A rise in construction employment through the month of August paints a cautiously optimistic picture for home builders, reflecting the pent-up demand in the housing market.
In its Aug. Employment Situation Summary, the U.S. Bureau of Labor Statistics reported that employment in the construction industry continued to trend up in August with the addition of 22,000 jobs, in line with the average monthly gain of 17,000 jobs over the prior 12 months.
Residential building construction employment increased by 2,400 jobs, down 1% from the peak hit earlier this year. Non-residential building jobs increased by 1,800, a record high.
First American Deputy Chief Economist Odeta Kushi said this presents reason to be optimistic, despite the fact that mortgage rates remain near 7%. “Consumers are feeling the pinch of declining affordability,” Kushi said. “However, demographic tailwinds from millennials aging into their prime home-buying years and a lack of existing-home inventory means new home construction is essential in meeting shelter demand. And you need more hammers at work to build more homes. That's why residential building jobs are still up more than 10% compared with pre-pandemic levels, despite the rate environment.”
More Americans were unemployed this August than in Aug. 2022, and employment by industry varied, reflecting seasonal and market trends. Employees’ average hourly earnings rose by 8 cents, or 0.2% in August, to $33.82.
Wage growth increased by 4.3% over the past 12 months, a rate in which MBA SVP and Chief Economist Mike Fratantoni said is “still likely too high” to be consistent with the Fed’s 2% inflation target. “This report should be enough for the Fed to keep the federal funds target rate on hold at its next meeting,” Fratantoni said. “We expect that they will hold here until next spring, and their next move should be cut. The combination of a still strong job market, and rates that should trend down over time, is positive for the housing market.”
The overall unemployment rate rose to 3.8% in August, due to an increase in the labor force participation rate.
“More people are actively looking for work, but new or re-entrants to the labor market in August were not having much luck, pushing up the numbers of those unemployed for less than five weeks,” Fratantoni pointed out. “This makes sense, given the report of businesses pulling back job openings over the past few months. Unfortunately, some started looking for work just as business demand for workers has begun to decline somewhat. Keep in mind that there are still many more job openings than unemployed individuals."
Total nonfarm payroll employment increased by 187,000 in August, less than the average monthly gain of 271,000 over the prior 12 months. The unemployment rate rose by 0.3% to 3.8%, as the total number of unemployed persons hit 6.4 million.
“August's jobs report is signaling that the labor market is solid but slowing,” Kushi said. “Unemployment did increase, but it was for mostly the ’right’ reason - more labor supply. Labor demand is cooling, labor supply increased, and wage growth is gradually moderating. Cooling is good from the perspective of the Federal Reserve.”
The industries that saw the most job growth in August were health care (+71,000), leisure and hospitality (+40,000), social assistance (+26,000), and construction (+22,000). Transportation and warehousing declined by 34,000 jobs over the same period.
Data is gathered through two monthly surveys issued by the Dept. of Labor. September's jobs report is set to be released Oct. 6.
