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Construction Sees Job Gains, Higher Pay

Monday, February 6, 2017

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U.S. construction employment started 2017 on a positive note, adding 36,000 net new jobs on a seasonally adjusted basis in January, as well as increasing worker pay, according to new analyses of federal data.

The Associated Builders and Contractors reports that the 0.5 percent increase represents the best month for construction employment growth since March 2016, citing U.S. Bureau of Labor Statistics data released Friday (Feb. 3). The Associated General Contractors of America reported in its analysis that the increase has resulted in the highest level since November 2008—6,809,000 construction jobs total.

modern office
© iStock.com / Nikada

The rapid pace of hiring indicates that the typical nonresidential construction firm can look forward to many more months of activity, economists say.

The nonresidential construction sector added 14,900 net new jobs for the month, while its residential counterpart added 20,300 net new jobs (rounded figures), ABC said. The construction industry added 170,000 net new jobs on a yearly basis, an increase of 2.6 percent, ABC reports.

“Today’s employment report indicated growing strength in construction along a variety of dimensions,” said ABC chief economist Anirban Basu. “First of all, there was job growth in both residential and nonresidential categories. Over the past year, nonresidential construction has accounted for roughly a quarter of total construction job creation.”

In January’s report, however, nonresidential activities account for more than 40 percent of new net jobs, Basu said, noting that it indicates relatively faster performance improvement in that part of the industry.

Unemployment Rate Surges

Further, “the industry’s unemployment rate surged in January to 9.4 percent,” an increase of 2 percentage points, he said.

“While one would be tempted to suggest that this was due to a loss of seasonal construction employment, that cannot be a primary explanation since the total number of construction jobs expanded meaningfully in January,” according to Basu. Instead, “[t]he better explanation is that more people have begun to look for work in the construction industry, perhaps in part because of indications from the new administration in Washington D.C. that an infrastructure-led stimulus package is now in the works.”

Chart
ABC

The construction industry gained 36,000 jobs in January, to reach 6,809,000.

That unemployment rate grew 4.9 percentage points since July 2016. The nationwide unemployment rate, which inched up to 4.8 percent in January, has decreased by a tenth of a percentage point over that same time period, ABC reported.

Continued Investment

The rapid pace of hiring aligns with ABC’s backlog survey, ABC said, which indicates that the typical nonresidential construction firm can look forward to many more months of activity.

“With continued aggressive investment in commercial properties and still-low interest rates, backlog will continue to expand among many contractors,” Basu added. “Indeed, the architecture billing index, a key industry leading indicator, surged late last year in part because of growing confidence in the U.S. economy.”

Skilled Laborer Shortage

Still, Basu warns that many contractors may find it even more difficult to find suitable workers to complete these projects.

“While the industry unemployment rate has been rising, there is no assurance that new entrants into the U.S. labor force possess the skills necessary to work on today’s construction projects,” he said.

“This also likely implicates faster wage growth within the nation’s construction workforce.”

Indeed, the AGC reports that the January average hourly earnings in construction increased 3.2 percent over the past year, to $28.52 per hour.

contractor
©iStock.com / Gringos012

Hourly earnings in construction are rising faster than the 2.5 percent for all private sector workers, according to the AGC's Ken Simonson, relying on federal data.

Ken Simonson, the association’s chief economist, added that hourly earnings in construction are rising faster than the 2.5 percent increase for all private sector workers and are now nearly 10 percent higher than the private sector average of $26.00 per hour.

"Contractors have the 'help wanted' signs out and are offering good pay and benefits," said Stephen E. Sandherr, the AGC’s CEO. "We need government at all levels to revitalize and better fund programs to educate and train the next generation of construction craft workers."

   

Tagged categories: Associated Builders and Contractors Inc. (ABC); Associated General Contractors (AGC); Business conditions; Business matters; Economy; Jobs; Labor; Market

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