July Jobs Jolt: Construction finds summer stride

Finally, construction workers across the land are donning their hard hats and returning to work, en masse. If many of you already knew that, then at least the numbers have finally caught up to reality.

Welcome confirmation came last week from the U.S. Dept. of Labor’s Bureau of Labor Statistics (BLS), which released data that has helped to assuage long-standing concerns about the health of both the U.S. economy and the nation’s construction industry. Overall, the U.S. added a surprisingly hale 255,000 jobs in July, including 14,000 in the construction ranks and another 7,000 in architectural and engineering professional services. This followed a three-month loss of 27,000 jobs in this industry. Of the July rebound, nonresidential construction accounted for 11,500 of the latest total gains.

These numbers “provide evidence that the nonresidential construction recovery is not stalled,” said Anirban Basu, chief economist at both Associated Builders & Contractors (ABC), as well as Procore Technologies. “If there is a slowdown in construction, it appears to be in residential activity.”

“Construction employment increased from June 2015 to June 2016 in 228 of the 358 metro areas… [But] increases are becoming less widespread as more contractors run into difficulty finding qualified workers”

— Ken Simonson, AGC Chief Economist

“Contractors are adding employees in most parts of the country, while construction job losses are primarily in areas most affected by the steep decline in oil and gas drilling,” noted Ken Simonson, chief economist for Associated General Contractors of America (AGC). He added that construction employment had hit new peak levels in 32 metro areas, and in general, had increased in 228 out of 358, between June 2015 and June 2016. “However, increases are becoming less widespread as more contractors run into difficulty finding qualified workers,” said Simonson.

Skilled labor’s tightening supply is the fly in the ointment for more growth. At 4.5%, the U.S. construction employment rate already is below the national rate of 4.9%. “The implication is that wage pressures continue to build,” explained Basu. In response, contractors will likely feel forced to pass along cost increases to customers in order to maintain current levels of profitability, he added.

  • Below, Procore’s latest Construction Health Indicator (CHI) for Labor. For more, click here.

In the past, economists and industry members alike have expressed concern that a lack of labor and a corresponding increase in project costs, sideline some projects, with unskilled labor putting others behind schedule. As a result, training and recruitment remain key priorities among construction firms and industry groups like ABC, AGC, and the AFL-CIO Building & Construction Trades.

Last week, AGC CEO Stephen E. Sandherr said the latest employment data underscores the need to reinvigorate high school-level training programs to encourage more students to pursue construction careers. “It makes no sense that there are thousands of young people who can’t find a job while we have hundreds of members who can’t find enough workers,” he lamented. “Congress can help fix this mismatch by passing legislation that makes it easier for schools to prepare students with the skills they need to find high-paying jobs in careers like construction.”

Rounding out the monthly crop of leading AEC indicators, Dodge Data & Analytics last week released its latest Dodge Momentum Index, which moved slightly higher in July, increasing 0.5% to 134.7 from its revised June reading of 134.1. According to Dodge, DMI measures each month’s initial report for nonresidential building projects in planning, which has been shown to foretell construction spending for nonresidential buildings by a full year. July’s modest rise follows a substantial increase in June, which had seen the DMI jump 10.9% for the month. The Index has now moved higher in four consecutive months, suggesting that planning for construction projects is still progressing nationally, albeit in an uneven pattern, despite concerns over the subdued rate of economic growth. Steady as she goes…