2-16-17

1. In the six months from Oct’15 to Mar’16 construction added 225,000 jobs, the most in any six month period since the Oct-Mar 2005-2006, the very peak of the construction spending boom.
2. In the last three years, we’ve added 840,000 construction jobs. We’ve also increased hours worked to an equivalent to 880,000 jobs, growth of 15%. That’s a faster rate of growth in three years than the 2004-2006 construction boom.
3. In order to track jobs growth compared to the real amount of work put-in-place, construction spending must be adjusted for inflation to get real volume of work completed. The adjustment gives us what is referred to as “constant dollars.” Jobs must be adjusted for hours worked.
4. For much of 2014 and 2015 construction spending real volume growth was exceeding jobs growth, but for 10 months from August 2015 through May 2016, volume growth stalled and (completely contrary to what one would expect in a labor shortage) new jobs growth exceeded volume by 3%. Only in the last few months has volume growth begun to outpace jobs growth again.
5. From the Jan 2011 bottom of the recession in construction to current, both net jobs (jobs x hours worked) and volume (spending after adjusted for inflation) have increased equally by 28%.
6. For 2017, several economists (including myself) are predicting total construction spending will increase by just over 6%. However, I’m also predicting that combined construction inflation for all sectors will increase by 4.0% to 4.5%. That leaves us with a net volume growth of only 1.5% to 2.0%. Therefore, for 2017, we should not expect jobs to increase by more than 1.5% to 2.0%, or 100,000 to 140,000.
7. Growth of only 100,00 to 140,000 new jobs in 2017 would be the slowest growth in 5 years and will look like a growth slowdown. Some might attribute it to lack of available workers. In large part it may be due to a balancing of workforce to real volume growth.
8. Jobs growth is often slightly out-of-balance with real volume growth. But it does tend to come back to balance. If both were to grow at the same rate then productivity would remain unchanged. It will very likely vary slightly from balanced growth.