Thursday, May 31, 2007

Construction Spending Increases

From CBS.Marketwatch:

Spending on U.S. construction projects rose 0.1% in April as a jump in private nonresidential construction outlays offset a drop in spending on residential projects.

Spending on private residential construction projects fell by 1.0% for the second consecutive month, the Commerce Department reported. Meanwhile, private nonresidential construction spending climbed by 1.5% in April, the government said.

Construction spending in March was revised to rise upward, by 0.6%, from a previously estimated gain of 0.2%

Here's a link (PDF) to the Census Bureau Report.

A few points.

1.) Nonresidential construction is a little under 52% of total construction spending. So long as nonresidential increases at the same pace residential decreases, overall construction spending will be fine.

2.) Nonresidential construction has increased 12.7% since April 2006, while residential has decreased 14.1%. Because these rates are pretty close to offsetting, I have to wonder if the increase in non-residential construction is absorbing the loss in jobs in the residential construction sector. Overall construction employment has barely dropped in the last year. According to the BLS, it has dropped from 7,699,000 to 7,680,000, or a loss of 19,000. The preceding assumes that nonresidential and residential labor is interchangeable and the nonresidential projects are happening in the same place.

3.) Practically every area of nonresidential spending increased, making the gains pretty broad based.