May 9 2006 12:00AM | Permalink | Email this | Comments (0) |
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The April jobs report showed only 6,000 new construction jobs, the same increase reported in March, but I am still expecting another strong gain in construction spending to be reported for April and I bumped up the forecasted spending gain for the full year to 8.4%.

I think the last two months of meager hiring by contractors brought the size of work crews back into line with work schedules. Contractors hired an average of 25,000 people a month last year, more than needed for the growth in their business. Also, I’ve learned to pay more attention to the total hours worked on job sites than to the number of people on the payroll.

Hours worked by construction crews increased 1.3% in March and April. The longer work week got as much added work done as hiring 98,000 people at the shorter February workweek.

How much construction spending increases this year depends on the timing and pace of the slowdown in the housing market and the boom in the nonresidential building and heavy markets. Missing either of these market turning points by a month would result in an embarrassingly wrong forecast.

The latest market data shows that housing activity will persist longer than many had expected before the inevitable downturn. That is the clear message in recent reports on new home sales, permits and affordability — down but still well above the long-term average. Similarly, the key drivers for the rest of the construction market are now stronger than expected a few months ago. The 1st quarter GDP report showed that business investment accounted for 1.5 of the 4.8 percent economic growth. This is an investment boom which will keep nonresidential and heavy/engineering construction work expanding strongly through next year. Also, our monthly monitoring of construction starts recorded a 9% rise in April over an already high March count. This is more than the usual seasonal change; it is an acceleration.