Area Economy

Construction industry loses 25,000 jobs since April

September 9, 2016
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The U.S. construction industry lost 6,000 net jobs in August, according to an analysis of data provided by the U.S. Bureau of Labor Statistics.

BLS also revised July’s estimate from 14,000 net new jobs to 11,000 net new jobs, meaning the construction industry has lost 25,000 net jobs since April after adding 68,000 through the first three months of 2016.

The nonresidential sector lost 10,700 net jobs in August after adding 9,600 jobs in July (revised down from 11,500). Employment in the heavy and civil engineering sector fell for the fourth time in five months, declining by 6,500 net jobs, an indication of weak infrastructure investment. The construction industry’s unemployment rate rose to 5.1 percent in August but still is 3.4 percentage points lower than it was at the beginning of 2016.

The downbeat employment data came less than 24 hours after a relatively upbeat nonresidential construction spending report. This pattern of good news followed by bad news is nothing new and continues to paint a confusing picture for nonresidential construction activity in the United States.

Most contractors continue to report decent backlog, and although profitability remains a challenge, margins are thicker than they were several years ago. Construction firms continue to complain about a lack of appropriately trained workers, and construction wage costs are rising. These are signs of an industry that remains busy.

However, the data also are consistent with the notion the pace of expansion in nonresidential construction activity has slowed. Nonresidential construction spending has expanded by less than 2 percent during the past year. The biggest culprit continues to be a lack of public sector capital spending on infrastructure, whether in the form of roads or water systems.

Survey data regarding commercial real estate lending standards indicate lending standards are tightening. While spending in office, lodging and commercial categories has expanded over the past year, the pace of growth is constrained by a combination of regulatory pressures and growing concerns regarding overbuilding in certain key communities and product segments.

The other consideration is job growth remains rapid in a number of key economic segments, including in e-commerce/distribution, retail and a host of services. This may lure construction workers away from the industry, helping to explain continued low industry unemployment despite the job losses experienced in recent months.

The national unemployment rate remained unchanged for a third consecutive month and stands at 4.9 percent. The labor force expanded by 176,000 workers in August and has grown by roughly 1 million people over the past three months. Labor force participation stands at 62.8 percent.

Anirban Basu is chief economist with Associated Builders and Contractors.

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