Construction Labor Market Still Strong, Withstands Fed Rate Hikes

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Despite expectations that Federal Reserve interest rate hikes would negatively impact the construction labor market, the June U.S. Bureau of Labor Statistics report indicates the industry is still strong with more jobs, consistent wage growth and low unemployment.

The Construction Labor Market at a Glance

Of the 209,000 total jobs added in June, construction was among the sectors with notable increases, reporting 23,000 new jobs divided nearly evenly between residential and nonresidential positions. Nonresidential construction positions grew by 12,200, with 7,300 heavy and civil engineering positions and 5,400 nonresidential building jobs added. A loss of 500 jobs among nonresidential specialty trade contractors was the only nonresidential loss indicated in June. 

In other industries, air transportation saw a modest increase of 3,000 new jobs, while general transportation and warehousing saw a negligible decline of -7,000 positions. 

Unemployment in the construction industry for the month was 3.6%, in line with the rate across all sectors in the Department of Labor report. Additionally, hiring for the month increased by 22,000 to 379,000 hires. Construction wage growth is slowing slightly, but thanks to competition for workers, it is not doing so at nearly the rate expected in response to interest rate hikes. 

The construction labor market is still tight, but hiring managers have found it slightly easier to fill positions, as the ratio of construction hires to job openings saw a slight uptick since May. As well, layoffs decreased while quits increased by 57,000, indicating workers in the industry hold some of the power. According to Business Insider, the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS), also released last week, “signals a labor market where workers — especially blue-collar workers — still feel comfortable leaving their jobs, with plenty of opportunities awaiting them, including remote and hybrid options.”

State of the Broader Labor Market

With the June report, the Department of Labor (DOL) has now reported the 30th consecutive month of job growth in the United States. The most recent numbers were slower than previous months, with nearly 100,000 fewer jobs than in May, but the continued growth is generally favorable. On Friday morning, Washington Post columnist Catherine Rampell told CNN the numbers indicate a “warm economy” despite the slowdown. She added that job growth of over 200,000 is still higher than the average monthly growth in the ten years before the pandemic. Acting Secretary of Labor Julie Su noted that the jobs report for June is strengthened by the unemployment rate of 3.6%, which she said was not expected to fall below 4% for years. “This is a jobs report that demonstrates what steady and stable growth looks like,” Su told CNN’s Kate BolduanSmiling engineer shaking hands at construction site with happy architect. Handshake between cheerful african construction manager with businessman at bulding site. Team of workers with architects and contractor conclude an agreement with safety uniform.

Bloomberg’s Reade Pickert explained that the labor supply and demand are beginning to catch up because there is more participation in the workforce and some groups have seen historic highs. “While the overall participation rate – the share of the population that is working or looking for work – held steady, for those ages 25-54, that rate climbed to a 21-year high,” Pickert wrote. Twenty-five to 54 is considered prime-age; participation from that group was 83.5%.

Among other groups, employment among prime-age women came in at an all-time high, with 77.8% of members of this group actively in the workforce. Disruptions in the labor market historically disproportionately impact women, but they have emerged from the pandemic stronger than ever before, perhaps due to the increase in remote work and higher education levels among women. 

Additionally, wage growth remains robust, even as the number of new jobs cools slightly. The expectation for June’s wage growth was 4.2%; the actual growth was 4.4% since June 2022. 

The Future Looks Good; Remains Uncertain

Despite the optimism over June’s numbers, the threat of a recession continues to loom over the economy. From January to June, the U.S. recorded the twelfth-highest number of jobs added since records have been kept, with 1.67 million new jobs this year. Federal Reserve interest rate hikes were supposed to cool the job market – especially wage growth – and inflation, and the Fed is expected to raise rates again later this month. Some economists and other experts project a continued cooling of the labor market as internal and external factors catch up with employers.  

Others, however, are now predicting – or at least considering seriously – the possibility of a “soft landing” instead. Last week, Seth Carpenter, a top economist for Morgan Stanley, told Markets Insider he expects a soft landing, which means inflation numbers that hit 2% without eliminating large numbers of jobs. Carpenter credits the resilience of the U.S. labor market in light of aggressive hikes by the Federal Reserve as a significant reason for his prediction. 

Regardless, predictions and expectations are just that, and the continued growth of jobs in construction demonstrates a resilient industry, one that is recovering from the pandemic slowdown, supply chain issues and other factors. It is essential to take the numbers in context and to understand the uncertainty inherent in them.