Why June's upbeat jobs report isn't necessarily positive for construction

Abstract

Dive Brief: Nonresidential construction added 16,500 jobs in June, according to the Bureau of Labor Statistics, a surge that offset 4,100 jobs lost in the residential sector. The June gains helped push the industry's overall unemployment rate even lower, to 3.7%. That's the lowest rate for June in the data series' 23-year history, according to Ken Simonson, chief economist for the Associated General Contractors of America. The job gains coincided with a 13-cent bump in hourly wages during the month, to $34.68, outpacing the 10-cent rise in wages for all industries. Dive Insight: While additional jobs are usually viewed as a sign of industry strength, construction economists found reasons for concern. The Fed has already undertaken three increases to raise a key borrowing rate by a total of 1.5 percentage points since the beginning of the year, with more hikes likely ahead. Basu said higher borrowing costs, in conjunction with inflated materials prices and rapidly rising worker compensation, give project owners more incentive to postpone or cancel projects, and cuts into contractors' profitability. In June 2021 the unemployment rate for job seekers with construction employment was 7.5%, more than double the current rate. In the 12 months since then, the number of construction workers looking for jobs fell by 345,000, or 47%. That suggests there are few experienced job seekers left in the field for companies to fill the 466,000 construction jobs that were still open at the end of May. That's the largest number of unfilled jobs in the sector for May since 2000, when the data series first appeared.