Construction Reclaiming Role in U.S. Economy, Years After Subprime Crash

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Construction Reclaiming Role in U.S., Years After Subprime Crash

Construction, left for dead after the subprime crash, may be reclaiming its importance for the U.S. economy.

Today’s private-sector payrolls report from ADP showed the industry adding 49,000 jobs in April. That translated into a 0.66 percent increase overall — triple the broader total. It followed a string of increases going back more than two years.

Construction now accounts for 5.87 percent of U.S. employment, according to ADP. That’s the highest proportion since housing went into a free-fall in late 2008. Still, despite being less than 6 percent of the overall workforce, the industry has delivered more than 15 percent of this year’s new jobs.

Other reports have indicated a similar trend. The government’s monthly construction-spending report beat estimates by wide margins in January and February. Both months showed double-digit gains for highway construction. Remember, state and local government increase project funding after years of economic growth because that’s when their tax receipts are highest.

Companies associated with construction have also been rising. Homebuilders including Lennar (LEN) and D.R. Horton (DHI) have outperformed the S&P 500 in the last month. Ditto for suppliers like United Rentals (URI) and Vulcan Materials (VMC).

iShares US Home Construction ETF (ITB), with "Golden Cross" of 50- and 200-day moving averages.
iShares US Home Construction ETF (ITB), with “Golden Cross” of 50- and 200-day moving averages.

Construction’s rebound also seems to go hand-in-hand with accelerating wage gains lower in the pay scale. Did you know that Goldman Sachs published a report in March showing that the lower-half of workers are seeing income growth of more than 4 percent while the better-paid half are slowing to barely half that pace?

In conclusion, big technology companies like Apple (AAPL) remain the biggest names in the market. And, IT spending is an increasingly important part of the U.S. economy.

But, the data shows a rebound in the traditional construction industry. It seems to have implications for both companies and workers, so investors may want to watch it more closely again. After all, 2008 was more than a decade ago!

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