Nonresidential spending, jobs keep 'torrid pace'

WASHINGTON Nonresidential building continues to outperform the residential segment, and construction industry job and wage figures reflect that trend, said Ken Simonson, chief economist for the Associated General Contractors. He said he was looking on the bright side when commenting on a Jan. 3 report from the U.S. Census Bureau that shows the value of construction put in place in November 2006 totaled

WASHINGTON — Nonresidential building continues to outperform the residential segment, and construction industry job and wage figures reflect that trend, said Ken Simonson, chief economist for the Associated General Contractors.

He said he was looking on the bright side when commenting on a Jan. 3 report from the U.S. Census Bureau that shows the value of construction put in place in November 2006 totaled $1.184 trillion at a seasonally adjusted annual rate, down 0.2% from the upwardly revised October total.

"I must point out there was lots of good news hidden in today's seemingly gloomy construction spending report," Simonson said. "Nonresidential spending showed a strong 1.2% gain in November, even after the October figure was revised from a small loss to a 1.1% gain. "

Meanwhile, residential construction spending shrank again in October by 1.6%, bringing the cumulative decline to 11% since peaking last March."

Simonson said he has observed-"no letup in the torrid pace of private nonresidential spending growth."

"For instance, lodging construction — mainly hotels and resorts — jumped 4% in November and was up 71% from the November 2005 level," he said. "Electric power construction charged ahead 4% in November and was 18% higher than a year ago. Manufacturing construction had a 1% gain for the month and was 11% ahead of the year-ago level. Health-care construction, mainly hospitals, gained 0.4% for the month and 20% compared to November 2005.

"The diverse commercial sector, with strong gains in multi-retail and warehouse components, tacked on 1% in November and 11% compared to the year-ago month."

Education spending climbed 2% for the month and 6.6% from a year earlier, Simonson said.

"A closer look at the private residential totals shows new multifamily construction gained 1% in November and 16% compared to November 2005, while improvements rose 0.6% and 6.7%," Simonson said. "But those numbers were swamped by declines of 3.1% and 20% for new single-family construction.

"Energy-and power-related construction, hotels, hospitals and rental housing will all perform well, while single-family and condo construction will sink the totals."

Commenting on the January employment report from the U.S. Bureau of Labor Statistics, released later, Simonson noted that nonresidential construction jobs jumped during the month, while employment related to home building fell off.

"In January, construction accounted for one out of five net new jobs in the entire non-farm economy — 22,000 out of 111,000," Simonson said. "Not bad for an industry that constitutes less than 6% of total non-farm employment. Nonresidential construction employment growth has been sizzling.

"Over the past 12 months, nonresidential building contractors and nonresidential specialty trades have boosted employment by 160,000, or 5%."

Simonson said that the job growth should translate into additional nonresidential construction work in the next several months. In contrast, residential building and specialty trades employment slipped in January, bringing the year-over-year decline to 84,000 jobs, or 2.5% of the January 2006 total.

"I expect home builders will continue to shrink for most of 2007, until they see a marked upturn in home sales," Simonson said.

Construction wages rose 4.5% in the last 12 months, outpacing the 4% increase for all private industry production workers, he said.

"Part of this reflects a changing mix of construction jobs, away from lower-skilled home building and remodeling to skilled nonresidential crafts," Simonson said. "But it may also indicate that contractors are ratcheting up pay to find the workers they need."