The Data DIGest: 8.17.2010

Posted by TED Magazine on Tuesday, August 17, 2010

Construction starts were mixed in July, Reed says; pay gains shrink; costs vary

Click here for a table showing trends in average pay in construction.

The value of nonresidential construction starts in July dropped 9% compared with July 2009, Reed Construction Data reported on Thursday. Year-to-date starts for the first seven months of 2010 combined rose 8% from January-July 2009. Nonresidential building construction declined 14% July-to-July but rose 5% year-to-date, while heavy construction fell 1% and rose 12%, respectively. “Starts were about steady again in July [compared with June] as they have been for most of the year, allowing for the usual seasonal variation,” Chief Economist Jim Haughey said. “Heavy starts were the highest in six months with a surge in highway and bridge projects in the first month of the new fiscal year for most states….There were sizable July gains for developer-financed retail, hotel and warehouse (but not office) projects, which signals that this cyclically sensitive sector may be recovering. However, institutional building starts declined in July. Federal stimulus funds cannot offset the collapse of state and local government finances.”

A new analysis by AGC of Bureau of Labor Statistics (BLS) data on average hourly earnings (payroll divided by employee hours) in construction (www.bls.gov/ces) shows a dramatic slowdown for most subsectors since 2008. Average pay for all employees in the industry increased 4.0% in 2007, 4.8% in 2008, 1.9% in 2009 and only 1.1% in the 12 months ending in June. For production and nonsupervisory employees (roughly equivalent to craft workers), the increases were 4.2% in 2007, 5.4% in 2008, 2.1% in 2009 and 2.3% in the latest 12 months, showing that these workers received slightly larger pay increases on average each period than other employees. Pay increases slowed much more in some subsectors than others. For instance, craft workers at masonry contracting firms had an 11.6% average pay increase in 2008 but a drop of 0.4% in the latest 12 months; at roofing contractors, average increases slowed only from 3.5% in 2008 to 1.4% in the latest 12 months. Pay for all employees in June averaged $23.03, not seasonally adjusted, for the entire industry and ranged from $19.81 for painting and wall covering contractors to $29.63 for new-multifamily general contractors.

The consumer price index (CPI) for all urban consumers (CPI-U) increased 0.3% in July, seasonally adjusted, and 1.2% over 12 months, BLS reported today. The CPI for urban wage earners and clerical workers (CPI-W), used to adjust wages in some construction and other contracts, rose 1.6% over 12 months.

National construction costs increased 0.3% in the second quarter compared with the first quarter but remained 0.5% lower than in the second quarter of 2009, according to a survey of 13 cities released on Tuesday by property and construction consultant Rider Levett Bucknall (www.rlb.com). “Most cities reported slight [construction] price inflation, with Los Angeles and San Francisco representing the greatest quarterly increases by close to 1.0%. Construction costs continued to decline in some markets; Denver, Las Vegas, Portland and Seattle reported deflation of between 0.1% and 0.8%....[The data] represents estimates of current building costs in each respective market. Costs may vary as a consequence of factors such as site conditions, climatic conditions, standards of specification, market conditions, etc. Values represent hard construction costs based on U.S. dollars per square foot of gross floor area.”

“Steel executives are reporting an ‘across the board’ slowdown in July and August on everything but pricing—which seems to be bouncing along a bottom, tugged around by the vagaries of scrap steel surcharges,” www.Econoplay.com reported on Thursday. “‘My perspective is the commercial market—not residential and not infrastructure—and we just see ourselves bumping along the bottom,’ said Neil Platz, vice president of purchasing at Turner Construction. ‘If the market is heading up, it’s at an incredibly slow rate because I just can’t see it….Even public sector work is now vanishing. “State and local governments are collecting less taxes so that work is slowing. There’s still a reasonable amount of hospital work, and we’re still active in school construction, but neither is as big as it used to be.’ Meanwhile, Florida’s economy remains moribund. ‘I see a smattering of work in high and ultra-high residential construction—but commercial remains very depressed,’ [said Lee Disbury, president of Coral Steel Co. in West Palm Beach.] ‘The office and warehouse business is non-existent.’ The only business he sees is related to stimulus money—water treatment plants, bridges, a VA hospital complex, and military bases. ‘It has just been announced, by the producing steel mills, that the price of rebar and merchant shapes will be raised effective Aug. 15 by $25 a ton’ [4.2%].”

Liquid asphalt prices are heading down. The New Mexico Department of Transportation announced on Thursday that its asphalt price index for September would be $613, down $15 from August and down $52 (8%) from the high in June.

The Real Estate Roundtable (www.rer.org) reported on August 6 that its quarterly survey of more than 110 commercial real estate executives—encompassing office buildings, shopping malls, warehouses, hotels, and apartment buildings—found, “‘Uncertainty reigns. Whether it is job creation, unstable capital markets or a volatile mix of current policy and the upcoming mid-term elections—investors and businesses are skittish, causing the commercial real estate outlook to be flat. The good news is that last quarter’s view that commercial real estate markets have stopped falling has been confirmed this quarter and values for high quality assets show strength. But the overall sentiment is that the industry is in for a long slow recovery characterized by extreme caution.’ said President and CEO Jeffrey DeBoer.”