The Building Tradesman Newspaper

Friday, November 29, 2019

Construction starts slipping, but employment remains firm

By The Building Tradesman

Over the past few months U.S. construction industry employment and spending data have been moving in opposite directions. 

But there is likely logic behind the divergence.

First, in one direction: construction starts have been declining as the year winds down. Dodge Data and Analytics reported on Nov. 18 that U.S. construction starts dropped 11 percent in October, after falling 5 percent in September and 6 percent in August.

Through the first ten months of the year, Dodge reported that total U.S. construction starts were 4 percent lower than in the same period of 2018. Both residential and nonresidential construction starts were down through ten months, although non-building construction starts remained on the plus side due to gains in electric utilities/gas plants and environmental public works.

“Concern over the health of the U.S. economy continues to play a key role in the pullback in starts over the past few months,” stated Richard Branch, chief economist for Dodge Data & Analytics. “However, solid real estate fundamentals (such as vacancy rates) in addition to stable public funding will continue to support a modest level of construction activity across both public and private projects.”

The pullback in construction starts stands in contrast with the continued relative strength in industry employment. 

A significant bloc of states, 41, and the District of Columbia added construction jobs between October 2018 and October 2019, according to an analysis released Nov. 19 by the Associated General Contractors of America based on Labor Department numbers. AGC officials said efforts by construction employers to increase pay and benefits and do more in-house training appear to be helping them find people to hire despite tight labor conditions.

“Construction employment continues to experience robust growth in most parts of the country,” said Ken Simonson, the association’s chief economist. “Many firms appear to be overcoming the challenge of low unemployment rates and strong demand for labor by increasing compensation levels and investing more in training people with relatively little experience in construction.”

And Michigan has been among those job gaining states this year, putting 4,000 more construction workers to work in October 2019 compared to 12 months prior. That 2.4 percent increase ranked Michigan No. 25 among the states in construction job gains over the past year.

Contrast that with neighboring Ohio: the Buckeye State is ranked second-to-last last among the states (Louisiana, -6.4 percent, is No. 51) in construction employment over the past year, losing 3.9 percent of its workforce (-8,600 jobs) over the past year.

Meanwhile, construction employment reached a record highs last month in Nebraska, Texas and Washington.