The latest unemployment, employment rates from ABC

The not seasonally adjusted (NSA) national construction unemployment rate in June was 3.6 percent – 0.1 percent lower than June 2022’s rate of 3.7 percent – according to a state-by-state analysis of U.S. Bureau of Labor Statistics data done by the Associated Builders & Contractors (ABC)

According to the analysis, 15 states had lower unemployment rates over the same period, seven were unchanged and 28 states were higher. All states posted an unemployment rate lower than 8 percent.

National NSA payroll construction employment was 199,000 positions higher than in June 2022. From February 2022 through June 2023, seasonally adjusted construction employment was above its pre-pandemic peak of 7.6 million, ABC says.

While residential construction employment moved above its pre-pandemic peak in October 2021, nonresidential construction employment only recently did so in February 2023, according to ABC. Seasonally adjusted residential payroll construction employment in June 2023 was 308,000 jobs above its pre-pandemic peak while nonresidential payroll construction employment was 28,000 above its pre-pandemic peak.

In June 2023, 35 states had lower construction unemployment rates compared to June 2019 (pre-pandemic) and 15 states had higher rates.

“Construction activity and employment has been surprisingly strong in the face of higher interest rates,” says Bernard Markstein, president and chief economist of Markstein Advisors, who conducted the analysis for ABC. “Residential construction employment has been aided by home builders catching up with their projects and increased demand for new homes due to the low inventory of existing homes for sale.

“Meanwhile, nonresidential construction activity and employment are rising, stimulated by funding and tax incentives for manufacturers, states and localities from federal programs such as the CHIPS Act and the Infrastructure Investment & Jobs Act,” Markstein adds. “However, recent and possible future increases in the Federal Reserve’s target federal funds rate and various lenders tightening standards for commercial construction projects are a headwind for future construction projects and employment.”

Recent fluctuations

National and state unemployment rates are best evaluated on a year-over-year basis because these industry-specific rates are not seasonally adjusted, ABC says.

However, due to the decline in the adverse effects on the economy from the pandemic, high and rising interest rates, and other national and international occurrences, month-to-month comparisons offer insight into the rapidly shifting economic environment for construction employment.

The states with the lowest estimated NSA construction unemployment rates in June 2023 were Maryland (0.4 percent), North Dakota (0.6 percent), Maine and Wyoming (1 percent), and Montana, South Dakota and Utah (1.1 percent).

According to ABC, Maryland, Maine, Montana, Utah and Wyoming all posted their lowest June NSA estimated construction unemployment rates on record. North Dakota attained its second lowest June construction unemployment rate, while South Dakota had its second lowest construction unemployment rate over the past seven years, behind last year’s 0.6 percent rate.

The five states with the highest June 2023 estimated NSA construction unemployment rates were Hawaii (5.7 percent), Nevada (5.9 percent), New Jersey (6.4 percent), Rhode Island (7.1 percent) and Connecticut (7.5 percent).

Rhode Island had the largest monthly decline in its rate, falling 1.4 percent.

Basu

Additional analysis

The construction industry added 19,000 jobs on net in July, according to an ABC analysis of U.S. Bureau of Labor Statistics data.

On a year-over-year basis, industry employment has expanded by 198,000 jobs, an increase of 2.5 percent.

Nonresidential construction employment increased by 10,600 positions, with growth in two of the three subcategories. Nonresidential building added 10,500 positions and heavy and civil engineering added an additional 2,200 jobs. Nonresidential specialty trade lost 2,100 jobs.

“The economy is slowing, and inflation remains problematic,” says Anirban Basu, ABC’s chief economist. “While many economists have reversed their predictions of a near-term recession and conclude that the Federal Reserve will be able to engineer a soft landing, today’s report is a reminder that risks remain. Not only is the economy slowing, but wage pressures remain. Accordingly, the war on excess inflation has not yet been won, which means that the Federal Reserve may not be done raising rates.”

Basu adds that despite those pressures, nonresidential construction contractors continue to expand their payrolls.

“General and public works contractors collectively hired thousands of people in July,” he says. “However, weakness in several commercial real estate segments may help explain job losses among nonresidential contractors last month. Nonetheless, construction worker wages continue to grow rapidly in the context of structural skills shortages. According to data from the ADP Pay Insights report, construction workers who stayed at their job saw a 6.4 percent wage increase over the past year, or more than twice the rate of inflation.

“ABC’s Construction Confidence Index indicates that contractors will collectively continue to expand staffing for the rest of 2023,” Basu adds. “That will presumably keep upward pressure on industry wages even if the broader economy continues to soften.”