The December jobs report from the U.S. Bureau of Labor Statistics revealed an increase in overall employment, with construction as one of the more significant growth industries. In a month where employers added 216,000 positions, the construction industry contributed significantly with 17,000 new jobs. The report also provides insights into robust wage growth and the state of unemployment, and a report from the Associated General Contractors and Sage looks ahead to 2024.
Job Growth Exceeds Expectations in December
December’s hiring boost exceeded expectations for the month, serving as a positive indicator for both the industry and the overall economy. Reuters, on the other hand, highlighted that, despite this growth, there are some concerns in the employment landscape, with 71,000 fewer jobs added than initially reported for October and November. Nevertheless, projections for the labor market in 2024 maintain an optimistic outlook, anticipating sustained growth, resilience and strengthened consumer spending in the coming year.
Overall, construction employment in December reached 8,056,000, a seasonally adjusted increase of 17,000 from November. The sector has added an impressive 197,000 jobs over the past 12 months, reflecting a gain of 2.5% and outpacing the overall jobs growth rate of 1.7%. Reuters attributed the growth in construction jobs to “unseasonably mild weather.”
Breaking down the numbers, residential building and specialty trade contractors added 5,500 employees in December and 40,100 (1.2%) in 2023. On the nonresidential side, employment at nonresidential construction firms –– including nonresidential building and specialty trade contractors and heavy and civil engineering construction firms –– climbed by 11,900 positions for the month and 157,300 (3.4%) since December 2022.
Other sectors with notable growth included government (52,000), health care (38,000) and social assistance (21,000). Leisure and hospitality showed minimal change, and retail trade employment experienced only modest growth. On the other end of the spectrum, the report noted a decline in transportation and warehousing jobs by 23,000.
Construction Sector Experiences Positive Wage Growth
Wages in the construction sector are experiencing robust growth, outpacing inflation and reflecting a positive outlook for workers. Average hourly earnings for production and nonsupervisory employees in construction, covering both onsite craft workers and many office workers, climbed by an impressive 5.1% over the year, reaching $34.92 per hour. In December, construction firms demonstrated their commitment to their workforce by providing a wage “premium” of nearly 19% compared to the average hourly earnings for all private-sector production employees.
The remarkable wage growth in the construction industry can be attributed to several factors, with supply and demand playing a pivotal role. The Department of Labor Job Openings and Labor Turnover Survey (JOLTS) reported 459,000 job openings in construction in November 2023, the highest it’s been since 2022 (December’s report is due out January 30, 2024). As demand for labor remains robust, the industry continues to face the challenge of worker shortages, pushing labor costs upward.
Rising labor costs are a pressing issue for construction and average hourly earnings for construction workers have increased at more than twice the rate of economy-wide wages, particularly due to the scarcity of skilled labor. The Associated Builders and Contractors (ABC) Construction Confidence Index indicated last month that over half of contractors plan to increase their staffing levels in the next six months, while fewer than 7% intend to downsize. This points to a continued labor shortage and a projection for further wage growth over the next few quarters.
The factors influencing wage growth in construction extend beyond immediate industry dynamics. The overall decline in college enrollment, approximately 10% over the last decade, has led to fewer college-educated candidates available to fill vacant jobs in industries requiring a degree. Conversely, trade school enrollment is on the rise, offering specialized skillsets that are particularly sought after in construction.
Despite challenges posed by labor shortages, construction workers are expected to see continued wage increases even after adjusting for inflation. This positive trajectory is fueled by the growing demand for specialized skillsets within the construction industry, emphasizing the vital role these workers play in driving the sector’s growth and resilience.
Overall Unemployment Rate Holds Relatively Steady
The unemployment rate held at 3.7% in December, with the number of unemployed persons essentially unchanged at 6.3 million. Though slightly higher than a year earlier, when the jobless rate was 3.5% and the number of unemployed persons was 5.7 million, the job market remains resilient. Among the major worker groups, unemployment rates for various demographics showed little change, indicating a steady employment landscape.
The number of long-term unemployed –– those jobless for 27 weeks or more –– remained little changed in December and over the year, accounting for 19.7% of all unemployed persons.
The labor force participation rate and the employment-population ratio decreased by 0.3 percentage points in December, with little or no change over the year. The number of persons employed part-time for economic reasons changed little in December but was up by 333,000 over the year, and those not in the labor force who currently want a job increased to 5.7 million in December, up by 514,000 over the year.
Looking Ahead: Proceed with Caution
The December jobs report highlights the resilience of the U.S. job market, with the construction sector playing a vital role in driving employment growth. However, a more nuanced perspective emerges from respondents to an Associated General Contractors (AGC) and Sage survey. Survey participants identified significant challenges and considerations within the industry despite the anticipation of continued growth in demand for projects and investments in efficiency –– including artificial intelligence and offsite production. Concerns about higher interest rates, ongoing labor shortages and lingering supply chain disruptions pose potential threats to the sector’s growth in 2024. The AGC and Sage report paints a picture of an industry that remains confident, albeit with a more cautious outlook than a year ago.
