While the most recent employment figures may indicate a slowdown in the residential construction sector, experts believe that this is likely a temporary blip in an otherwise robust industry.
According to data released by the Labor Department on Friday, jobs in the residential construction sector saw a decline of 5,500 jobs, a 5.5% decrease from the previous month. However, the broader construction sector still managed to add 19,000 jobs in July, with non-residential building construction contributing 10,500 jobs and specialty trade contractors gaining 11,200 jobs compared to June.
Analysts caution that these figures should be viewed within the context of broader trends. Despite the recent dip, the lack of available homes for sale is expected to continue driving demand for residential construction, as long as the industry can maintain a steady workforce.
“It’s weather-related and I’d want to see confirmation of this in a follow-up report,” noted James Knightley, Chief International Economist at ING. “I think a one-off number given the weather patterns we’ve been seeing, the disruption that it causes, we can take that one.”
Additional data also supports the notion of ongoing construction activity. Data from the Commerce Department reveals a 2.1% increase in single-family housing projects in June. This uptick is attributed to the substantial shortage of single-family homes available for sale, leading to a surge in construction projects.
The trend is also evident in residential specialty contractor jobs, which grew by 13.3% in July compared to June. This shift highlights how homeowners are increasingly opting for renovation projects instead of relocating, particularly as mortgage rates remain near 7%.
“While existing homeowners are financially incentivized to stay in their homes due to rate-lock, they are more likely to embark on renovation projects to align their properties with their changing needs,” explained Ksenia Potapov, First American economist.
However, the construction industry continues to grapple with a shortage of skilled workers. In June, the industry reported 374,000 job openings, representing a slight drop of 5,000 from the previous month. Additionally, the number of quits in the sector decreased, with construction experiencing the most significant decline of 51,000 fewer workers leaving their jobs in June compared to May.
Despite the challenges, industry observers emphasize the resilience of the construction sector. “The real story is that, despite massive interest rate increases and tighter credit conditions facing developers and others that purchase construction services, the number of unfilled jobs remains so elevated by historical standards,” stated Anirban Basu, chief economist for Associated Builders and Contractors.
While short-term fluctuations may occur, the broader outlook for the residential construction industry remains positive, driven by strong demand and the need for new and renovated housing.
