Construction Economic Notes – November, 2012

11/16/2012 by Bernard M. Markstein

Executive Summary

Recent major developments for commercial construction and the U.S. economy

Some Additional Information on Economic Developments

October nonfarm payroll employment increased 171,000 (SA). Over the past four months, payroll employment increased an average of 173,000 per month, and year-to-date it averaged 157,000 per month—not stellar numbers, but good solid numbers nonetheless.

October’s unemployment rate rose 0.1% to 7.9% following September’s 0.3% drop to 7.8%. The slight rise in the unemployment rate was due to new job seekers adding to the number of unemployed faster than others found jobs. A rising unemployment rate is typical of the early stage of an improving jobs market, as the improving employment outlook attracts job hunters faster than workers are hired. Only later in the cycle, as the number of new and returning job seekers slows and employment gains continue, does the unemployment rate fall.

The October unemployment rate among construction workers was 11.4% (NSA), down from 13.7% in October 2011. Over that period, 177,000 construction workers found employment, but the number of unemployed construction workers fell by 199,000—reducing the construction labor force by a net 22,000 workers as some workers left construction for jobs in other industries or retired.

Construction spending increased 0.6% (SA) in September, after slipping 0.1% in August. Total residential construction, which includes improvements, continued to be the big percentage gainer, up 2.7% for the month. New residential construction, which excludes improvements, was up an even stronger 3.3%. Single-family construction spending was the main driver of higher new residential construction, powering up 3.9% while multifamily construction spending moved ahead 0.7%. Heavy engineering construction spending contributed to the overall increase, rebounding 0.7% from August’s 1.6% drop. Nonresidential construction is struggling, with spending falling 1.4% in September after increasing only 0.2% in August.

Housing is clearly in a recovery phase although some of the percentage increases are large due to the extraordinarily low level of residential construction activity in recent years. More to the point, residential construction is no longer a drag on the economy but a contributor, returning to its historical role of an engine for expansion.

On a year-to-date basis as of September, construction spending for single-family houses increased 15.9% and construction spending for multifamily projects increased 16.7% over the same period in 2011.