Construction spending slips in October; job openings top hires; Beige Book signals slowing demand
Friday, December 9, 2022
Section: Advocacy News

AGC is conducting the 2023 Hiring and Business Outlook Survey. Construction firm readers are invited to complete the survey by Friday, December 9. Results will be released in early January.
Construction spending (not adjusted for inflation) totaled $1.79 trillion in October at a seasonally adjusted annual rate, down 0.3% from the downwardly revised September rate but up 9.2% year-over-year (y/y), the Census Bureau reported today. However, without a deflator, it is impossible to say how much of the y/y gain is in units vs. price. Private residential construction decreased for the fifth-straight month, by 0.3%, with single-family homebuilding down 2.6%, multifamily construction spending up 0.6%, and owner-occupied improvements up 2.0%. Private nonresidential construction spending slid 0.8%. The largest private nonresidential segment (based on seasonally adjusted spending in October 2022)—commercial construction—fell 0.4% (consisting of warehouse, unchanged; retail, down 1.3%; and farm, up 0.4%). Manufacturing construction slumped 3.2% (including computer/electronic/electrical, up 1.3%, and chemical and pharmaceutical, down 18%). Power declined 0.8% (with electric power down 0.4% and oil and gas field structures and pipelines down 1.3%). Private office and data center construction rose 0.2%. Public construction spending fell 0.9%. The largest public segment, highway and street construction, fell 0.8%. Public education rose 0.5%. Public transportation construction rose 0.2%.
There were 377,000 job openings in construction, not seasonally adjusted, at the end of October, a drop of 25,000 (-6%) y/y, the Bureau of Labor Statistics (BLS) reported on Wednesday in its monthly Job Openings and Labor Turnover Survey (JOLTS) release. Hires fell by 42,000 (12%) y/y to 341,000. Despite the declines, October openings exceeded hires for the second year in a row, implying firms wanted to hire more than twice as many workers as they were able to find. BLS does not break out residential from nonresidential construction in the JOLTS report; thus, it is not possible to tell if the downturns in hiring and openings affected both segments. Layoffs and discharges totaled 153,000 (1.9% of employees), the lowest October total and rate in the 22-year history of the series.
“Economic activity was about flat or up slightly since the [October 30] report, down from the modest average pace of growth in the” September to mid-October period, the Federal Reserve reported on Wednesday in its latest “Beige Book.” The Beige Book is a compilation of informal soundings of business and nonbusiness sources in the 12 Fed districts, which are identified by their headquarters cities. “Residential construction slid further at a modest pace, while nonresidential construction was mixed but down slightly on average….Prices fell for some commodities, including lumber and steel.” District comments included the following. New York: “Contacts in the construction sector continued to report deteriorating business conditions but were somewhat less pessimistic about the near-term outlook than in the last report. New office construction starts remained exceptionally low throughout the district, though there was some pickup in New York City and Long Island. New industrial construction has largely dried up. In New York City, multifamily construction starts, though still quite low, have risen modestly in the latest reporting period, and there is a moderate volume of ongoing construction.” Philadelphia: “Market participants in commercial real estate reported steady current construction activity and a slight decline in leasing activity. Most noted examples of delayed deals and a significant reduction in credit availability – concluding that the current pipeline would carry construction through much of 2023, but activity might slow thereafter.” Cleveland: “Nonresidential construction and real estate activity also softened further. Contacts indicated that rapidly rising interest rates and growing economic uncertainty have led many businesses to hold off on new projects.” Chicago: “Delays and cancellations increased for both single- and multifamily projects….Nonresidential construction was little changed. Construction of industrial space and remodeling of office space held steady. That said, some projects were moving very slowly because of increases in building costs and interest rates.” St. Louis: “Construction contacts reported the pipeline of ongoing projects continued to be strong but demand for new projects has decreased since the previous report.” Minneapolis: “Construction firms reported that recent and future activity was slowing, yet one-third reported that they have been looking to hire more full-time, year-round employees, and a negligible share had cut workers….Commercial construction fell slightly since the last report and showed signs of future slowing. Industry data suggested that construction spending and overall activity held up relatively well, but firms reported that backlogs had shrunk compared with the same period last year. Firms also reported a notable decline in new projects out for bid. Industrial and multifamily segments reported steadier activity and outlooks, and government contract work was also reportedly more active. Labor demand remained healthy overall.”
Solar projects are encountering multiple hurdles. “An estimated 23 gigawatts’ worth of big solar projects have been delayed so far this year—almost twice as much as was installed in all of 2021 and approaching a third of all such projects in development, according to the American Clean Power Association,” the Wall Street Journal reported on Wednesday. “Several thousand shipping containers of solar panels have been detained by U.S. Customs near ports such as Los Angeles, according to some estimates, while even more have been held up in factories and ports from Vietnam to Malaysia or diverted to places such as Europe—a result of U.S. legislation aimed at cracking down on labor abuses in China. [In addition,] developers say they are grappling with long waits for project permitting and access to transmission grids as well as rising costs and lengthening lead times for equipment orders.”