Area Economy

Nonresidential construction bounces back with broader economy

May 15, 2015
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The U.S. construction industry added 45,000 jobs in April according to the May 8 Bureau of Labor Statistics preliminary estimate.

March's estimate was revised downward from -1,000 to -9,000 net new jobs. Nonresidential construction employment increased by 12,400 jobs in April, with nonresidential specialty trade contractors leading the way with 20,200 new jobs. Nonresidential building employment plummeted for the month, losing 7,800 jobs. The residential sector bounced back in April, adding 23,600 jobs.

While the broader jobs report proved better than expected, April was the best month for construction employment since January 2014. Though it may have been expected to see solid job creation performance reflected in the report, it is still a relief to obtain a nice piece of data.

Economic data regarding retail sales, industrial production and other elements of economic life have largely been disappointing to date, and the March jobs report fell in line with that series of uninspired results.

Data regarding unemployment claims strongly suggested employers viewed the recent bout of economic weakness as temporary. The lack of new layoff activity indicates an ongoing demand for labor, and April's reasonably strong employment gains suggest many employers continue to search for additional staffing.

After losing 9,000 jobs in March, the 45,000 jobs gain posted in April exceed all expectations. Construction spending should expand in the coming months as projects that were delayed during winter come to fruition.

The national unemployment rate inched down to 5.4 percent in April. While shedding a 10th of a percent is nothing remarkable in its own right, the falling unemployment rate looks significantly better when you consider the labor force added 166,000 new workers in April. The labor force participation rate inched up to 62.8 percent in April. The construction unemployment rate fell to 7.5 percent in April, a 2 percent decrease from March. The falling construction unemployment rate suggests that construction activity may finally be rebounding from the winter lull.

The lone underperforming segment in April was mining and logging, which lost 15,000 net jobs. The sector has now lost jobs in each of the year’s first four months after gaining jobs in every month of 2014. Mining and logging has lost more jobs during the first quarter of this year (-48,000) than it added in all of 2014 (+42,000), a direct result of the plummeting oil prices.

While the loss of mining and logging jobs isn't necessarily a good thing for the economy, it has likely had a beneficial effect on construction employment. Displaced mining and logging workers are likely finding employment in the construction industry, which has experienced sharp regional labor shortages in the past few years. This may be the cause of the 2 percent decrease in the construction unemployment rate.

  • Nonresidential building construction employment fell by 7,800 jobs for the month but is up by 16,600 jobs or 2.4 percent since April 2014.
  • Residential building construction employment expanded by 2,800 jobs in April and is up by 41,200 jobs or 6.3 percent on an annual basis.
  • Nonresidential specialty trade contractors added 20,200 jobs for the month and employment in that category is up by 76,400 jobs or 3.5 percent from the same time one year ago.
  • Residential specialty trade contractors added 20,800 net new jobs in April and have added 102,400 jobs or 6.8 percent since April 2014.
  • The heavy and civil engineering construction segment added 8,400 jobs in April, and employment is up by 33,100 positions or 3.6 percent on a year-over-year basis.

Anirban Basu is chief economist for Associated Builders and Contractors.

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