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The construction market added about 25,000 jobs during the month of January, according to news releases from the Arlington, Virginia-based Associated General Contractors of America (AGC) and the Associated Builders and Contractors (ABC).
That job gain is tepid in comparison with the addition of 28,000 construction jobs in December.
Nonresidential construction employment increased by 19,300 positions on net, with growth in two of the three subcategories, Washington-based ABC reports. Nonresidential specialty trades added 16,500 net new jobs, while nonresidential building added 4,000 positions. Heavy and civil engineering lost 1,200 jobs for the month.
“Construction employment and pay gains outpaced the economy as a whole in the past year, showing that demand for projects remains strong,” AGC Chief Economist Ken Simonson says. “In fact, most contractors would like to hire even more workers and are raising pay in an effort to attract them.”
Average hourly earnings for production and nonsupervisory workers in construction—mostly hourly craft workers—climbed by 6.2 percent, from $31.44 in January 2022 to $33.38 last month, says the AGC. That increase exceeded the 5.1 percent rise in average pay for all private sector production workers. Workers in construction now earn an average of 18.1 percent more per hour than in the private sector as a whole.
Despite the rising construction wages during the past year, ABC says the construction unemployment rate rose to 6.9 percent in January from 4.4 percent in December. Unemployment across all industries declined from 3.5 percent in December to 3.4 percent last month. Although up from December, the construction unemployment rate still is down from last January’s 7.1 percent unemployment rate, as reported by the Bureau of Labor Statistics (BLS).
“It is virtually impossible to reconcile today’s employment numbers with other phenomena in the U.S. economy,” ABC Chief Economist Anirban Basu says. “America’s labor market remains red hot despite falling retail sales, declining industrial production, bloated inventories and high-profile layoff announcements.”
While good news on the surface, Basu says the strong jobs report that came out Feb. 3—highlighted by a gain of 517,000 jobs in nonfarm employment—could indicate the Federal Reserve might continue ramping up interest rates to cool inflation.
“Today’s jobs report strongly suggests that the Federal Reserve has more work to do,” Basu says. “While many will cheer the jobs report, the bond market did not, with interest rates rising immediately in response to the persistent and surprising strength of the nation’s employment market. While contractors may be thrilled to hear that the labor market remains strong, associated upticks in borrowing costs increase the likelihood of a recession sometime later this year.”
Job openings in construction at the end of 2022 totaled 359,000, the highest December total in the 23-year history of the data, the AGC says. Simonson says that figure reinforces contractors’ reports that they are seeking far more workers than they have been able to hire, despite the industry’s large job gains over the past year.
Basu says the elevated construction backlog may continue to keep demand high for new construction workers for some time, but he says things could change later this year and in 2024.
“The outlook may dim later this year as the cost of project financing continues to rise, setting the stage for what could be a meaningfully weaker 2024, at least in construction segments that are primarily privately financed,” he says.
