Some employment data recently released by the U.S. Bureau of Labor Statistics (BLS) illustrates the patchy recovery in the construction market, with some states and metropolitan areas seeing a solid boost in construction employees returning to work and others still lagging the overall market. And with electrical contractors accounting for well over 40% percent of the sales through electrical distributors, when construction employment is on the rise, so are sales in the electrical wholesaling industry.
According to this BLS data, Nebraska, the District of Columbia, Washington, Arizona, Texas and Hawaii saw the biggest percentage increases in construction employment from Dec. 2011 to Dec. 2012. The metropolitan statistical areas (MSAs) showing the biggest percentage increases include Pascagoula, MS (+42%); Haverhill-North Andover-Amesbury, MA-NH (22%); Lafayette, LA (17%); Omaha-Council Bluffs, NE-IA (16%); El Centro, CA (15%), and Mobile, AL (15%).
On a sheer number basis, seven MSAs were the clear market leaders, with construction employment increases of at least 5,000 workers YTY through Dec. 2012. They were: Houston-Sugar Land-Baytown, TX (17,600); Dallas-Plano-Irving, TX (8,300); Seattle-Bellevue-Everett, WA (7,800); Boston-Cambridge-Quincy, MA (5,900 ); Los Angeles-Long Beach-Glendale, CA Div. (5,700) and Baton Rouge, LA (5,400).
According to an analysis of this construction data by the Associated General Contractors of America (AGC), Arlington, Va., construction employment increased in 139 out of 337 metropolitan areas between Dec. 2011 and Dec. 2012, declined in 133 and was stagnant in 65.
Ken Simonson, the association’s chief economist said in a press release that analyzed this employment data, “Private sector demand for energy, health care, higher education and residential construction is having a positive impact in a growing number of metro areas. Unfortunately, construction employment in almost as many metro areas appears to be suffering from declining public sector demand and a private sector market that is still well-below peak levels.”
AGC said the largest job losses were in Atlanta-Sandy Springs-Marietta, GA (-4,900 jobs, -5%); followed by Portland-Vancouver-Hillsboro, OR-WA (-3,600 jobs, -7%); Tampa-St. Petersburg-Clearwater, FL (-3,500 jobs, -7%) and northern Virginia (-3,200 jobs, -5%). Jackson, MS (-20%, -2,000 jobs) lost the highest percentage. Other areas experiencing large percentage declines in construction employment included Columbus, IN (-19%, -300 jobs); Springfield, MA-CT (-18%, -1,400 jobs) and Danville, IL (-13%, -100 jobs).
Electrical Marketing data shows that over the past decade electrical contractors account for 13% of all construction employment in the United States and that on average electrical contractors buy $46,584 in electrical supplies annually for every employee at their companies. That means any gain or loss in electrical contractor employment directly affects the sales of electrical products.
You can get a rough idea of the sales potential in a state, MSA or at an individual electrical contractor by multiplying the number of employees by $46,585. The chart on this page offers estimates for electrical contractor sales potential by state ,using this calculation and the new BLS employment data. The $46,585 national multiplier will vary on a local or regional basis, but for the purposes of this article it works well. Many people are surprised by the dollar value of this multiplier, but for the many electrical distributors that depend on electrical contractors for 50% of their business — as do many of EW’s Top 200 distributors — it’s probably even higher.
Where will electrical contractor sales potential go from here? EW estimates that the market as a whole will grow 4.4% in 2013, but as the saying goes, all business is local, and metro or state growth rates will vary from that national figure. The residential market is growing faster right now in other market segments, and according to the most recent government data, housing starts last month were 23.6% above the January 2012 rate of 720,000 (see related story on page 4).
Stephen Sandherr, AGC’s CEO, is mildly optimistic about the employment conditions in 2013. “Contractors in some areas appear confident enough about market conditions to begin adding staff,” he said in that press release. “The question is whether private sector demand will continue to grow in 2013 or stall as it has done in prior years.”
– Jim Lucy