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Contractors hire 5,000 workers in April

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Contractors hired 5,000 workers in April and March employment was revised up by 5,000 jobs. This gain suggests that a small rise in construction spending will be reported for April following the 1.4% gain in March. This improvement is consistent with an April gain in the value of construction starts which will be reported by project type detail later today by Reed Construction Data. The hiring gain was skewed with heavy contractors adding 13,000 workers and other contractors dropping 8,000 workers. Ahead, this disparity will reverse as subsidies to heavy construction are exhausted and economic growth spurs private building construction.

Construction hours worked increased 0.4% in April, better than a 5% annual growth pace and much higher than current overall economic growth. Average hourly earnings in construction rose 0.3% which is also much faster than wage gains in the overall economy. This is biased higher by the tilting of the work mix to heavy construction where wages are higher. While construction wages have begun to rise, the gains will be modest because of the huge reserve of employed workers.

Overall, US employers added 244,000 jobs in April and March employment was revised up by 46,000 jobs. This was a surprise. The expectation was 150,000 jobs. The expectation had been soured by a projection from ADP and rising jobless claims in the last few weeks. The estimate by the payroll processing firm apparently missed much of the nearly 100,000 new jobs at retail stores and restaurants. And the rise in unemployment insurance claims came after the April payroll survey week. This raises the risk that May job gains may be lower and that April job gains may be revised down. Nonetheless, the hiring surge is sustainable and will continue to average above 130,000 per month which is the threshold for reducing the number of unemployed people.

The mix of job gains was bizarre. Manufacturers added 29,000 jobs. This is extremely strong in an economic environment of at best 3% GDP growth and 6% gains in manufacturing labor productivity. Manufacturing jobs would typically be cut in this environment. The next few months will bring some manufacturing layoffs due to Japanese parts shortages.

Wholesaling, transportation and warehousing together added 11,000 jobs, a big decline from earlier in the year. This slowdown hints at a weaker hiring environment in the next few months. 2,000 fewer temporary workers were employed in April. This could be the result of temps becoming permanent workers which would be positive for the hiring outlook. But it is more likely due to employers’ concern about the pace of sales gains in the next few months.

Government employment was cut by a further 24,000 in April with most of the cuts at the state and local government level. These budget balancing layoffs are not yet over and may extend into next year. State tax revenues have been expanding for a year but are still very depressed. Local property tax revenues are just beginning to recover but state and federal aid to local governments continues to decline.

by Jim Haughey

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