CRE Midwest

Construction employment and wages are both rising

Construction employment and wages are both rising,ph1

According to an analysis of new government data by the Associated General Contractors of America, rising pay rates enabled the construction industry to attract more workers, leading to a growth of 61,000 jobs to the workforce in February. Association officials cautioned that the Trump administration’s newly imposed steel and aluminum tariffs have the potential to undermine future employment growth for the sector.

“Construction industry employment has accelerated over the past four months, and industry pay rates are now more than 10 percent higher than the private-sector average,” said Ken Simonson, the association’s chief economist. “However, steep tariffs on steel and aluminum will add to rapidly rising materials costs. The combination of higher materials and labor costs could push some contractors out of business and make many projects unaffordable.”

Construction employment totaled 7,173,000 in February, a 3.7 percent gain over 12 months. The industry’s year-over-year job growth rate was more than double the 1.6 percent rise in total nonfarm payroll employment. Residential construction—comprising residential building and specialty trade contractors—added 25,400 jobs in February and 107,500 jobs over the past year, or 4.0 percent. Nonresidential construction (building, specialty trades and heavy and civil engineering construction) employment increased by 3.5 percent over the same time period.

While the industry added over a quarter-million jobs during the past year, the number of unemployed job seekers with recent construction experience only fell by 49,000 between February 2017 and February 2018. The unemployment rate in construction dropped to 7.8 percent last month from 8.8 percent a year earlier. This suggests that most of the new hires at construction firms are from other sectors of the economy or new entrants to the labor force, Simonson said.

One impetus driving people into construction from other sectors is a climbing average hourly wage of $29.47, which is up by 3.3 percent over the year prior. In contrast, the average for all nonfarm private-sector jobs rose just 2.6 percent in the past year, to $26.75, meaning the construction rate is now more than 10 percent higher than the private-sector average. While the employment figures signify robust demand for construction services, many construction firms are locked into fixed-price contracts and the higher costs that will come about from the tariffs won’t be able to be passed onto the client, leaving many employers with less money to invest in equipment and personnel.

“It is frustrating to see the potential benefits of the President’s tax cuts and regulatory reforms being undermined by his short-sighted decision to impose tariffs,” said Stephen E. Sandherr, the association’s chief executive officer. “The best way to help the U.S. steel and aluminum sector is to continue pushing measures, like regulatory reform and new infrastructure funding, that will boost demand for their products.”