Labor Shortage in the Construction Industry Despite a Dip in Job Openings

The construction industry continues to grapple with labor shortages, even as job openings experienced a slight decline. Economists predict that these labor challenges will persist, impacting a lot of aspects of construction. Today we will look into the current state of the construction job market, factors contributing to labor shortages, and the outlook for the industry.

Decline in Job Openings

According to the Bureau of Labor Statistics (BLS), the construction industry reported 350,000 job openings at the end of August. While this number indicates a slight decrease from the previous month, the drop was less than 1%. Despite this, the industry did see an overall increase in job creation, with 1.5% more jobs added in August.

Steady Demand for Construction Workers

Throughout the summer, the demand for construction workers remained relatively stable. The percentage of construction jobs actively seeking candidates showed only a slight decline, dropping from 4.6% in May to 4.2% in August. This data suggests that construction companies are actively seeking skilled workers to meet project demands.

Factors Contributing to Labor Trends

Anirban Basu, the chief economist for Associated Builders and Contractors, highlighted an interesting observation. In August, there were 15,000 fewer resignations in the construction industry compared to July. This trend may be attributed to easing labor shortages in sectors competing with construction for workers. Resignations are seen as a sign of a person’s willingness and ability to seek new job opportunities.

Labor Shortages Persists

Despite a slight dip in job openings in August compared to July, the overall number of job opportunities in the construction sector remains higher than in previous periods. This situation aligns with Basu’s previous projection that robust demand for personnel in construction is unlikely to diminish. Labor-related improvements are good for managing project costs, as contractors want to bolster their workforce in the coming months.

Outlook for the Construction Industry

While labor shortages pose challenges, the construction industry is expected to remain resilient. According to ABC’s Construction Confidence Index, the majority of contractors plan to increase their personnel levels over the next six months. Although certain segments, such as office and retail, face weaknesses, contractors maintain optimism, particularly regarding profit margins.

Rising Construction Input Prices

Construction input prices experienced a 1.5% increase in August compared to the previous month. Nonresidential construction input prices also rose by the same percentage. This uptick is attributed to rising energy costs, including an 8.9% increase in crude oil prices and a 5.4% rise in raw energy component costs. The construction industry continues to grapple with inflationary pressures.

Construction Backlog and Confidence

Associated Builders and Contractors reported that the Construction Backlog Indicator decreased slightly to 9.2 months in August, though it remains higher than the previous year. All company size groups saw a decline in backlog, except those with annual revenues of $100 million or more. Despite these fluctuations, the Construction Confidence Index indicates optimism in terms of sales, profit margins, and personnel levels, dispelling fears of an impending construction recession.