Nonfarm payroll construction employment, seasonally adjusted, totaled 7,452,000 in April, unchanged from March, according to AGC’s analysis of Bureau of Labor Statistics (BLS) data posted on Friday The April total was 196,000 (-2.6%) below the pre-pandemic peak in February 2020. There is a large gap between residential and nonresidential employment gains. Residential construction employment, comprising residential building and residential specialty trade contractors, edged up by 3,000 in April, putting the total 46,000 (1.6%) higher than in February 2020. Nonresidential construction employment—building, specialty trades, and heavy and civil engineering construction—dipped by 3,000 in April and was 242,000 (-5.2%) below the February 2020 level. A total of 768,000 former construction workers were unemployed in April, half as many as in April 2020 but the second-highest April level since 2014. The industry’s unemployment rate in April was 7.7%, compared to 16.6% in April 2020.
AGC posted an update of its Construction Inflation Alert to inform owners and others of the ongoing challenges contractors are experiencing regarding materials costs and supply-chain disruptions. Notices of materials price hikes increased in number, amount, and variety last week. Readers forwarded notices of imminent price increases for steel building orders (4%, effective May 18, following a 5.5% increase effective May 11); imported ductile iron pipe fittings (23%, effective June 1, following a May 1 announcement by China that it was immediately ending an export tax credit on 146 steel products); reinforcing-steel products ($40/ton, effective immediately as of April 29); cement ($8/ton in Texas, effective July 1 or September 1); steel and aluminum ceiling- and wall-systems products (“up to 10%,” effective June 7, with “additional increase of 5% for quotes on or after August 2”); wallboard (20%, announced May 3, effective June 1); expanded polystyrene and flexible foam products (“as much as 10% in some parts of the country, that will be effective for material shipping June 1”). Readers are invited to send price and supply-chain notices to firstname.lastname@example.org.
Copper futures on the CME’s Comex exchange closed on Friday at an all-time high of $4.75 per pound, erasing the 2011 record. Lumber futures and steel price indexes also reached new peaks, triple or quadruple their lows of last year. The National Association of Home Builders reported in its April 28 “Eye on Housing” blog, “According to NAHB’s latest estimates, rising softwood lumber prices over the last 12 months have added…190% ($11,280) [to] multifamily builders’ lumber costs,” based on lumber prices reported by Random Lengths on April 23. “That study, however, was done before the most recent spike in prices,” Wells Fargo Economics noted on Friday, adding, “Apartment developers are also delaying projects and looking for alternative materials.”
Several measures of inventories suggest supply problems may intensify as current supplies are depleted. The American Chemistry Council noted on Friday in its weekly summary of economic releases, “The [wholesale] inventories-to-sales ratio moved lower from 1.26 in February to 1.22 in March. A year ago, the ratio was 1.39. [The] inventories-to-shipments ratio [for U.S. factories declined] from 1.40 in February to 1.38 in March. [The Institute for Supply Management (ISM)’s April “Services ISM Report On Business,” a monthly survey of purchasing executives, found,] “Order backlogs expanded even more, indicative of the supply chain disruptions. Supplier deliveries slowed even more, and inventories contracted.”
The ISM survey report, issued on Wednesday, also found items relevant to construction that were reported in short supply include construction contractors (for the seventh month in a row) and labor (4 months in a row), PVC products (3 months), steel products (5 months), lumber, and circuit breakers. For the first time in 15 months, personal protective equipment (PPE) was not listed in short supply, although it was listed as both up in price (15 months) and down in price (3). Other items relevant to construction that were reported up in price include construction materials and labor (2 months each), copper products (3) and wire; oriented strand board (5), lumber (4), and wood products (3); resin products (4); PVC products (8); steel (8) and steel products (4); diesel (5); aluminum and aluminum products; vinyl windows; and shingles. For the second-straight month, all 18 sectors covered reported paying higher prices for materials and services. Construction was one of 17 reporting an increase in business activity and in new orders, employment (11 sectors), slower supplier deliveries (17 sectors), and backlog of orders (11 sectors).
ISM’s survey of 18 manufacturing industries, released on May 3, found “Survey Committee members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials. Recent record-long lead times, wide-scale shortages of critical basic materials, rising commodities prices, and difficulties in transporting products are continuing to affect all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential….Customers’ Inventories Index hit…another all-time low and…Backlog of Orders Index continu[ed] at a record-high level.”
AGC chief economist Ken Simonson will present his latest information on construction spending, materials, and employment trends in a free Zoom talk to the National Economists Club from 12 to 1 pm ET on Thursday, May 13. He also participated in a webinar on Thursday with the chief economists of the American Institute of Architects and ConstructConnect. Click here for a link to the recording.
Source: AGC Data Digest 05.11.21