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Construction Labor Market Tightens A Little

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After a period of slowing associated with declines for some elements of the residential construction industry, the count of open construction sector jobs has remained lower than a year ago, per the November Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS). However, the most recent data showed a slight gain for the number of open construction sector jobs.

The number of open jobs for the overall economy increased from 7.84 million to 8.10 million in November. Nonetheless, this is notably smaller than the 8.93 million estimate reported a year ago and reflects a softened aggregate labor market. Previous NAHB analysis indicated that this number had to fall below 8 million on a sustained basis for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. With estimates remaining below 8 million for national job openings, the Fed is continuing a policy of interest rate cuts.

The number of open construction sector jobs increased from a revised 259,000 in October to 276,000 in November. Nonetheless, the November reading of opening, unfilled construction jobs is lower than that registered a year ago (454,000) due to a slowing of construction activity because of elevated interest rates.

The construction job openings rate edged higher to 3.2% in November but remains lower than a year ago, albeit with a fair amount of statistical month-to-month noise in the recent data.

The layoff rate in construction remained in the 2% range in November (2.1%). The quits rate in construction fell to 1.7% in November.

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Construction Labor Market Continues to Ease

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After a period of slowing associated with declines for some elements of the residential construction industry, the count of open construction sector jobs trended lower in the October data, per the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS). The data indicates the demand for construction labor market remains weaker than a year ago.

In contrast, after revisions, the number of open jobs for the overall economy increased from 7.37 million to 7.74 million in October. Nonetheless, this is notably smaller than the 8.69 million estimate reported a year ago and is a sign of a softening aggregate labor market. Previous NAHB analysis indicated that this number had to fall below 8 million on a sustained basis for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. With estimates remaining below 8 million for national job openings, the Fed is underway easing credit conditions.

The number of open construction sector jobs fell from a revised 258,000 in September to a softer 249,000 in October. Elements of the construction sector slowed in prior months as tight Fed policy persisted. The October reading of opening, unfilled construction jobs is lower than that registered a year ago: 413,000.

The construction job openings rate fell back to 2.9% in October and continues to trend lower, albeit with a fair amount of statistical month-to-month noise in the recent data.

The layoff rate in construction moved lower to 1.2% in October after a 2% rate in September. This was the lowest layoff rate for construction in the data series (going back to late 2000). The quits rate in construction increased to 1.9% in October.

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Hurricanes and Strikes Hit Labor Market in October

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Job growth decelerated significantly in October, driven by the effects of strikes and hurricanes. As stated in this month’s job report, October data are “the first collected since Hurricanes Helene and Milton struck the United States”. Despite lower monthly job gains, the unemployment rate held steady at 4.1%, indicating the labor market remains solid.

In October, wage growth remained unchanged. Wages grew at a 4.0% year-over-year (YOY) growth rate, down 0.3 percentage points from a year ago. Wage growth is outpacing inflation, which typically occurs as productivity increases.

National Employment

According to the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 12,000 in October, down sharply from a downwardly revised increase of 223,000 jobs in September, marking the smallest monthly job gain in years. The estimates for the previous two months were revised lower. The monthly change in total nonfarm payroll employment for August was revised down by 81,000, from +159,000 to +78,000, while the change for September was revised down by 31,000 from +254,000 to +223,000. Combined, the revisions were 112,000 lower than previously reported.

In the first ten months of 2024, 1,701,000 jobs were created. Additionally, monthly employment growth averaged 170,000 per month, compared to the 251,000 monthly average gain for 2023. The Fed’s easing cycle began on September 18, marking the end of a period of restrictive monetary policy. The U.S. economy has created about 8 million jobs since March 2022, when the Fed enacted the first interest rate hike of this cycle.

The unemployment rate was unchanged at 4.1% in October. While the number of employed persons decreased by 368,000, the number of unemployed persons rose by 150,000.

Meanwhile, the labor force participation rate—the proportion of the population either looking for a job or already holding a job—decreased by one percentage point to 62.6%. However, for people aged between 25 and 54, the participation rate declined for the third straight month to 83.5%. This rate still exceeds the pre-pandemic level of 83.1%. Meanwhile, the overall labor force participation rate remains below its pre-pandemic levels of 63.3% at the beginning of 2020.

In October, employment continued to trend up in health care (+52,000) and government (+40,000). Temporary help for business and professional services lost 49,000 jobs. Manufacturing employment fell by 46,000 in October. The BLS noted that a decline of 44,000 in transportation equipment manufacturing was “largely due to strike activity.”

Construction Employment

Employment in the overall construction sector increased by 8,000 in October, after 27,000 gains in September. While residential construction shed 5,300 jobs, non-residential construction employment added 13,500 jobs for the month.

Residential construction employment now stands at 3.4 million in October, broken down as 957,000 builders and 2.4 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 3,000 a month. Over the last 12 months, home builders and remodelers added 44,500 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,388,200 positions.

In October, the unemployment rate for construction workers rose to 5.3% on a seasonally adjusted basis. The unemployment rate for construction workers has remained at a relatively lower level, after reaching 15.3% in April 2020 due to the housing demand impact of the COVID-19 pandemic.

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Construction Labor Market is Cooling

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Due to slowing home construction and elevated interest rates, the count of open construction sector jobs continued to decline in July, per the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS). However, this shift lower is also consistent with a cooler overall labor market, which is a positive sign for future inflation readings and the interest rate outlook.

In July, after revisions, the number of open jobs for the overall economy decreased slightly from 7.91 million to 7.67 million. This is notably smaller than the 8.81 million estimate reported a year ago. Previous NAHB analysis indicated that this number had to fall below 8 million on a sustained basis for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. With estimates now measurably below 8 million, interest rate cuts from the Federal Reserve are at hand (Indeed, the yield curve reversed its inversion for the first time since June 2022 today, although this reversion can also be a bond market signal for some concern for future macro data).

As the Fed eases monetary policy, the demand for new construction will expand. Thus, a reversal for the current soft readings for construction labor will occur in the quarters ahead. This means the underlying skilled labor shortage is likely to persist during the coming years.

In July, the number of open construction sector jobs shifted notably lower from 299,000 in June to 248,000. Elements of the construction sector have slowed as elevated interest rates held, most notably multifamily development. This slowing has somewhat reduced demand for construction workers, lowering the job opening count for the construction industry. The open job count was 351,000 a year ago.

The construction job openings rate fell to 2.9% in July, the lowest rate since March 2020. The job openings rate has trended lower as the number of single-family and multifamily residences under construction has declined. This is a cyclical effect that will likely reverse later in 2025.

The layoff rate in construction increased to 2.1% in July from 1.3% in June as the labor market slows. The quits rate in construction increased to 2.1% in July from 1.6% in June. The rise in the layoff rate is consistent with a slowing construction labor market.

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Labor Market Continues to Soften in July

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In July, job growth decelerated significantly, and the unemployment rate increased to a nearly three-year high of 4.3%. The July data indicates that the labor market is slowing, which signals monetary policy easing in the months ahead.

Additionally, wage growth slowed for the second month in a row. In July, wages grew at a 3.6% year-over-year (YOY) growth rate, down 1.0 percentage point from a year ago. This marks the lowest YOY wage gain in the past four years.

Total nonfarm payroll employment increased by 114,000 in July, following a downwardly revised increase of 179,000 jobs in June, as reported in the Employment Situation Summary. The estimates for the previous two months were revised down. The monthly change in total nonfarm payroll employment for May was revised down by 2,000, from +218,000 to +216,000, while the change for June was revised down by 27,000 from +206,000 to +179,000. Combined, the revisions were 29,000 lower than the original estimates.

Despite restrictive monetary policy, nearly 7.8 million jobs have been created since March 2022, when the Fed enacted the first interest rate hike of this cycle. In the first seven months of 2024, 1,419,000 jobs were created. Additionally, monthly employment growth averaged 203,000 per month, compared with the 251,000 monthly average gain for 2023.

In July, the unemployment rate rose for the fourth straight month to 4.3%, the highest rate since October 2021. The number of unemployed persons rose by 352,000, while the number of employed persons was barely changed.

Meanwhile, the labor force participation rate, the proportion of the population either looking for a job or already holding a job, rose 1.0 percentage point to 62.7% for July. Moreover, the labor force participation rate for people aged between 25 and 54 ticked up to 84.0%, the highest level since March 2001. While the overall labor force participation rate is still below its pre-pandemic levels at the beginning of 2020, the rate for people aged between 25 and 54 exceeds the pre-pandemic level of 83.1%.

For industry sectors, health care (+55,000), construction (+25,000), and transportation and warehousing (+14,000) have notable job gains in July, while information employment lost 20,000 jobs.

Employment in the overall construction sector increased by 25,000 in July, after 20,000 gains in June. While residential construction gained 9,100 jobs, non-residential construction employment added 16,200 jobs for the month.

Residential construction employment now stands at 3.4 million in July, broken down as 950,000 builders and 2.4 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 6,067 a month. Over the last 12 months, home builders and remodelers added 67,600 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,387,400 positions.

In July, the unemployment rate for construction workers rose to 4.4% on a seasonally adjusted basis. The unemployment rate for construction workers remained at a relatively lower level, after reaching 15.3% in April 2020, due to the housing demand impact of the COVID-19 pandemic.

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