Area Economy

Residential construction job growth remains tepid

May 19, 2017
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National construction employment remained largely unchanged for the second consecutive month, adding 5,000 net new jobs on a seasonally adjusted basis in April, according to analysis of U.S. Bureau of Labor Statistics data.

The nonresidential construction sector added 3,200 net new jobs in April after adding 8,500 net jobs in March (revised down from 13,300), while the residential sector added just 900 net jobs for the month. Construction employment expanded 2.6 percent on yearly basis, well above the year-over-year growth rate for all nonfarm industries (1.6 percent).

The employment report confirms the U.S. economic expansion remains firmly in place. That said, the simultaneous expansion in job totals and ongoing slow GDP growth indicate the average net new job is associated with relatively low output. This is consistent with still-soft productivity growth and somewhat sluggish wage growth relative to expectations.

Construction has been especially susceptible to weak productivity growth in recent years, in part because skilled workers capable of delivering elevated productivity remain in such short supply. The scarcity of skilled craftspeople helps explain the scant 0.2 percent growth in nonresidential building construction employment over the past year.

Nonresidential construction added 3,200 net new jobs; however, nonresidential specialty trade contractors shed 5,100 net jobs in April. It is conceivable this occurred, as certain segments of private development have begun to slow, including key commercial segments. Conversely, the loss in nonresidential specialty construction positions may simply be a one-month statistical anomaly.

Recent construction spending data indicate overall nonresidential construction activity is climbing, but very slowly. This implies hiring will remain moderate for the foreseeable future. Naturally, if the administration in Washington, D.C., is able to implement a significant portion of its pro-business agenda, the rate of job growth will eventually accelerate appreciably.

The construction industry unemployment rate, which is available only on a non-seasonally adjusted basis, fell 2.1 percentage points in April and now stands at 6.3 percent. Due to seasonal factors, the industry unemployment rate almost always plummets from March to April. Since 2009, that decline has averaged 2.3 percentage points. The national unemployment rate inched down from 4.5 percent in March to 4.4 percent in April. This is the lowest nationwide rate since May 2007.

Anirban Basu is chief economist with Associated Builders and Contractors.

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