The construction industry is undergoing a dynamic and complex evolution, with recent employment data highlighting both challenges and opportunities. From a sharp decline in job openings in early summer to a notable rebound in job creation by mid-year, the trends reveal a multifaceted picture of the sector’s health.
While high interest rates and economic uncertainty weigh heavily on residential construction, nonresidential sectors like manufacturing, infrastructure, and renewable energy continue to bolster demand. Insights from industry experts paint a nuanced view, balancing the immediate impacts of slowed homebuilding with optimism for sustained growth in commercial projects.
From May to June
The construction industry is experiencing a significant shift in job availability, as evidenced by a sharp decline in job openings. According to the latest report from the Bureau of Labor Statistics (BLS), construction job openings plummeted by 71,000, or approximately 19%, from May to June. This drop marks a notable change in the employment landscape, raising questions about the factors driving this trend and its implications for the industry.
From June to July
The construction industry added 25,000 jobs on net in July, according to an Associated Builders and Contractors analysis of data released by the U.S. Bureau of Labor Statistics. On a year-over-year basis, industry employment has expanded by 239,000 jobs, an increase of 3.0%.
Nonresidential construction employment increased by 16,200 positions on net, with growth in all three subcategories. Nonresidential specialty trade contractors added the most jobs, increasing by 11,300 positions. Heavy and civil engineering and nonresidential building added 2,900 and 2,000 jobs, respectively.
The construction unemployment rate rose to 3.9% in July. Unemployment across all industries rose from 4.1% in June to 4.3% last month
Expert Insights
According to an article posted in Construction Dive, Anirban Basu, chief economist for Associated Builders and Contractors, highlighted the contrasting trends within the construction sector. "More new housing units were completed in June than in any month since January 2007, but high interest rates have weighed on home builders’ backlogs," Basu noted. He also emphasized that nonresidential construction, buoyed by strong segments like manufacturing and infrastructure, should sustain a high demand for labor.
In the same article, Ken Simonson, chief economist for Associated General Contractors of America, offered additional perspective on the data. He pointed out that while the significant drop in job openings suggests slowing demand, the relatively low rate of layoffs indicates that firms still expect to need workers in the near future. In June, 133,000 construction workers were laid off, and 124,000 quit, down 11% and 34% from the previous month, respectively. The unemployment rate for workers with construction experience was 3.3% in June, the lowest rate for the month in the 25-year history of the report and lower than the national average for all industries.
Residential vs. Nonresidential Construction
Interpreting the BLS data can be challenging due to the lack of differentiation between residential and nonresidential construction. However, there is a notable decrease in homebuilding, along with significant drops in office and warehouse projects. Despite these declines, the industry is experiencing extremely strong growth in data centers, continued strength in manufacturing, and an increase in renewable energy and infrastructure work. However, the timing of energy and infrastructure projects remains unpredictable, which may cause contractors to temporarily reduce their hiring efforts.
Implications for the Industry
The decline in job openings reflects broader economic trends and sector-specific challenges. For residential construction, high interest rates have dampened demand, leading to fewer new projects and, consequently, fewer job openings. Conversely, the ongoing strength in manufacturing and infrastructure projects suggests that the commercial construction sector will continue to require skilled labor, albeit with some fluctuations based on project timelines.
ABC Chief Economist Anirban Basu commented on the broader economic context, suggesting that the U.S. may be heading into a recession. “Although economists have been predicting a downturn for over two years, the recent economic slowdown feels more pronounced. Unemployment is rising quickly, consumer spending is slowing, and U.S. equity markets are experiencing significant losses. This indicates a growing belief that the Federal Reserve has been slow to reduce interest rates,” Basu said.
Sources: https://www.bls.gov/iag/tgs/iag23.htm, https://www.constructiondive.com/news/construction-job-openings-plummet-nonresidential/722870/
