Construction spending in December totaled $1.054 trillion at a seasonally adjusted annual rate (SAAR), down 1.4% from the downwardly revised November figure and 3.6% below the December 2007 level, the Census Bureau reported on Monday. For the year, construction spending totaled $1.079 trillion, a record 5.1% decline from the previous year. Private residential construction sank 3.2% for the month, 23% compared to the year-earlier month, and 27% for the full year. Private nonresidential construction fell 0.4% for the month but was 8.9% higher than a year before and 15% higher for the full year. Public construction slid 0.8% for the month but climbed 7.0% from December 2007 and 7.4% for the year. The highest-growth category for the year was manufacturing construction, which soared 51% after a huge increase in refinery work, plus large increments for transportation equipment (auto plants for Honda, Toyota and Volkswagen) and primary metal (principally a multi-billion dollar steel plant in Alabama). Power construction climbed 33%, led by a 50% increase in private electric power (mainly conventional power plants, transmission lines and wind farms). Lodging construction rose 29% but has slipped since peaking last summer. The largest categories in 2008 were educational construction, $104 billion (up 8.3% from 2007); commercial (retail, warehouse and farm), $86 billion (-4%); highway and street, $81 billion (+6%); and office, $73 billion (+12%). Among private residential categories, new single-family totaled $186 billion (-39%); new multi-family, $44 billion (-8%); and improvements, $128 billion (-8%).
Real (net of inflation) gross domestic product (GDP), the broadest measure of U.S. economic activity, fell 3.8% (SAAR) in the fourth quarter, following a drop of 0.5% in the third quarter, the Bureau of Economic Analysis reported on Friday. Real gross private investment in nonresidential structures fell 1.8% after 12 straight quarterly increases, but still outperformed real GDP for a record-setting 13th consecutive quarter. Real gross government investment in structures slipped 0.2%. The price index for investment in private structures accelerated to a 7.7% SAAR from 7.3% in the third quarter. The government structures price index rose 10.6%, following a 6.9% increase.
The Federal Reserve on Monday released its latest quarterly survey of senior loan officers at 53 large U.S. banks and 23 foreign bank holding companies. "On balance, about 80% of domestic banks reported that they had tightened their lending standards on commercial real estate (CRE) loans over the past three months, slightly less than the roughly 85% that reported doing so in the October survey. Fifty percent of foreign respondents also indicated that they had tightened their lending standards on CRE loans. On net, about 55% of domestic and foreign respondents reported weaker demand for CRE loans over the survey period. In response to special questions on CRE lending, significant net fractions of banks reported having tightened many lending policies on CRE loans. Over 2008 as a whole, about 95% of domestic banks increased their loan-rate spreads, and about 80% tightened their loan-to-value ratios. About 75% of foreign respondents, on net, reported wider loan-rate spreads, and about 65%, on net, had reduced their loan-to-value ratios. About 30% of the domestic respondents indicated that the shutdown of the CMBS [commercial mortgage-backed securities] securitization market had led to an increase in CRE lending at their bank over the second half of 2008, whereas about 15% indicated that the shutdown of the CMBS securitization market had reduced the volume of their CRE lending."
"All 50 states and the District of Columbia recorded both over-the-month and over-the-year unemployment rate increases" in December, the Bureau of Labor Statistics (BLS) reported on January 27. For the month, nonfarm payroll employment decreased in 48 states, was unchanged in Oklahoma, and rose only in Louisiana (3,700 or 0.2%) and D.C. (100 or less than 0.05%). Over the year, nonfarm employment increased in eight states and D.C. and decreased in 42 states. Over the year, construction employment rose only in Oklahoma, 4%; Louisiana, 4%; D.C., 2%; and Texas, 1%. The biggest percentage losses were in Utah, -22%; Arizona, -21%; South Carolina, -17%; Florida, -16%; and Michigan, -16%.
Mass layoffs (involving 50 or more workers in a month from a single employer) in December were the highest for December in the 13-year history of the series overall and for six out of 21 major industry sectors, including construction, BLS reported on January 28. Construction accounted for 16% of mass layoff events and 12% of associated initial unemployment claims, although the industry employs only 5% of all employees.
Union members accounted for 12.4% of employed wage and salary workers in 2008, up from 12.1% in 2007, BLS reported on January 28. Among private industry workers, 7.6% were union members. Construction had the third-highest rate of unionization (15.6%, up from 14.4% in 2007) among private industries, after transportation and utilities (22.2%) and telecommunications (19.3%). The unionized share in construction rose because total employment in construction shrank by 909,000 (11%) to 7,652,000; employment of union members was almost constant at 1,195,000.
Total compensation costs (salaries, wages and benefits) rose 0.5% in the fourth quarter, seasonally adjusted, compared to a rise of 0.7% in the third quarter, BLS reported on Friday. For the 12 months ending in December, compensation rose 2.6%, down from 3.3% in 2007. Compensation in construction increased 0.6% in the fourth quarter, vs. 0.5% in the third, and 3.1% for the year, compared to 3.5% in 2007.
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