Construction Spending Declines, Manufacturing Activity Grows, Worker Pay Rises as Fewer Relocate
Construction Spending Declines
Construction spending in June was down 1.1% from the prior month, as lingering supply chain disruptions and cost hikes showed signs of slowing residential and nonresidential projects.
The approximately $1.76 trillion spent on all types of construction during the month was down from May’s $1.78 trillion, though still 8.3% above the amount for June 2021, the Commerce Department reported Monday. June’s private residential construction tally of $923.7 billion was down 1.6% from May, with $492.7 billion in private nonresidential projects down 0.5%.
Associated Builders and Contractors, a Washington, D.C.-based trade group, predicted Monday there could be continued downward pressures on spending going forward, particularly on nonresidential projects. Anirban Basu, the group’s chief economist, said construction spending to date has been propped up by elevated materials, labor and related costs.
“The primary issue is that those high construction delivery charges are inducing a significant fraction of project owners to reconsider start dates,” Basu said in a statement, noting current elevated backlogs for active projects may be tied to delays in completing them.
“Additional project delays and cancellations are likely as borrowing costs continue to ratchet higher for those who purchase construction services and as the risk of recession increases,” Basu said. “For now, many contractors remain busy and continue to operate at or near capacity. Whether that will continue for another 12 to 18 months remains an unanswered question.”
Manufacturing Activity Grows
Despite predictions of a looming recession, surveys of project managers suggest that U.S manufacturing activity remains in growth mode amid continued recuperation of supply chains that were broken by the pandemic. But growth is slowing in the face of high costs and other headwinds.
The latest July survey from the Institute for Supply Management research group showed the manufacturing economy posting its 26th consecutive month of year-over-year growth since declines were seen in April and May of 2020. But its index, based on positive outlook responses from supply chain executives, dipped 0.2 percentage points from June to 52.8%, its lowest level since June 2020.
The group said its July index measuring new orders was down 1.2 percentage points from June, and its production index was down 1.4 percentage points. “The U.S. manufacturing sector continues expanding — though slightly less so in July — as new order rates continue to contract, supplier deliveries improve and prices soften to acceptable levels,” Timothy Fiore, who chairs the institute’s manufacturing survey committee, said in a statement Monday.
Fiore said surveys show companies continue to hire at strong rates, with few indications of layoffs, hiring freezes or other headcount reductions. Respondents said supply price hikes are easing, but continued instability in global energy markets remains a detractor.
“Panelists are now expressing concern about a softening of the economy, as new order rates contracted for the second month amid developing anxiety about excess inventory in the supply chain,” Fiore said.
Worker Pay Rises as Fewer Relocate
Workers remain in a relatively strong position in a climate of low unemployment. Average civilian worker pay rose 5.1% in June compared with a year earlier, the Labor Department reported July 29.
Within private industry, pay raises ranged from 4.3% for those in natural resources, construction and maintenance occupations, to 8% for those in service occupations. Data showed no categories getting pay increases that matched the consumer inflation rate of 9.1% at the end of June.
The Labor Department numbers were issued as the outplacement consulting firm Challenger, Gray & Christmas reported that job seekers relocating for new jobs during the second quarter fell to the lowest level in the firm’s tracking.
The firm’s quarterly national survey of 3,000 job seekers found 2.8% of respondents relocated for new positions, down from 4.6% in the first quarter and down from 3.3% in the second quarter of 2021. The latest figure is also far below the 7.5% who relocated in the second quarter of 2020, in the early days of the pandemic.
“Historically, the relocation rate has fallen over time, as companies have opened additional locations, as smaller cities have attracted companies bringing jobs and as remote work has infiltrated many organizations,” Senior Vice President Andrew Challenger said in a statement. “With the exception of the second quarter of 2020, the last two years have seen workers less willing or able to move for positions.”