Jan 5 2007 9:28AM | Permalink | Email this | Comments (2) |
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The first hint that the decline in construction activity since April may be ebbing came in today’s monthly jobs report. Only 3,000 construction jobs were lost in December and total construction hours worked jumped 1.7%, back to the summer level, as average hours worked per week expanded. Net construction job losses totaled 53,000 in October and November.

The latest jobs report probably overestimates any turnabout because of unseasonably good construction weather in most of the country in December. While the Bureau of Labor Statistics tries to correct for this, it often takes a few months to get it right. The December construction jobs and hours counts may be marked down in subsequent revisions but will still show a year end improvement.

Just as important, better economic support for construction starts was very clear in the December jobs report. Total employment rose 167,000 and the November job count was revised 29,000 higher. Temporary jobs increased 15,000 after little change in recent months. This usually precedes a period of stronger permanent job gains.

Several industries are hiring rapidly so their space needs are now or soon will be expanding. This includes 35,000 permanent new December jobs in professional and business services, the largest office-based industry. This industry hires only when their customers are giving them additional contracts. Note that architectural and engineering service firms hired 11,000 people in the last two months after little change earlier in the year.

Healthcare added 38,100 workers, in some cases crowding them into existing space. Hotels added 4,600. This does not seem like a lot but it is a 3.5% annual growth rate, more than three times as fast as overall job growth. Restaurants hired 22,600 people in December bringing the job gain since August to 114,000. Sure, most of these jobs are part-time and low wage. But interpret strong net hiring at restaurants as a sign of improving confidence by small business managers. Public education, including colleges, hired 14,000 people. This is a sign that state and local government officials are still willing to draw on their large budget reserves and are not now expecting to impose spending cuts forced by weakness in tax receipts.

The jobs report also identifies weak markets where additional space needs are not being generated. Manufacturers dropped 12,000 jobs, including 4,600 more in motor vehicles. Productivity gains are keeping manufacturing very profitable so projects underway or soon to bid are not likely to be cancelled. Retailers cut 9,200 jobs in December, reducing employment to 58,000 (-0.4%) below a year ago. Here too, productivity is growing faster than sales volume. Reed Construction Data interprets this to mean that gross retail space needs have peaked in this cycle but that there will be a modest expansion of construction starts into 2007 to accommodate remodeling and changing store location in a still growing economy.