Nonfarm payroll employment increased by 80,000 (0.1%) in June, seasonally adjusted, and by 1,777,000 (1.4%) over the past 12 months, theBureau of Labor Statisticsreported July 6. The unemployment rate was 8.4%, not seasonally adjusted (8.2%, seasonally adjusted), compared with 9.3% in June 2011. Construction employment in June was virtually unchanged, rising by 2,000 from May and 14,000 (0.3%) from June 2011, to 5,509,000, seasonally adjusted, after a downward revision to the May total.

The unemployment rate for former construction workers was 12.8%, not seasonally adjusted, down from 15.6% in June 2011 and 20.1% in June 2010. (BLS does not seasonally adjust unemployment rates by industry.) Over the past two years, construction employment was virtually unchanged but the number of unemployed former construction workers fell by 746,000, suggesting workers are quitting construction, either to take jobs elsewhere, return to school, retire or otherwise leave the workforce.

May construction spending

Construction spending in May totaled $830 billion at a seasonally adjusted annual rate, a 29-month high, up 0.9% from the upwardly revised April total and up 7.0% from May 2011, theCensus Bureaureported July 6. (Census posted routine “benchmark” revisions back to January 2010.) The year-over-year increase was a bit slower than the 9.4% year-to-date  growth for the first five months of 2012 combined (compared with the same span in 2011), as all three major components decelerated slightly.

Private nonresidential spending rose for the third month in a row, climbing 0.4% in May, 19% year-over-year and 25% YTD. Private residential spending was up 3% for the month, 7.5% over 12 months and 7.6% YTD. Public construction spending fell for the fifth straight month, by 0.4% for the month, -3.9% over 12 months and -3.5% YTD. The largest private nonresidential segments (listed in descending current order) logged large double-digit year-over-year percentage gains: power, including oil and gas (down 0.1% in May but up 35% over 12 months); manufacturing (up 2.8% and 27%, respectively); commercial-retail, warehouse and farm (up 1.3% and 11%); and private health care (0.3% and 11%). The fifth-largest segment, private office construction, rose 0.1% and 6.5%.

Of the three private residential segments, multifamily construction soared 6.3% for the month and 50% over 12 months; single-family construction, 1.8% and 15%, respectively; and improvements, 3.6% and -3.4%. Of the two largest public categories, highway spending slipped 0.5% for the month but edged up 1.6% year-over-year, while educational spending dropped 3.0% and 7.1%.

Future factory, apartment construction

Conflicting signals appeared regarding future demand for factory construction. New orders for U.S. manufactured goods (excluding semiconductor manufacturing) climbed 0.7% in May, seasonally adjusted, after decreasing in April and March, and were up 6.1% YTD for the first five months of 2012, compared with January-May 2011. Orders for construction materials and supplies rose 0.9% for the month and 6.8% YTD. The more volatile orders for construction machinery fell 7.8% in May but rose 3.3% YTD. Persistent increases in orders can encourage manufacturers to build, expand or modernize factories.

Airbus said July 2 it would spend $600 million to build jetliners near Mobile, Ala., its first U.S. assembly plant. But, also July 2, theInstitute for Supply Managementsaid that its manufacturing Purchasing Managers Index dropped to 49.7 last month from 53.5 in May. Readings below 50 indicate contracting activity; the index reflects the difference between the percentages of purchasing executives at manufacturing firms who say activity rose or fell in the latest month. The index is not weighted by size of firm, industry mix or magnitude of increase or decrease reported by each respondent. The new orders index fell to 47.8 from 60.1, the steepest decline in more than 10 years.

New data released this week by real estate research firmReis Inc.suggests a strong outlook for apartment construction but not private offices. Average apartment rents rose in all 82 markets tracked by Reis and set records in 74 of them, the Wall Street Journal reported July 5. The vacancy rate fell to 4.7%, the lowest since the end of 2001. Office construction activity appears likely to remain sluggish and confined largely to tenant improvements as firms with five-year leases signed in 2007 move to smaller quarters.

For instance, “In Los Angeles … law firm Morrison & Foerster LLP last month signed a lease for … less than half the size of the offices it’s moving from,” the Journal reported July 3. “Gregory Koltun, managing partner of the office [, said] the firm is cutting the size of its library … and it has many empty desks left over from years when law firms had more administrative assistants.” Citing Reis’s survey of 79 metropolitan areas, the article reported that occupancy rose 0.12% in the second quarter, less than the 0.18% rise in the first quarter.

“‘These levels of improvement remain incredibly weak by historical standards,’ Reis said. [But] San Francisco-area rents grew 1.1% over the course of the second quarter [and 6.4% over 12 months]. Other areas with strong tech sectors that showed improvement included San Jose, Seattle, Austin and Denver, Reis said.”