June Jobs Report (May 15-Jun 18) released July 8
There have been no job gains in construction for the last 3 months. In fact we’ve lost 22,000 jobs since March and have only 46,000 new jobs year-to-date. I have to admit after the Apr and May losses, I expected a sizable jobs gain in June. However, for quite a while I’ve predicted spending would decline in Q1 and since a peak in Mar it’s been going down for 2 months. Lower spending would correlate to lower jobs.
Construction jobs are up 3.9% over the same period 2015, so a temporary slowdown should not have much effect. We have just gone through the best 3 years of construction jobs growth since 2004-2006. Perhaps we may experience a leveling out between spending and jobs. At any rate, I see construction spending increasing. There’s still a lot of spending growth in current backlog from starts, so I expect further increases in jobs.
The available unemployed pool dropped to the lowest in 16 years. That could also have some correlation with slow or no jobs growth, as it may mean the people to hire are not available.
Availability already seems to be having an effect on wages. Construction wages are up 2.6% year/year, but are up 1.2% in the last quarter, so the rate of wage growth has recently accelerated. The most recent JOLTS report shows we’ve been near 200,000 job openings for months. That with this latest jobs report could indicate labor cost will continue to rise rapidly.
As wages accelerate, also important is work scheduling capacity which is affected by the number of workers on hand to get the job done. Inability to secure sufficient workforce could impact project duration and cost and adds to risk, all inflationary. That could potentially impose a limit on spending growth. It will definitely have an upward effect on construction inflation this year.
Construction worker output Q2 2016 (# workers x hours worked) is up 3.7% over the same quarter last year, but up only 0.6% from Q1 2016.
Spending minus inflation (volume) has been growing faster than workforce output for the last few years. Since Jan 2011, volume has increased 20% and workforce output increased 26%, a net productivity loss, but since Jan 2014 volume increased by 16% and workforce output increased by only 12.5%. Total hours worked compared to total spending shows productivity has been increasing for the last two years. It would be unusual to see productivity growth continue for another year. This leads me to think if spending plays out as expected then construction jobs will grow by about 200,000 in 2016. Availability could have a significant impact on this needed growth.