Despite Very Weak Industrial Construction Starts, U.S. Unemployment Rate Drops in November

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Researched by Industrial Info Resources (Sugar Land, Texas)--Both the unemployment rate and industrial construction starts have been difficult to pin down in the U.S. throughout 2012. Inconsistency has been the mantra of these two key economic indicators this year as the country struggled through slow economic growth, high oil and gas prices, and a presidential election that slowed everything down. Now that the election is over and the country's path for the next four years has been determined, the country must adjust to what the future holds. In November, industrial spending took a significant dive as companies played wait-and-see with the election while the unemployment rate, somewhat unexpectedly, dropped from 7.9% to 7.7%.

Click on the image at the right for a graph detailing U.S. construction starts by industry in November 2012.

A total of 146,000 new jobs were added in November, and while that still leaves the total unemployment number at 12 million workers, it was a good sign for the economy. However, much of the hiring that was done in November may end up being temporary, as this is the time of year when retailers and transportation companies bring on extra workers for the Christmas holiday. Looking closer at where gains were seen during the month, the bulk of the increases occurred in the private goods-providing sector, which includes retail companies and added 169,000 jobs.

The retail trade itself saw 52,600 new jobs, while education and health services added another 18,000. Motor vehicle and parts dealers added 3,300 jobs, electronics and appliance stores added 9,100 jobs, food and beverage stores added 6,700 jobs, transportation and warehousing companies added 3,500 jobs, and clothing and clothing accessories stores added 33,300 jobs during the month, all of which was indicative of the traditional temporary hiring that occurs this time of year. While some of these jobs will indeed become permanent after the new year, it is typically a small percentage, which could lead to higher unemployment numbers in January.

The construction sector, one of three sectors still experiencing double-digit unemployment, lost 20,000 jobs in November. Unemployment in the construction sector currently stands at 12.2%, while the leisure and hospitality sector is experiencing 10.3% unemployment and the agricultural and related private wage and salary workers sector is topping out at 13.6%. The manufacturing sector, one of the areas that the economy is really counting on growing in the coming year, lost 7,000 jobs during the month, thanks to losses in the computer and electronic products, food manufacturing, primary metals, paper and paper products, and chemicals sectors.

On the industrial spending side of the equation, only $9 billion in capital or maintenance projects began construction during November, making the month one of the lowest industrial spending months of the year. Less than 250 projects actually began construction activities during the month, with the largest number of projects occurring in the Food & Beverage Industry, which edged out the Chemical Processing Industry by two projects. Despite the high volume of projects, the Food & Beverage Industry only saw $575 million in total spending, while the Chemical Processing Industry did a little better with $891 million in total spending.

The Power Industry, traditionally the foundation of monthly spending, saw modest totals for November with 36 capital or maintenance projects worth an estimated $1.7 billion beginning construction. The Alternative Fuels Industry saw the largest amount of investment in November, with 12 projects worth $2.8 billion beginning construction activities. The Pharmaceuticals & Biotech Industry topped the $700 million mark for the month, while the Oil & Gas Production Industry saw $869 million in total spending. For the month, only two industries broke the $1 billion mark, which is a significant decline from most months this year.

The lack of spending in November was not exactly unexpected. Most companies were wary of the presidential election scheduled that month and had already begun to scale back expenditures. Lower expenditures are also expected in December and possibly into the new year, as companies adjust to the election results and the path the country will take to deal with both the "fiscal cliff" and the overall deficit problem. Companies had already been hiring at a slower pace in the post-recession world, as they had determined they could do more with less by streamlining operations. 2013 will be an interesting year both in terms of the unemployment situation facing the country and how companies react to four more years of an Obama presidency.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.