the economists write, spending on lodging has been gaining steadily throughout
the year. It has recorded “solid gains” on both on a monthly and yearly basis,
thanks largely to declining hotel vacancies in many regions of the country.
“With this update,
we now expect both nonresidential and nonresidential construction to post
growth in the low teens for the third quarter,” Karol and Newport write. “These
are badly needed gains in an economy that is wobbling.”
Source: Globest.com
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