Tight Labor Conditions See Construction Workers Return to Work

Back on the Job

The construction industry added 19,000 jobs in July even as the sector’s unemployment rate increased, according to an analysis of new government data by Associated General Contractors of America. Officials with the association noted that tight labor conditions are bringing more previously employed construction workers back into the job market as firms continue to boost pay levels.

“The construction industry continues to add workers at a steady clip as demand for many types of construction remains strong,” said Stephen Sandherr, the association’s CEO. “Firms are boosting pay to cope with tight labor-market conditions, which is bringing more former workers back into the job market.”

Construction employment in July totaled 7,971,000, seasonally adjusted, an addition of 19,000 compared to June. The sector has added 198,000 jobs, or 2.5%, during the past 12 months. Non-residential construction firms — non-residential building and specialty trade contractors along with heavy and civil-engineering construction firms — added 10,600 employees (3.1%) in July. Meanwhile, employment at residential building and specialty trade contractors grew by 7,800 (1.8%).

The unemployment rate among job seekers with construction experience rose from 3.5% in July 2022 to a still-low 3.9%. A separate government release reported there were 378,000 openings at construction firms on the last day of June, close to the record high for June set in 2022, indicating that demand for workers remains strong.

Average hourly earnings for production and non-supervisory employees in construction — covering most on-site craft workers as well as many office workers — jumped by 5.8% over the year to $34.24 per hour. Construction firms in July provided a wage ‘premium’ of just over 18% compared to the average hourly earnings for all private-sector production employees.

“The good news is that there remain private construction segments associated with rosier prospects, including manufacturing, data centers, and healthcare.”

Officials at Associated General Contractors of America noted that labor shortages in construction threaten to undermine new federal investments in infrastructure, semiconductor chip plants, and green-energy construction. They urged federal officials to boost funding for construction education and training programs, noting that the federal government currently spends five times as much encouraging students to go to college as it does on career and technical education programs.

“Unless federal officials begin to narrow the funding gap between college prep and career training, the construction industry will continue to struggle to find workers,” Sandherr said. “It is great that federal officials want to invest in construction projects; they also need to invest in construction workforce development.”

The report followed an Associated Builders and Contractors (ABC) analysis of data published by the U.S. Census Bureau noting that national non-residential construction spending increased 0.1% in June. Spending is up 18% over the past 12 months. On a seasonally adjusted annualized basis, non-residential spending totaled $1.07 trillion in June.

Spending increased on a monthly basis in 12 of the 16 non-residential subcategories. Private non-residential spending was virtually unchanged, while public non-residential construction spending rose 0.3% in June.

“Non-residential construction spending growth downshifted over the past two months,” ABC Chief Economist Anirban Basu said. “While stakeholders can expect ongoing spending growth in public non-residential construction segments as more Infrastructure Investment and Jobs Act monies flow into the economy, private, developer-driven activity appears to be drying up in the context of higher costs of capital and tighter credit conditions.

“Among other things, these dynamics will translate into larger spreads in performance among contractors,” Basu added. “While those that focus on public work stand to remain busy for years to come, those who specialize in meeting the needs of developers of office buildings, hotels, and shopping centers are likely to struggle to support backlog going forward. The good news is that there remain private construction segments associated with rosier prospects, including manufacturing, data centers, and healthcare.”