Construction Sector is on an Upward Trend

The number of open, unfilled construction sector positions rose during the month of May over a slightly downwardly revised estimate for April

By Robert Dietz

According to the BLS Job Openings and Labor Turnover Survey (JOLTS) and NAHB analysis, the number of open construction sector jobs (on a seasonally adjusted basis) increased from 137,000 (revised) in April to 149,000 in May. The May estimate is the fourth highest monthly total since the recession, with the March count standing as the cycle high point.

On a three-month moving average basis, the open position rate for the construction sector declined slightly to 2.3 percent in May. The open rate has been trending upward since 2012. The three-month moving average for May remains near the cycle high set in March and April (2.4 percent).

The May construction sector hiring rate, as measured on a three-month moving average basis, held steady at five percent. The May number of sector job quits was also relatively unchanged at 117,000.

Monthly employment data for June 2015 indicates that total employment in home building/remodeling stands at 2.442 million, broken down as 686,000 builders and 1.755 million residential specialty trade contractors.

In June, the number of jobs in home building and remodeling declined on seasonally adjusted basis for only the second time in the last two years, falling 2,400 for the month. The industry pace of hiring has slowed in 2015, with the average monthly employing gain standing at about 7,500 over the last six months.

Nonetheless, over the last 12 months the industry has added 127,000 jobs on a net basis. Since the low point of industry employment following the Great Recession, the residential construction industry has gained 455,600 positions.

In June, the unemployment rate for construction workers stood at seven percent on a seasonally adjusted basis. The unemployment rate for the construction occupation has been on a general decline since reaching a peak rate of 22 percent in February 2010.

Many builders continue to cite access to labor as a top business challenge as the market recovers.

For the economy as a whole, the May JOLTS data indicate that the hiring rate fell to 3.5 percent of total employment. The overall job openings rate held steady at an elevated 3.6 percent rate. Rising job openings for the overall economy are affecting many business sectors as the unemployment rate falls.

Furthermore, a survey of single-family builders conducted by NAHB in June 2015 shows that shortages of labor and subcontractors—already quite widespread in mid-2014—have become even more widespread during the past year.

The shortages are most acute for basic skills like carpentry, which are needed during the construction of any home. For example, in the 2015 survey 69 percent of builders reported a shortage (either serious or some) of construction workers willing and able to do rough carpentry.

Builders, however, may be even more concerned about the availability of subcontractors than of workers to employ directly. In building a single-family home, three-quarters of the construction work is typically done by subcontractors (documented in a 2012 NAHB survey available here). The rankings of labor and subcontractor shortages in the 2015 survey were similar, but—with the exception of building maintenance managers—the shortages of subcontractors were more widespread. In the rough carpentry category at the top of both charts, 74 percent of builders reported a shortage of subcontractors, compared to 69 percent for labor directly employed.

Historically, for every trade covered in the survey, shortages were more widespread in 2015 than in 2014. One way to see this is to look at the labor shortage percentage averaged across all 9 trades that NAHB surveys have covered in a consistent way since 1996. This average skyrocketed from a low of 21 percent in 2012 to 46 percent in 2014, before increasing even further to 52 percent in 2015.

The nine consistently covered trades are carpenters-rough, carpenters-finished, electricians, excavators, framing crews, roofers, plumbers, bricklayers/masons and painters. The history for each is available in the full report.

The incidence of shortages is surprisingly high given the rate of new home construction, which has only partially recovered from its 2008 downturn. In fact, the 9-trade shortage is now substantially higher than it was at the peak of the 2004-2005 boom, when annual starts were averaging around 2 million, compared to current rates of about 1 million. The last time builder-reported labor shortages were as widespread as now was just before 2001—during a prolonged period of strong GDP growth with overall unemployment as low as 4 percent.

• Rising job openings for the overall economy are affecting many business sectors as the unemployment
rate falls

• Over the last 12 months the industry has added 127,000 jobs on a net basis


Robert D. Dietz, Ph.D., is Vice President for Tax and Market Analysis for NAHB. He may be reached at rdietz@nahb.org.

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