Construction Jobs Up, Spending Down
According to a new report issued by the U.S. Department of Labor’s Bureau of Labor Statistics, construction employment witnessed an uptick in September, with firms hiring 22,000 new employees.
In addition, the report also revealed that construction’s jobless rate of 4.5% had slightly improved from the previous month’s 4.6% figure. Despite the increase in workers, however, the industry has yet to reach pre-pandemic levels and currently sits 201,000 employees below its February 2020 numbers.
Construction Job Increase
Since the early stages of the pandemic, the Associated Builders and Contractors reports that the nonresidential construction industry has recovered 81.9% (912,000) of its jobs.
Nonresidential construction employment increased by 18,600 positions on net, with all three subcategories showing gains for September, while nonresidential specialty trade contractors added 11,400 jobs and nonresidential building and heavy and civil engineering employment rose by 4,100 and 3,100 positions, respectively.
In the residential sector—which includes building contractors, homebuilders and residential specialty trades—employment witnessed the addition of 3,600 workers over the course of the same month.
“The economy added fewer than 200,000 jobs in September, well below the consensus forecast of 500,000 new jobs, making it clear that August’s disappointing employment performance was not an aberration,” said ABC Chief Economist Anirban Basu. “Earlier during the summer, the U.S. economy had been adding jobs at a rapid pace. The last few weeks suggest the final stages of labor market recovery will prove extremely challenging.
“Theories abound regarding why employers are struggling to fill available jobs, including fear of infection and vaccination, previously received federal assistance and changed values during the pandemic. Recent data suggest that many job seekers are actively looking for opportunities to continue to work from home much of the time. Construction generally does not supply many opportunities for telework.”
The Associated General Contractors of America also weighed in on the recent report, noting that nonresidential construction has been affected by the widespread supply chain problems, which are causing owners already uncertain about future demand for commercial space to delay or even cancel some projects.
“While it is refreshing to see job gains in both residential and nonresidential construction, nonresidential building and infrastructure employment remains far below its pre-pandemic peak,” said Ken Simonson, the AGC’s Chief Economist. “It will take more than a few months of gains to match the overall economy.”
Again, the association has tried to urge the Biden administration to remove tariffs and import quotas on a range of key construction materials to help address ongoing supply chain disruptions.
“Both parties in the House should make passing the infrastructure bill a top priority because it is the best way to create new construction careers and make our economy more efficient,” said Stephen E. Sandherr, the association’s Chief Executive Officer. “If the President acts to address supply chain problems and Congress passes the infrastructure bill, construction employment is likely to surge.”
The August to September construction employment statistics are as follows:
In looking at the growth percentages year-over-year, the Construction sector has increased 2.6%, Nonresidential increased 1.3%, Residential increased 4.7% and Residential Building saw the biggest increase at 6.8%.
“The ongoing labor shortage puts continued upward pressure on the price of delivering construction of nonresidential construction spending at risk. Based on ABC’s Construction Backlog Indicator, a growing chorus of project owners are choosing to delay projects and, in some instances, cancel them altogether,” said Basu. “The primary issue is that bids are coming in too high to justify the deployment of capital under many circumstances.”
Although employment seems to be on the rise in nonresidential construction, ABC reports that national nonresidential construction spending fell 0.4% in August. Nonresidential spending totaled $788.6 billion in August on a seasonally adjusted annualized basis, down 3.0% from August 2020.
On a monthly basis, the ABC reported that 10 of the 16 nonresidential subcategories witnessed a spending decline, with spending in transportation unchanged for the month. Private nonresidential spending was down 1.0%, while public nonresidential construction spending rose 0.5% in August.
“The nonresidential construction spending data are among the most interesting to monitor as the economy continues to wrestle with COVID-19, supply chain disruptions and rampant uncertainty regarding the direction of federal policymaking,” said Basu. “First, nonresidential construction spending dynamics are shaped by all of the major forces shaping economic outcomes today, including labor shortages, surging input prices, massive liquidity and wavering confidence.
“Second, despite the many challenges they have faced, contractors continued to express confidence regarding near-term prospects until recently, per ABC’s Construction Confidence Index. For economists, who have been focused on phenomena such as the growing volatility of asset prices, rising freight costs, ongoing lockdowns in parts of the global economy and still-high infection rates in America, that expression of abundant confidence has been somewhat surprising. Today’s data release reminds us that challenges abound, with the trajectory of the nonresidential segment remaining on a downward trend that has now been in place for many months.
“Third, a growing number of contractors indicate that the combination of increasingly expensive labor and rising materials prices are inducing more project owners to postpone work.”
Threatened Recovery, Recent Backlogs
The AGC of America has been watching construction employment rates for some time now, reporting last month that numbers from July remained below the levels reached before the pre-pandemic peak in February 2020 in 36 states.
“This data shows that full recovery remains elusive for construction in most states,” said Simonson. “In fact, the fast-spreading COVID-19 Delta variant may make it harder to find employees eligible to work on restricted sites and may also depress demand if some owners defer projects.”
In its analysis, the AGC found that from February 2020—the month before the pandemic caused project shutdowns and cancellations—to July, construction employment increased in only 14 states and was flat in the District of Columbia.
The five states to lose the most construction jobs are as follows:
From June to July construction employment decreased in 18 states, increased in 30, and was unchanged in Kansas, Tennessee and D.C. The largest decline over the month occurred in Colorado, which lost 1,600 construction jobs, or 0.9%, followed by a loss of 1,500 jobs each in Oklahoma (-1.9%), Texas (-0.2%) and Pennsylvania (0.6%).
The steepest percentage declines since June were reported to have occurred in New Hampshire (-2.2%, -600 jobs), followed by 1.9% losses in Oklahoma and Arkansas (-1,000 jobs).
Of the states that added construction jobs since February 2020, the top three states are as follows:
The largest percentage gain was in Idaho, followed by South Dakota (7.5%, 1,800 jobs) and Utah.
North Carolina added the most construction jobs between June and July (4,300 jobs, 1.8 %), followed by New Jersey (4,000 jobs, 2.7%) and Illinois (3,700 jobs, 1.7%). The largest percentage gains were in New Jersey and Connecticut (2.7%, 1,500 jobs), followed by South Carolina (2.4%, 2,600 jobs).
The AGC reported then, much like now, that construction employment was largely impacted by supply-chain challenges and growing market uncertainty caused by the resurgent Delta variant. To mitigate these issues, the AGC has called on the government to adopt new federal infrastructure investments as outlined in the bipartisan infrastructure bill to provide a needed boost in demand and help put more people to work in construction careers.
Another way the industry has been keeping tabs on construction health and projects are though ABC’s Construction Backlog Indicator. Last month, ABC reported that the backlog plummeted to 7.7 in August from the 8.5 that was recorded in July.
The ABC member survey was conducted from Aug. 19 to Sept. 1. The reading is down 0.8 months from July 2021 and down 0.3 months from August 2020.
Falling in most categories over the past month, the backlog revealed:
However, the backlog did gain in a few sectors, including the Middle States region (from 7.1 to 7.4) and in companies at $50-100 million (from 10.0 to 10.9).
Despite the slip in backlog, contractor confidence readings for sales, profit margins and staffing levels all remained above the threshold of 50, indicating expectations of growth over the next six months.