By Richard Branch, Chief Economist Dodge Data & Analytics
The U.S. economy added back 4.8 million jobs in June, well above expectations of 3.0 million. June’s addition follows a gain of 2.7 million in May (revised up from 2.5 million). Private sector employment improved by 4.8 million while the government sector added just 33,000 new positions. The unemployment rate fell to 11.1% from 13.3% in May. Questions raised about the April and May jobs reports (that furloughed workers were not classified as unemployed thereby lowering the unemployment rate) appear to have been somewhat mitigated in June.
Employment in the construction sector improved by 158,000 positions. Jobs in building construction increased by 32,000, while specialty contractors added 135,400 positions. Heavy and civil employment fell by 9,700 positions. With June’s data the construction sector has added back more than half of the jobs lost in March and April.
While certainly a positive sign that the U.S. economy is in recovery, the survey was undertaken before new flare-ups of the virus in Texas, Florida, California and other states. It therefore does not reflect the new business shutdowns mandated by state and local governments in these areas. Should the number of new cases continue to accelerate in the weeks to come, and business closures expand, it raises questions about the ability of the labor market to post further strong gains and raises the specter of a stalled recovery.
In a separate report released this morning the number of initial claims for unemployment insurance for the week ending June 27 fell slightly to 1.43 million – still, its 14th week above 1 million. These elevated numbers continue to point to the downside risk for consumer spending, particularly when the expanded unemployment insurance benefits provided by the CARES Act expire at the end of the month.
By Richard Branch, Chief Economist, Dodge Data & Analytics
BEDFORD, MA – June 5, 2020 – In a huge upside surprise the U.S. economy added 2.5 million jobs in the month of May – consensus estimates were looking at a potential decline in employment of between 4 to 8 million jobs. May’s net addition to employment follows declines of 1.4 million in March and 20.7 million in April. The unemployment rate fell from 14.7% to 13.3%. Private sector jobs increased by 3.1 million while government employment was down by 585,000.
From a construction standpoint, the sector added back 464,000 jobs following a decline of 995,000 in April. Employment in building construction rose by 105,000, while heavy and civil engineering jobs increased by 33,500. Specialty trade contractors added 325,000 jobs.
Today’s release confirms that when looking back on this recession, May will have been the low point with the recovery phase beginning in June. As state and local governments continue to loosen rules on business activity, hiring will certainly pick back up and the economy will move forward.
However, this recovery will be a very long and slow process fraught will potential pitfalls. Even with today’s number, employment is down close to 20 million from its February level. The easy lifting will come first. With the massive negative numbers in April, there was bound to be an immediate jump in employment as people started returning to work. That jump has come sooner than expected, but growth in the second half of the year will nevertheless be slow-going. Even by year end, the unemployment rate will be stubbornly high – potentially still close to 9% - compared to the 3.5% rate before the COVID crisis began. May’s report should certainly be viewed with a sense of cautious optimism in these dark and difficult times.
By Kim Kennedy, Director of Forecasting, Dodge Data & Analytics
BEDFORD, MA – May 8, 2020 – Gut-wrenching is the word that comes to mind regarding the U.S. Bureau of Labor Statistics’ latest employment release. In April, the first full month of stay-at-home orders and social distancing due to COVID-19, the U.S. economy lost 20.5 million jobs and the unemployment rate spiked to 14.7%. This was, by far, the largest collapse of the labor market since the Great Depression. March job losses were revised down to 870,000 and, combined with April, sum to 21.4 million job losses over the past two months. These losses dwarf the 8.7 million jobs lost during the Great Recession and essentially wipe out the 22.4 million jobs gained in the decade since it ended.
The suddenness of the downturn was stunning. As recently as February, the job market had been growing for 113 months and the unemployment rate had fallen to a 50-year low of 3.5%. Furthermore, the current unemployment rate does not include the 5.1 million people whose hours were cut or the unknown numbers whose pay was reduced as a result of the pandemic.
The April figures shattered previous historical records. Previously, the largest one-month decline in employment had occurred in September 1945 when 2.0 million jobs were lost. The previous record for the highest unemployment rates (where records only go back to 1948) was 10.8% in November 1982, although estimates suggest that the unemployment rates reached nearly 25% during the Great Depression.
Job declines were widespread across industries in April. Construction lost 975,000 jobs with most of the losses coming from Specialty Trades, which fell by 691,000. But other industries were hit even harder: the greatest losses came from leisure and hospitality where 7.7 million jobs were lost (47% of the total). Most of these jobs came from restaurants and bars, which were down 5.5 million. The retail sector lost 2.1 million jobs, although warehouses/supercenters gained 93,000 jobs as online shopping surged. Education and healthcare lost a combined 2.5 million jobs in April and professional/business services were down 2.1 million. Even government employment was down 980,000 with most losses coming from local governments where 801,000 employees were laid off, mostly due to school closures.
As many states slowly begin to reopen during the month of May, job losses should begin to abate. Still, it will be many more months before the economy, and the job market, return to any sense of normalcy. As Thomas Paine once said, “These are the times that try men’s souls.”
By Richard Branch, Chief Economist Dodge Data & Analytics
BEDFORD, MA - April 30, 2020 - The much anticipated advance release of first-quarter GDP came in at an annualized -4.8%, the largest quarterly decline since the fourth quarter of 2008. This was a little worse than Dodge’s expectation for a 2.5% decline.
Weakness was widespread. Consumer spending dropped 7.6% on an annualized basis, marking the largest quarterly percentage drop since the second quarter of 1980. Within consumer spending, the only category to post growth in the quarter was nondurable goods (aka groceries and other consumables).
Private investment fell back 5.6% (annualized), but the underlying story was mixed. Stark declines were evident in both nonresidential structures and equipment, the business portions of private investment. Residential investment, by contrast, posted an annualized 21% gain in the first three months of the year. Separately, Dodge reported that first-quarter single family starts were the strongest since 2007. Government spending also increased, but by a tepid 0.7% (annualized) in the first quarter.
Of course, the first quarter ended with March, before the full force of shutdowns, increased unemployment, and physical distancing were fully accounted for in economic data. Second-quarter GDP will likely be even more dour — dropping by 24% on an annualized basis in the Dodge forecast. And this may turn out to be an overly optimistic projection.
As the year transitions into the second half and as the country gradually reopens, the economy will rebound. However, the growth trajectory will depend largely on the track of the virus and how well it can be contained as stay-at-home orders are eased. Tracking, measuring, and very gradual re-opening will be key to a sustained recovery.
By Richard Branch, Chief Economist, Dodge Data & Analytics
BEDFORD, MA – FEBRUARY 24, 2020 – The mounting number of cases of COVID-19 (Coronavirus) has roiled stock markets around the world and added concern that global economies will be materially impacted. Estimates from Moody’s Analytics suggest that first-quarter U.S. GDP growth could be reduced by nearly 0.45 percentage points as a result of the outbreak with tourism and travel taking the largest hit among U.S. industries. If the outbreak is contained quickly, U.S. economic growth should rebound in the second quarter.
The most notable impact comes from supply chains for goods from China. These supply chains have been crimped as Chinese workers remain at home, causing production to fall substantially. Here in the U.S., General Motors unions have warned that U.S. production could slow as parts dry up. Apple Inc. announced that it will not meet its first-quarter revenue projections as their China plants are shuttered. Even N.H.L hockey players have noted the shrinking supply of hockey sticks. Consumer sentiment is also taking a hit. Should containment of the virus be elusive, we could see consumer spending and business investment sour — which could cause a further drag on U.S. economic growth.
The construction industry is also not immune to challenges presented by the outbreak. A rough calculation suggests that nearly 30% of products typically used in U.S. building construction are imports from China, making the country the largest single supplier to the U.S. If the virus is not quickly contained and quarantines remain intact, supplies will continue to tighten causing building costs to continue to escalate, and potentially causing projects to be delayed or cancelled outright. The exact extent to which this happens will depend on the ability of U.S. builders to substitute products from China to domestic or other international suppliers. Note though, that many Asian countries, such as Japan, South Korea, and Vietnam that also export building products to the U.S. rely heavily on raw materials from China.
At present, our outlook continues to expect a modest decline in construction starts in 2020. The current outbreak is one of many issues facing the U.S. economy this year that will lead to a slowdown in overall economic growth and push starts lower. The issue, however, remains in flux. Dodge will continue to assess the impact of the COVID-19 virus in the coming months.
By Richard Branch, Chief Economist
BEDFORD, MA – January 30, 2020 – The advance reading for U.S. Gross Domestic Product in the fourth quarter came in at a close-to-expected annualized 2.1%. While likely to be revised in the coming months, it painted a picture of an economy that continues to hover near its potential rate.
A closer look at the details, however, suggests that there are reasons to expect slower growth in 2020. On the plus side, the fourth quarter pace of government spending picked up driven equally by state and local governments and federal defense spending. Trade also provided a sizeable positive contribution to the headline number as exports jumped and imports tumbled.
Total fixed investment was neutral in the fourth quarter. As expected, residential investment picked up in line with rising sales and construction of single family housing in the fourth quarter. However, nonresidential investment in both equipment and structures declined for the third consecutive quarter most likely due to uncertainty over trade policy. Inventories were also a net drag on headline GDP.
The consumer, who has been the stalwart of economic growth through most of 2019, took a concerning breather, however, as spending growth cooled from an annualized 4.6% in the second quarter and 3.1% in the third quarter to just 1.8% in the final three months of the year.
For the full year, the U.S. economy grew at a 2.3% pace, down from the 2.9% rate in 2018, but about on par with growth in 2017.
Looking ahead, labor constraints are likely to slow employment growth in 2020 making it harder for consumers to sustain their level of contribution to the economic growth. Business investment is also likely to remain sluggish as uncertainty over trade policy continues despite the Phase I trade deal signed between the U.S. and China in early-January. Residential construction will also struggle to gain a foothold as margins to build entry level homes for the ballooning millennial generation remain tight. All told, economic growth will slow but remain positive in 2020, allowing the longest expansion in U.S. history to continue.
By Kim Kennedy, Director of Forecasting
Payroll employment grew by 164,000 in July, following a downwardly revised increase of 193,000 in June. This month’s increase indicates that employment and the overall economy continue to grow even if the pace has slowed from last year and even though the economy has now been expanding for a decade. After increasing at a monthly rate of 223,000 in all of 2018, job growth slowed to 165,000 per month in the first seven months of 2019 and slowed further to just 140,000 in the most recent three months. Despite the slowing pace of growth, the unemployment rate remained steady at 3.7% in July. Even July’s wage growth, which has been particularly soft over the long stretch of the recovery, rose by a healthy 3.2% from a year earlier.
July’s employment growth was broad-based, with many industries showing gains. The service-producing sector dominated July gains with an increase of 133,000 jobs. Goods-producing industries gained just 15,000 and government grew by 16,000. Within services, the large education and healthcare sector advanced by a strong 66,000 jobs and professional/business services rose by 38,000.
Within the goods-producing sector, manufacturing gained 16,000 jobs as the motor vehicle and parts industry saw employment grow by a healthy 7,200 after a modest dip in June. At the same time, construction was only able to add 4,000 jobs in July after a more ambitious 18,000 gain in June. Within construction, the improvement came from specialty trades contractors, where employment rose by 7,400. Employment in residential building gained 1,400 and nonresidential building remained little changed, but heavy/civil engineering construction fell by 4,300 jobs.
The consensus believes this was a solid jobs report, signaling that the economy still has life left in it, but within the report were suggestions that the economy is slowing over and above the general slowdown in job growth. The average workweek declined (manufacturing has cut back overtime) and total hours have flattened in 2019. These cautionary indicators may be behind the Federal Reserve’s move to drop interest rates by a quarter percent earlier this week. The Fed cited a slowing global economy and a desire to shore up domestic growth as its reasons for the dip in interest rates. Uncertainty about trade policy is also giving the Fed cause for concern. In fact, Wall Street expects the Fed to continue lowering rates at its next meeting in September. While most don’t expect this jobs report to have much effect on the Fed’s rate decision, the administration’s decision to increase tariffs on Chinese imports may be more impactful.
Nonbuilding Construction and Nonresidential Building Rebound After a Weak April
NEW YORK – June 20, 2019 – At a seasonally adjusted annual rate of $757.0 billion, new construction starts in May climbed 10% from April, according to Dodge Data & Analytics. The increase continues the double-digit swings that were reported during the previous two months, when a 16% hike for total construction starts in March was followed by a 15% decline in April. Each of the three main construction sectors contributed to May’s 10% gain. Nonbuilding construction rebounded 32% after depressed activity in April, lifted by an especially strong amount of new power plant starts and an $800 million light rail project in the Minneapolis MN area. Nonresidential building improved 7%, supported by groundbreaking for two very large manufacturing plant projects. Residential building edged up 2%, with modest gains for both single family housing and multifamily housing. Through the first five months of 2019, total construction starts on an unadjusted basis were $295.0 billion, down 9% from the same period a year ago. On a twelve-month moving total basis, total construction starts for the twelve months ending May 2019 were 2% below the amount reported for the twelve months ending May 2018.
By Kim Kennedy, Director of Forecasting, Dodge Data & Analytics
BEDFORD, MA – May 3, 2019 – The job market seems to have bounced back in April after having experienced a mild case of the flu in February and only partial recovery in March. The number of payroll jobs grew by 263,000 in April after gaining just 56,000 in February and 189,000 in March. With this stronger gain in employment, the April unemployment rate slid to 3.6%, the lowest level in 50 years. Given its advanced age (the job market is now in its 10th year of expansion), the health of the labor market continues to surprise.
The heart of this month’s growth came from professional/business services (up by 76,000 jobs), healthcare (up 53,000), and hospitality (up 34,000). Construction payrolls also boosted job growth by a robust 33,000 in April. At the other extreme, the retail sector lost 12,000 jobs in April, continuing its downward slide.
The survey of households showed somewhat more fragility in the labor market than the establishment/payroll survey (reported above). According to this survey, the three main components – the number of people in the labor force, the number of people with jobs, and the number of unemployed people) all declined in April. The total labor force (a combination of those employed and those looking for work or unemployed) fell by 490,000 in April. The number of people employed fell by 103,000 April and the number of unemployed fell by 387,000 over the month. Because the number of unemployed fell by more than the number of employed, the unemployment rate was able to improve.
With a decline in the labor force during April, the labor force participation rate (the share of the 16+ population either employed or looking for a job) slipped to 62.8% – the same as a year earlier, but down from 63.0% in March and 63.2% in the first two months of the year. On the positive side, the participation rate remains above the low of 62.4% reached in September 2015.
The gains in average hourly earnings have also slowed in 2019 despite the very low unemployment rate and tightening labor market. In April, earnings rose 0.2% following increases of just 0.1% in March and January. Only February’s 0.4% gain matched levels seen near the end of 2018. Still, in the first four months of 2019, private sector wages were up 3.3% from a year earlier, much stronger than seen in prior years of the recovery. Construction wages have performed about average in 2019. Although April wages gained a stronger 0.4% over the month, construction wages were up 3.2% in the first four months of the year.
Overall, the April jobs report contained good news for the U.S. economy. It suggests that the first quarter’s ills were perhaps temporary, rather than a sign that the job market, and the entire U.S. economy, have reached the end of their lifecycle as recession nears. Even though it’s no longer a bounding pup, there may be some life in the old dog yet.
IMPORTANT INDUSTRY UPDATE: The potential Impact of Coronavirus (COVID-19) on Construction Starts.Watch the webinar replay.
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NEW JERSEY – June 5, 2020 – The Dodge Momentum Index moved a scant 0.1% lower in May to 129.2 (2000=100) from the revised April reading of 129.4. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. Read More
Broad based weakness present due to COVID-19 spread NEW JERSEY — May 14, 2020 — Total construction starts declined 25% from March to April to a seasonally adjusted annual rate of $572.2 billion as COVID-19 and economic recession hit the construction sector. In April, nonresidential building starts fell 37% from March, while residential dropped 25%. The decline in nonbuilding construction starts was more tepid, falling just 5% due to strong activity in streets and bridges. Read More
NEW JERSEY – May 7, 2020 – The Dodge Momentum Index moved 6.0% lower in April to 135.9 (2000=100) from the revised March reading of 144.5. The Momentum Index, issued by Dodge Data & Analytics, is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. Read More
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