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   ARTICLE   |   From Scotsman Guide Residential Edition   |   January 2004

Construction Contributes to Gains in Employment, Manufacturing Orders

Non-farm payroll employment went up in November by 57,000, seasonally adjusted, the Bureau of Labor Statistics (BLS) reported today. That was the fourth straight monthly rise but broke a string of increasing gains—35,000 in August, 99,000 in September (previously estimated as 125,000), and 137,000 in October (previously, 126,000). The unemployment rate dropped from 6% to 5.9%. Construction employment rose for the ninth month in a row, by 10,000, to a total of 6,856,000, just shy of the record 6,860,000 set in March 2001. BLS noted, “The industry has added 156,000 jobs since February”; in that span, the rest of the nonfarm economy lost 217,000 jobs, despite the gains of the past four months.

All three of BLS’s construction subgroups have added jobs in the past year: 16,000 (1%) in construction of buildings, 1,000 (0.1%) in heavy and civil engineering construction and 95,000 (2.3%) among specialty trade contractors. Over the past year, average hourly earnings of construction workers rose 2% to $19.07 (23% above the average for all private production workers); a concomitant rise in average weekly hours boosted weekly earnings 2.8%. In another indication that job gains are far from uniform, BLS reported yesterday that “among the 272 metropolitan areas for which over-the-year comparisons could be made, 152 reported [October-to-October] decreases in employment, 115 recorded increases, and 5 had no change”.  During the week, BLS posted 2002 employment counts and average wages for the nation, states, and metro areas for 770 occupations, including 40 construction occupations (www.bls.gov/oes/2002/oessrcst.htm).

New orders for manufactured goods (except semiconductor manufacturing) increased for the fifth time in six months in October, by 2.2%, seasonally adjusted, the Census Bureau reported today. Orders for construction machinery rose 0.9%, following a pickup of 4.2% in September and a plunge of 12% in August. Year-to-date orders were 5% higher than in the first 10 months of 2002. Orders for construction materials and supplies rose for the fourth straight month by 0.5% (after increases of 1.7%, 0.8%, and 4%) but year-to-date orders were just 0.1% above the 10-month total for 2002.

Same-store sales (sales at stores open at least 13 months) in November at major retail chains were mixed, but generally stronger than a year ago. Today’s Wall Street Journal reported, “The Bank of Tokyo-Mitsubishi’s composite index of 74 U.S. retailers rose 3.6% for the month….In the Goldman Sachs composite index of retailers, department stores once again were the weakest performers, posting a 1.3% decrease, but better than last year’s 6.7% decline. Discount stores rose 4.7% compared with 1% a year ago, while specialty retailers reported a 1.9% gain compared with flat sales in the same period last year.”

“States faced aggregate budget gaps of $78.4 billion as they confronted their fiscal year 2004 budgets” (generally beginning July 2003), according to the National Conference of State Legislatures (NCSL) in a report cited Wednesday in the December “Fiscal Policy Brief” of the Rockefeller Institute of Government (www.rockinst.org). Citing NCSL, the Brief states, “31 of 43 states surveyed made spending reductions. Fourteen states made across-the-board cuts, 15 states targeted corrections, 15 targeted Medicaid, and 11 states targeted K-12 education. Higher education has taken a particularly hard hit….Twenty-six states cut higher education spending in 2004; meanwhile public university tuition and fees increased in all 50 states.” The problems persist. A November NCSL survey cited in the Brief “reported the appearance of gaps in their fiscal 2004 budgets between the beginning of that fiscal year and November 2003. Sixteen states reported that revenues are below estimates. The situation is not nearly as bad as it was a year ago, but this is more indication of continuing problems. Looking to the next fiscal year…, the Center for Budget and Policy Priorities has reported that 21 states are already projecting budget gaps for fiscal year 2005…”

Non-manufacturing business activity, as measured by the Institute for Supply Management’s monthly survey of purchasing executives, released Wednesday, increased in November. The index stood at 60.1, down from the record levels of the previous four months but well above a breakeven reading of 50. Thirteen sectors reported increased business activity; two each reported decreases or no change. Construction was listed first among industries reporting the highest rates of growth in backlog of orders and was among those reporting a reduction in employment and highest rates of increase in prices paid.

Among products used in construction, asphalt and asphalt products and steel were reported higher in price, while conduit and fittings and diesel fuel were reported lower. Steel prices may come down; the White House announced yesterday that it was abandoning the steel tariffs imposed 21 months ago, and the European Union and Japan promptly dropped the retaliatory duties they had threatened to impose in the next few days. Petroleum product prices may rise soon; OPEC announced yesterday it would hold its production target steady for now but may cut it at its next meeting.


 


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