After a long period of concern over too many open positions and the “great resignation,” construction job openings have significantly declined, leading industry experts to question the direction of the construction labor market.
“In May, the national construction industry had 405,000 available, unfilled jobs. By June, this number had declined to 334,000,” reported Association of Builders and Contractors (ABC) Chief Economist Anirban Basu in an August 2022 press release.
“While that remains a significant number of job openings, demand for workers is clearly fading due to rising borrowing costs, increasingly pervasive pessimism and growing risk of recession. These factors have diminished contractor profit margin expectations, as indicated by ABC’s Construction Confidence Index,” Basu said.
Basu predicts that the US economy is poised to slow down. “What had been an economy beset largely by issues of supply is now becoming one faced with both supply chain issues and weakening demand for goods and services,” he said.
Why are construction job openings dropping?
There are several possible reasons experts are pointing to as catalysts for the sudden dip in construction job openings. As Basu said, rising borrowing costs as well as worry and pessimism for the US economic situation — and a possible incoming recession — are chief among them.
Industry experts are predicting more drop-offs for the construction industry in the coming months in response to rising interest rates from the Federal Reserve — a potential growing concern, as Federal Reserve Governor Michelle Bowman has recently spoken about continuing interest rate hikes in the coming months.
Others are seeing rising mortgage rates as a main reason for the pullback, as a cooling residential construction market may push contractors into being warier of hiring.
“Rising mortgage rates continue to impact this industry, and the availability of labor and materials continues to slow the rate of new starts,” said real estate consultant Kelly Mangold. “There is a lot of uncertainty around future conditions, and the lingering possibility of a recession has caused both builders and buyers to take a temporary ‘pause’ as they adjust to the evolving market.”
Some believe that inflation is simply making some projects too expensive to continue, eliminating the possible job openings that went with them.
“Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” said contractor and National Association of Home Builders chairman Jerry Konter.
A July 2022 report from NPR noted that changing economic demand is making a big impact on the construction industry and its hiring practices. Construction companies added 13,000 jobs during June 2022 — a number that NPR noted was less than half as many as in May 2022 — at a time when the hospitality industry added 67,000.
While people are pulling back from residential construction after a lengthy period of investment in this area during the early days of the pandemic, jobs are shifting back to hospitality: “There’s a lot of people out there traveling, going out to eat,” said senior Wells Fargo economist Sarah House. “So there’s still a lot of demand for those workers.”
Earlier in July 2022, ABC data pointed to growing concerns with profitability in the industry, with Basu saying that even though “For months, contractors expected sales, employment and margins to expand,” some instead have had to look towards ways to trim margins in order to remain profitable — with job reductions certainly being on the table for many.
“Several months ago, there was conjecture that contractors were generally too upbeat regarding their collective future,” Basu added at the time. “Increasingly, the data suggests that they were.”
Some contractors & economists are still optimistic
Of course, with all eyes on the possibility of a recession in the United States and the state of the labor market, not everyone is of the belief that this drop in openings is going to be an immediate concern.
Contractor Larry Rooney, president of Tulsa, Oklahoma’s Manhattan Construction Group, maintained that despite concerns his company was still expanding and looking to continue hiring, saying that “We continue to see project opportunities in all sectors.”
Nick Bunker, director of economic research at Indeed Hiring Lab in Washington, DC, said that “The labor market may be cooling off, but the temperature decline is far from a plunge…The outlook for economic growth may not be as rosy as it was a few months ago, but there’s no sign of imminent danger in the labor market.”
Even some other reports from ABC have added reason for hope: An analysis released on August 5, 2022, showed that the industry filled 32,000 net positions in July 2022 — showing that even as job openings themselves decline, there may still be hope that the openings that already exist will continue to be filled.