May Construction Jobs Report: 11,000 New Jobs But Still Reason for Concern

According to the data released on Friday, June 2, 2017 by the US Bureau of Labor Statistics, the construction industry added 11,000 net new jobs (seasonally adjusted). This is the highest construction employment level since since October 2008, but two major industry associations issued statements expressing concern.

Press Release from Associated Builders and Contractors, Inc (ABC)

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Jobs Report Offers Reasons for Hope and Concern for Construction Industry

WASHINGTON, D.C. June 2—National construction employment added 11,000 net new jobs on a seasonally adjusted basis in May according to analysis of U.S. Bureau of Labor Statistics data released today by Associated Builders and Contractors (ABC).

The nonresidential construction sector added 4,400 net new jobs in May after losing 1,000 net jobs in April (revised down from a net increase of 3,200 jobs), while the residential sector added 7,100 net jobs for the month. Overall construction employment expanded 2.9 percent on yearly basis, well above the year-over-year growth rate of 1.6 percent for all nonfarm industries.

“Today’s jobs numbers supply a mixture of good and bad news,” said ABC Chief Economist Anirban Basu. “Overall nonresidential construction industry employment was up, but much of that was due to the heavy and civil engineering component, which can be associated with volatile employment levels from month-to-month. Nonresidential specialty trade contractors collectively shed employment, which is consistent with the weak construction spending numbers released yesterday. Those statistics indicated ongoing softening in construction spending in both private and public segments.

“More worrisome perhaps are statistics related to labor force participation and the construction industry unemployment rate,” said Basu. “The labor force participation fell to 62.7 percent in May, a multi-month low. There is also evidence that the construction labor market continues to tighten, which implies construction firms will continue to struggle to find workers, particularly at higher skill levels. This means that construction spending growth is decelerating even as labor becomes more expensive. None of this is good from the perspective of profit-margins or aggregate industry profitability.“

The hope is that the observed weakness in spending is brief and largely a result of lingering uncertainty that would be associated with any major political transition,” said Basu. “Financial markets continue to perform brilliantly, implying that investors continue to view economic conditions favorably. With the construction unemployment rate remaining so low one further hopes that more job seekers will be induced to seek employment in the construction trades. Unfortunately, to date that has not happened at sufficient levels. That said, economists remain confident that the next two quarters will be associated with more robust growth, which could help to reinvigorate construction spending momentum.”

The construction industry unemployment rate, which fell 2.1 percentage points last month, declined further in May and now stands at 5.3 percent. The construction industry unemployment rate is only available on a nonseasonally adjusted basis. Due to seasonal factors, the industry unemployment rate almost always plummets from March to April and continues to decline in May. The national unemployment rate inched down from 4.4 percent in April to 4.3 percent in May. The last time the unemployment rate was this low was in May 2001.

Press Release from The Associated General Contractors of America (AGC)

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Construction Employment Increases by 11,000 in May to Eight-Year High But Labor Shortages Likely Limited Number of New Jobs Being Added

Contractors Struggle to Fill Jobs as Weekly Hours Reach Highest May Level Since Series Began in 2006; Association Officials Urge Greater Public-Sector Support for Career and Technical Education Programs

Construction employment increased by 11,000 jobs in May to the highest level since October 2008 and average weekly hours set a series high for May as contractors struggled to find enough workers to meet demand for projects, according to an analysis of new government data by the Associated General Contractors of America. Association officials urged lawmakers and other public officials to address the growing shortage of available qualified workers by funding and re-invigorating career and technical education programs.

“Construction firms continued adding new jobs at a faster rate than the broader economy during the past year as demand for their services remains strong,” said Ken Simonson, the association's chief economist. “Even so, they had to keep employees on the job for more hours because they could not find enough qualified people to hire.”

Construction employment totaled 6,881,000 in May, a gain of 11,000 from the April total and an increase of 191,000 or 2.9 percent from a year ago. The year-over-year growth rate was almost double the 1.6 percent rise in total nonfarm payroll employment, Simonson noted. The sector’s unemployment rate in May was 5.3 percent, up slightly from 5.2 percent a year ago but one of the lowest May levels in decades.

The economist noted that average weekly hours in construction rose to 39.9, the highest May figure since the series began in 2006. Average hourly earnings in the industry climbed to $28.55, an increase of 2.2 percent from a year earlier. Construction pays nearly 9 percent more per hour than the average nonfarm private sector job in the United States, which pays $26.22 on average per hour.

Residential construction—comprising residential building and specialty trade contractors—added 7,100 jobs in May and 191,000, or 4.7 percent, over the past 12 months. Nonresidential construction (building, specialty trades, and heavy and civil engineering construction) employment increased by 4,400 jobs in May and 71,300, or 1.7 percent, over 12 months.

Construction officials said construction labor shortages were becoming more severe in many parts of the country after years of under-investment in career and technical education programs, which used to be called vocational education. They urged Congress and the Trump administration to enact a measure to increase funding, and flexibility, for the Perkins Act, which provides federal funds for career and technical education. And they urged state and local leaders to make it easier for construction firms and local associations to set up regional recruiting and training programs.

“It is time for elected officials to get the word out to students that construction offers high-paying jobs with upward mobility,” said Stephen E. Sandherr, the association’s chief executive officer. “The best way to deliver that message is to provide the funding and flexibility to set up programs that expose more students to the opportunities that exist in construction careers.”

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