The Building Tradesman Newspaper

Friday, May 17, 2019

U.S. economy, construction industry both humming along

By The Building Tradesman



Both the broader U.S. economy, as well as the nation's construction industry, are cruising past the year's first quarter mark.

This year's wicked winter in the Midwest was certainly a temporary drag on the economy, but the underlying markers remain positive. The Bureau of Labor Statistics reported this month that the nation's jobless rate fell to 3.6 percent in April, the lowest since 1969. Businesses created 236,000 new jobs last month and governments added 27,000. Overall, the U.S. economy grew at an annual rate of 3.2 percent in the first quarter, exceeding predictions of 2.5 percent growth. 

"We have great growth and also very, very low inflation," said President Donald Trump upon release of the numbers. "Our economy is doing great. Number one in the world."

Construction firms added 33,000 jobs in April, with the industry now employing 7.48 million workers. Two-thirds of the new jobs (+22,100) were with specialty contractors who built offices and factories, not houses. In many areas the U.S. housing industry is being buffeted by low profit margins and higher interest rates. Still - although there are pockets of unemployment - there is generally enough work to go around.

Employment in the U.S. construction industry rose by 33,000 jobs in April and by 3.5 percent over the past 12 months. And the Associated General Contractors reports that the number of unemployed jobseekers in construction fell to a record low for April.

"With overall unemployment now at the lowest level in nearly 50 years, contractors are having an ever harder time finding workers with or without construction experience," said Ken Simonson, the AGC's chief economist. "Average pay in construction is more than 10 percent higher than in the private sector as a whole but job openings in the industry keep climbing."

The unemployment rate for jobseekers who last worked in construction declined to 4.7 percent from 6.5 percent in April 2018, and the number of such workers decreased over the year from 623,000 to 439,000. Both the rate and number of unemployed were the lowest for April since such numbers began being tabulated in 2000, Simonson said. He added that another government series showed that the number of job openings in construction, last reported for February, totaled 286,000, the highest February total in the 19-year history of that series. 

Average hourly earnings in construction—a measure of all wages and salaries—increased 3.1 percent over the year to $30.60. That figure was 10.2 percent higher than the private-sector average of $27.77, the economist noted.

"These figures are consistent with the message we keep hearing from contractors that finding qualified workers keeps getting harder," Simonson added. He noted that in a survey the association released in January, 78 percent of contractors reported they were having trouble filling some positions and 68 percent said they expected that hiring would remain difficult or become harder.

According to the left-leaning Economic Policy Institute, one of every 14 U.S. workers (7.3 percent) was either unemployed, so discouraged they’ve stopped seeking work, or forced to work part-time when they really wanted full-time work in April. And 7.765 million workers – one of every 20 – held multiple jobs.

The unemployment rate decline “was unfortunately accompanied by a drop in labor force participation,” said EPI senior analyst Elise Gould. The drop occurred because there were “more people leaving the labor force as opposed to getting a job.”

Almost half a million people (490,000) dropped out of the labor force in April, BLS noted. The number of jobless dropped by 387,000, to 5.824 million, but the number of employed people also declined by 103,000 last month. 

In April, wages rose 3.2 percent, the ninth straight month of above 3 percent wage growth. The higher wages are especially found among lower-wage workers, whose "Fight for $15" minimum wage efforts seem to be paying off around the country.

Economic models suggested that wages should have been steadily rising during this past decade as the nation emerged from the Great Recession and saw tighter labor markets, but wages hikes have moved up very slowly. Economists have been all over the map to explain the discrepancy. Declining unionization. Globalization. Increased automation. Sluggish productivity. Bigger conglomerate corporations leading to less competition. 

"The recent uptick in wage growth suggests a simpler explanation: Perhaps the job market wasn’t as good as the unemployment rate made it look," said the New York Times on May 2. "The government’s official definition of unemployment is relatively narrow. It counts only people actively looking for work, which means it leaves out many students, stay-at-home parents or others who might like jobs if they were available. If employers have been tapping into that broader pool of potential labor, it could help explain why they haven’t been forced to raise wages faster.

"It appears as if that is exactly what is happening. In recent months, more than 70 percent of people getting jobs had not been counted as unemployed the previous month. That is well above historical levels, and a sign that the strong labor market is drawing people off the sidelines."

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Meanwhile, the Dodge Data and Analytics "Momentum Index" for the U.S. construction industry, registered a drop of 0.5 percent for the month of April. It was a small decline in the monthly measure of the initial report for nonresidential building projects in planning. which have been shown to lead construction spending for nonresidential buildings by a full year.

"The Momentum Index has clearly lost some impetus over the last twelve months," Dodge said. "The overall Momentum Index is down 8.5 percent since April 2018, with the commercial component 4.7 percent lower and the institutional component 13.9 percent lower. However, over the past several months the Momentum Index has moved in a crab-like fashion with neither strong gains or losses. This suggests that there continues to be a reasonably healthy number of projects in the planning pipeline to support a moderate level of construction activity in the coming months."