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Job Growth Slows in January

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U.S. job growth slowed in January amid Southern California wildfires and severe winter weather across much of the country. Meanwhile, the unemployment rate edged down to 4.0%. This month’s data indicates that the labor market is slowing at the start of 2025 but remains healthy.

In January, wage growth remained unchanged from the previous month. Year-over-year, wages grew at a 4.1% rate, down 0.2 percentage points from a year ago. Wage growth is outpacing inflation, which typically occurs as productivity increases.

On the annual benchmark revision of the Current Employment Statistics (CES), the seasonally adjusted total nonfarm employment for March 2024 was revised down by 589,000. The average monthly pace of job growth for 2024 was revised down from a previous estimate of 186,000 per month to an average of 166,000.

National Employment

According to the Employment Situation Summary reported by the Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 143,000 in January, the lowest monthly gain in the past three months. Since January 2021, the U.S. job market has added jobs for 49 consecutive months, making it the third-longest period of employment expansion on record.

The estimates for the previous two months were revised up. The monthly change in total nonfarm payroll employment for November was revised up by 49,000, from +212,000 to +261,000, while the change for December was revised up by 51,000 from +256,000 to +307,000. Combined, the revisions were 100,000 higher than previously reported.

The unemployment rate decreased to 4.0% in January, after accounting for the annual adjustments to the population controls. While the number of employed persons increased by 2,234,000, the number of unemployed persons decreased by 37,000.

Meanwhile, the labor force participation rate—the proportion of the population either looking for a job or already holding a job—increased one percentage point to 62.6%. For people aged between 25 and 54, the participation rate rose one percentage point to 83.5%. While the overall labor force participation rate remains below its pre-pandemic levels of 63.3% at the beginning of 2020, the rate for people aged between 25 and 54 exceeds the pre-pandemic level of 83.1%.

In January, employment in health care (+44,000), retail trade (+34,000), and social assistance (+22,000) increased, while employment declined in the mining, quarrying, and oil and gas extraction industries.

Construction Employment

Employment in the overall construction sector increased by 4,000 in January, after 13,000 gains in December. While residential construction lost 200 jobs, non-residential construction employment added 4,400 jobs for the month.

Residential construction employment now stands at 3.4 million in January, broken down as 956,000 builders and 2.4 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 1,350 a month. Over the last 12 months, home builders and remodelers added 40,100 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,376,600 positions.

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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This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Residential Construction Inputs Price Growth Slows in 2024

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Prices for inputs to new residential construction—excluding capital investment, labor, and imports—were unchanged in December according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. This index grew 0.8% over 2024, the lowest yearly increase in the index since its inception in 2014.

The inputs to the new residential construction price index can be broken into two components—one for goods and another for services. The goods component increased 1.7% over the year, while services decreased 0.4%. For comparison, the total final demand index increased 3.3% in 2024, with final demand with respect to goods up 1.8% and final demand for services up 4.0% over the year.

Input Goods

The goods component has a larger importance to the total residential construction inputs price index, representing around 60%. The price of input goods to new residential construction was down 0.1% in December from November. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index.

The price of goods used in residential construction grew 1.7% in 2024, slightly higher than the growth in 2023 of 1.0%. This growth can be attributed to the rise in the prices of building materials, which grew 2.2% in 2024. The price of energy inputs fell for the second straight year, down 5.3% in 2024.

At the individual commodity level, the five commodities with the highest importance for building materials to the new residential construction index were as follows: ready-mix concrete, general millwork, paving mixtures/blocks, sheet metal products, and wood office furniture/store fixtures. Across these commodities, there was price growth for most commodities in 2024 except for sheet metal products. Ready-mix concrete was up 5.1%, wood office furniture/store fixtures up 4.3%, general millwork up 2.5%, paving mixtures/blocks up 2.3% while sheet metal products were down 0.2%. The commodity used in new residential construction the featured the highest price growth in 2024 was softwood lumber, not edge worked, which increased 14.7% in 2024. The commodity where prices declined the most was No. 2 diesel fuel, down 13.9%.

Input Services

Prices of inputs to residential construction for services were up 0.5% in December from November. The price index for service inputs to residential construction can be broken out into three separate components: a trade services component, a transportation and warehousing services component, and a services excluding trade, transportation and warehousing component. The most significant component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%). The largest component, trade services, was down 1.8% in 2024 after growing 5.8% in 2023.  Across individual services, credit deposit services advanced the most in 2024, up 21.2% over the year while the prices for metal, mineral and ore wholesaling services fell the most, down 19.2%.

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Inflation Slows in September

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Inflation continued to ease in September and remained at a 3-year low as shelter costs continued to moderate. Shelter costs, the main driver of inflation since early 2023, saw their annual growth rate fall below 5% for the first time since February 2022. With the Fed beginning its easing cycle with a half-point cut last month, lower interest rates could help ease some pressure on the housing market.

Though shelter remains the primary driver of inflation, the Fed has limited ability to address rising housing costs, as these increases are driven by a lack of affordable supply and increasing development costs. Additional housing supply is the primary solution to tame housing inflation. However, the Fed’s tools for promoting housing supply are constrained.

In fact, tight monetary policy hurts housing supply because it increases the cost of AD&C financing. This can be seen on the graph below, as shelter costs continue to rise at an elevated pace despite Fed policy tightening. Nonetheless, with the Fed shifting to a more dovish stance, along with additional apartment supply supported by real-time private data, NAHB expects to see shelter costs to continue decline in the coming months.

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose by 0.2% in September on a seasonally adjusted basis, the same increase as in July and August. Excluding the volatile food and energy components, the “core” CPI increased by 0.3% in September, the same increase as in August.

The price index for a broad set of energy sources fell by 1.9% in September, with declines in gasoline (-4.1%) and fuel oil (-6.0%) offset by increases in electricity (+0.7%) and natural gas (+0.7%). Meanwhile, the food index rose 0.4%, after a 0.1% increase in August. The index for food away from home increased by 0.3% and the index for food at home rose by 0.4%.

The index for shelter (+0.2%) and food (+0.4%) were the largest contributors to the monthly increase in all items index, accounting for over 75% of the total increase. Other top contributors that rose in September include indexes for motor vehicle insurance (+1.2%), medical care (+0.4%), apparel (+1.1%) and airline fares (+3.2%). Meanwhile, the top contributors that experienced a decline include indexes for recreation (-0.4%) and communication (-0.6%).

The index for shelter makes up more than 40% of the “core” CPI. The index saw a 0.2% rise in September, following an increase of 0.5% in August. Both the indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) increased by 0.3% over the month. These gains have been the largest contributors to headline inflation in recent months. 

During the past twelve months, on a non-seasonally adjusted basis, the CPI rose by 2.4% in September, following a 2.5% increase in August. This was the slowest annual gain since February 2021. The “core” CPI increased by 3.3% over the past twelve months, following a 3.2% increase in August. The food index rose by 2.3%, while the energy index fell by 6.8%.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than overall inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).

In September, the Real Rent Index remained unchanged after a 0.1% increase in August. Over the first nine months of 2024, the monthly growth rate of the Real Rent Index averaged 0.1%, slower than the average of 0.2% in 2023.

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Price Growth for Inputs to Residential Construction Slows in August

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Prices for inputs to new residential construction, excluding capital investment, labor and imports decreased 0.1% in August according to the most recent Producer Price Index (PPI) report published by the U.S. Bureau of Labor Statistics. Compared to a year ago, this index was up 0.8% in August after a 1.8% increase in July. The inputs to new residential construction price index can be broken into two components­—one for goods and another for services. The goods component increased 0.2% over the year, while services increased 1.9%. For comparison, the total final demand index increased 1.7% over the year in August, with final demand goods flat and final demand services up 2.6% over the year.

Input Goods

The goods component has a larger importance to the total residential inputs price index, around at 60%. The price of inputs to residential construction, goods, remained flat in August after increasing 0.1% in July. The input goods to residential construction index can be further broken down into two separate components, one measuring energy inputs with the other measuring goods less foods and energy inputs. The latter of these two components simply represents building materials used in residential construction, which makes up around 93% of the goods index. Prices for inputs to residential construction, goods less food and energy, were up 1.6% in August compared to a year ago. This year-over-year growth has come down since April, when it was at 2.5% and remains well below the growth in August of 2022, when it was at 14.7%.

The graph below focuses on the data since the start of 2023 for residential goods inputs. Energy prices have retreated over the past year, with only two periods of growth in 2024.

Input Services

Prices of inputs to residential construction, services, fell 0.2% in August after remaining flat in July. The price index for service inputs to residential construction can be broken out into three separate components, a trade services component, a transportation and warehousing services component, and a services less trade, transportation and warehousing component. The most vital component is trade services (around 60%), followed by services less trade, transportation and warehousing (around 29%), and finally transportation and warehousing services (around 11%).

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