At the risk of reinforcing the stereotype of the “two-handed” economist, I must use both hands to describe the current state of the construction industry. On the one hand, residential construction is continuing the free-fall it began early last year. On the other, nonresidential private and public construction still looks robust.
The latest evidence arrived January 5 from the Bureau of Labor Statistics (BLS). In December, overall construction employment, seasonally adjusted, declined by 3,000 jobs, the fourth straight monthly decrease. For the year, employment edged up just 39,000 (0.5 percent), a far cry from 2005 and 2004.
But closer inspection shows that nonresidential construction categories are creating jobs as fast or faster than before. From December 2005 to December 2006, employment increased 3.6 percent in nonresidential building construction and specialty trades combined, and 2.6 percent in heavy and civil engineering. In contrast, residential building construction and specialty trades employers shed 100,000 workers, or 3.0 percent.
The BLS data confirmed what Census Bureau figures on construction spending in November had shown. That report, released January 3, showed total spending had risen only 0.1 percent from the preceding November. Yet private nonresidential construction was 18 percent higher and public construction was up 11 percent. Even new multi-family construction was 16 percent higher and residential improvements were up 6.7 percent. The apparent stability in the overall number was a function of a 20 percent plunge in single-family residential building.
Contributing to the strength in private nonresidential spending were: lodging, up 71 percent from November 2005; office, 31 percent; health care, 20 percent; electric power, 18 percent; commercial and manufacturing, 11 percent each. Gains for the major public categories included: highways and streets, 14 percent; and education, 6.6 percent.
For now, neither nonresidential nor residential construction appears set to reverse course. Although retail and office construction may tail off, energy- and power-related appear to be gaining momentum, and health care, lodging, and manufacturing all have growth opportunities left. Home builders are still trying to unload inventory and trim new starts. New rental housing and buildings converted from condos will keep some home builders busy but the single-family market will not revive for most or all of 2007.
