ABC: Construction employment up, nonresidential spending down

By Jack Kopanski| July 10, 2023

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Construction industry employment increased by 23,000 in June, according to an Associated Builders & Contractors (ABC) analysis of U.S. Bureau of Labor Statistics data.

The industry has added 198,000 jobs since June 2022, a 2.6 percent increase, to 7.947 million total jobs.

Nonresidential construction employment gained 12,200 positions, with positive growth in two of the three subcategories. Heavy and civil engineering added 7,300 jobs, while nonresidential building added an additional 5,400 jobs. Nonresidential specialty trade contractors lost 500 jobs.

The construction unemployment rate increased to 3.6 percent. Unemployment across all industries decreased from 3.7 percent in May to 3.6 percent in June.

“Theory suggests that the roughly 500-basis point increase in the federal funds rate over the past year would weigh on the demand for construction workers, yet the industry continues to add thousands of jobs each month,” says Anirban Basu, ABC chief economist. “Contractors have collectively added jobs in 15 of the past 16 months, and ABC’s Construction Confidence Index suggests they will continue to increase staffing levels through the remainder of the year.”

Basu adds that data shows labor shortages will continue to be a headwind hindering hiring.

“The construction unemployment rate inched up to 3.6 percent in June, but that’s still the second-lowest rate on record,” he says. “Across all industries, unemployment remains near a 50-year low, and the prime age (24 to 54) employment-to-population ratio rose to the highest level since 2001. High interest rates and the cumulative effects of inflation will eventually catch up with the economy. For now, however, the labor market remains overheated.”

Basu

Construction spending

National nonresidential construction spending decreased 0.2 percent in May, according to an ABC analysis of U.S. Census Bureau data.

On a seasonally adjusted annualized basis, nonresidential spending totaled $1.06 trillion.

Spending declined on a monthly basis in nine of the 16 nonresidential subcategories. Private nonresidential spending fell 0.3 percent, while public nonresidential construction spending increased 0.1 percent in May.

“Nonresidential construction spending declined in May, ending a streak of 11 consecutive monthly increases,” Basu says. “While spending is up more than 17 percent over that span, manufacturing-related construction has accounted for the majority of that increase. Excluding the manufacturing segment, nonresidential construction spending is barely outpacing inflation, up just 6 percent over the past year.”

Despite this uncharacteristic dip, Basu says contractors remain upbeat, citing ABC’s Construction Confidence Index, ongoing strength in manufacturing and publicly financed segments. The future, however, remains uncertain.

“Unfortunately, conditions may prove challenging in other segments over the next few quarters,” Basu says. “Interest rates remain elevated and are likely to rise at least once more over the second half of 2023, exacerbating already tight credit conditions and ultimately limiting construction activity.”