Construction hiring outpaces national numbers
The U.S. construction industry added 19,000 net new jobs in November and has added jobs for three consecutive months, according to an analysis of the latest U.S. Bureau of Labor Statistics data released at the beginning of December.
Industry employment is up by 2.4 percent on a year-over-year basis, considerably faster than the overall economy’s 1.6 percent job growth rate. Construction industry employment growth likely would be much sharper if more suitably skilled or trainable workers were available to fill available job openings.
The skilled labor shortage appears to be impacting nonresidential activity more than residential. The nonresidential sector added 1,100 net new jobs in November, while the residential sector added 19,600 positions. Heavy and civil engineering lost 2,100 jobs for the month.
The demand for construction talent was strong before the election, and the outcome has improved the near-term outlook for private and public construction activity. The implication is demand for construction workers is positioned to remain high, which will translate into gradual reduction in industry unemployment and significant wage pressures.
Some of these wage pressures already are evident. Construction firms in the nation’s hottest markets, including New York, Seattle and Miami, report in certain occupational categories, compensation is rising at a 10 percent per annum pace or more. This appears to be particularly true for construction superintendents and managers.
Next year is shaping up to be a good one for both residential and nonresidential construction segments. Of the two branches of the industry, nonresidential likely offers the larger upside. An infrastructure-led stimulus package largely would be oriented around nonresidential activities. Moreover, in certain markets, there is evidence the apartment market is approaching saturation. Expected increases in interest rates next year also would tend to hit certain residential activities (i.e., single-family construction) more forcefully.
The construction unemployment rate remained unchanged at 5.7 percent in November. One might have expected this rate would have declined given the generally elevated levels of demand for construction talent. However, there are certain parts of the country that are softer economically, including many commodity-rich communities that have been impacted by lower oil and natural gas prices. Moreover, it is difficult to assess the skill level of jobseekers.
The unemployment rate for all U.S. industries fell to 4.6 percent, the lowest rate since mid-2007 and 0.3 percentage points below October’s rate. The labor force lost 226,000 persons for the month but still is more than 2 million people larger than at the same time one year ago.
Anirban Basu is chief economist with Associated Builders and Contractors.