Threat of Recession Dampens Positive Construction Job Report

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Nonresidential construction employment increase of 13,000 jobs is a respite in a sea of bad economic news.
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Despite the employment increases in nonresidential construction in June, economists within the industry are still forecasting a recession.

Both the Associated Builders and Contractors and Associated General Contractors of America reported that the U.S. Bureau of Labor Statistics data shows that the construction industry added 13,000 jobs in June.

"This does nothing, however, to dim the risk of recession,” said ABC Chief Economist Anirban Basu. “Employment tends to be a lagging indicator.”

However, he acknowledged the news was a welcome respite from the ongoing waves of bad economic news.

With an abundance of open positions and inflation driving people back into the labor market, it served as a recipe for another month of solid job growth. construction employment growth june 2021 versus june 2022Associated Builders and Contractors

However, Basu suggested the positive nature of the numbers is a false positive. Rather than indicating a continued boom in labor, he said that the numbers will likely prompt further interest rate increases by the Federal Reserve in the months to come.

“Higher borrowing costs working in conjunction with lofty materials prices and rapidly rising worker compensation mean that the threat of significant numbers of project postponements and cancellations remains firmly in place,” Basu said. “These factors have already begun to whittle away at contractor profit margins.”

Based on analysis of the federal government's data, he may be right. While there were employment increases, at the same time the number of jobseekers with construction experience plunged to a record low.

“With industry unemployment at a record low for June and openings at an all-time high for May, it is clear contractors can’t fill all the positions they would like to,” added AGC chief economist Ken Simonson.

He noted that the unemployment rate among jobseekers with construction experience tumbled from 7.5 percent in June 2021 to 3.7 percent last month, the lowest rate for June in the 23-year history of the data.

The number of unemployed construction workers was nearly cut in half, falling by 345,000, or 47%. That leaves 385,000 potential workers to fill 466,000 openings as reported in May by the federal government. That total is 39% higher than May 2021 and marks the largest number of construction job openings in May since 2000, when the data was first collected.

“Although nonresidential contractors were able to add employees in June, the industry needs more as demand for projects is outpacing the supply of workers,” Simonson said. 

total nonfarm and construction employment february 2020 thru june 2022 line graphAssociated General Contractors of America