Construction market remains resilient despite challenges

Nonbuilding construction starts were up 24 percent in April compared to a year earlier, according to Dodge Construction Network. Photo: ThamKC/iStock / Getty Images Plus/Getty Images

The headwinds swirling around the construction industry largely carried over from 2022 into the first half of 2023.

Interest rates rose again in May – for, hopefully, the last time – while recession fears linger and funding from the Infrastructure Investment & Jobs Act remains a waiting game in some areas.

Despite all of that, the industry showed resilience through the first six months of the year. Construction employment is up compared to a year ago along with construction starts in most sectors.

The Associated General Contractors of America (AGC), Associated Builders & Contractors (ABC) and Dodge Construction Network have some of the latest analyses of the industry’s performance.

Employment update

Construction employment increased in 42 states and the District of Columbia in April from a year earlier, according to an AGC analysis of federal employment data. Additionally, year over year, employment decreased in seven states and held steady in Hawaii.

“Contractors continue to report strong demand for projects and have added employees in all but a handful of states over the past year,” says Ken Simonson, AGC’s chief economist.

Texas added the most jobs over the 12-month span (28,000 jobs, up 3.6 percent), followed by New York (13,400 jobs, up 3.5 percent), Indiana (11,200 jobs, up 7.3 percent) and Florida (8,600 jobs, up 1.4 percent). Arkansas had the largest percentage increase (up 9.8 percent, 5,500 jobs) followed by Rhode Island (up 7.6 percent, 1,600 jobs), Indiana, Nebraska (up 6.8 percent, 3,900 jobs) and Idaho (up 6.3 percent, 4,100 jobs).

California lost the most jobs year over year (5,100 jobs, down 0.6 percent), while West Virginia had the largest percentage loss (down 3.7 percent, 1,200 jobs). Losses also occurred in Connecticut (1,900 jobs, down 3.1 percent) and Colorado (700 jobs, down 0.4 percent).

AGC officials say construction firms continue to pay premium wages that are above the national average for the overall economy to attract workers. Still, too few workers have been exposed to construction as a career opportunity, largely because federal officials spend only one dollar to support career and technical education for every five dollars they spend urging students to attend college, AGC says.

Meanwhile, the association says gridlock on immigration issues has resulted in too few workers coming into the country who can lawfully work in construction.

“Public officials at the state and federal level don’t seem too eager to encourage students to pursue careers in fields like construction,” says Stephen Sandherr, AGC’s CEO. “If we want the workers, we need to rebuild our infrastructure and modernize our economy. We need to invest in construction-focused education.”

Additional analysis

Year over year, industry employment in April expanded by 205,000 jobs for an increase of 2.7 percent, according to an ABC analysis of U.S. Bureau of Labor Statistics data.

Nonresidential construction employment rose by 800 positions in April, with growth in only one of the three subcategories. Nonresidential specialty trade contractors added 10,700 positions. The number of heavy and civil engineering jobs decreased 8,100, while nonresidential building lost 1,800 jobs.

“Despite adding just 800 net jobs in April, nonresidential construction payrolls have expanded at a faster pace than the broader economy over the past year,” says Anirban Basu, ABC’s chief economist. “Job creation continues to exceed expectations, and April saw the unemployment rate return to the lowest level since 1969. Put simply, the demand for workers remains significantly above the supply. This is especially true for contractors, a majority of whom intend to increase their staffing levels over the next six months, according to ABC’s Construction Confidence Index.”

Basu says there are still signs of a softening economy despite what is happening within the labor market.

“The Federal Reserve raised interest rates again,” he says. “Meanwhile, regional banks remain under pressure. While it is conceivable that the end of the banking crisis is near, credit conditions are likely to tighten further during the months ahead. This is especially problematic for commercial real estate, which faces a debt maturity wall over the next four years. Developers and other private purchasers of construction services are likely to suffer difficulty refinancing debt going forward, dampening demand for new construction.”

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