As June comes to an end, the June employment report from the U.S. Bureau of Labor Statistics paints a complex picture of the job market. The construction industry reports key data in employment, job growth, project starts, and mortgages.
These indicators not only reflect the industry’s current health but also offer insights into broader economic trends shaping the months ahead.
UPDATED AT: July 19, 2024
In June, construction employment saw strong growth, with the U.S. Department of Labor reporting a gain of 27,000 jobs on July 5. Additionally, the construction unemployment rate fell to 3.3%, indicating ongoing labor supply pressures.
The report reveals a potential cooling of the labor market. The unemployment rate ticked up, and revisions showed fewer jobs added in previous months. This could indicate a slowdown, but it's vital to differentiate between a healthy correction and a cause for serious concern.
June's job growth surpasses the 20,000-per-month average gain over the past 12 months. Construction remains a leading industry for employment growth, alongside health care, social assistance, and government sectors.
The increase in construction employment was driven by significant contributions from various sectors within the industry.
Nonresidential sectors and heavy and civil engineering construction accounted for 21,200 of the 27,000 new positions. Specialty trade contractors added 11,600 positions, with nonresidential specialty trade firms contributing 9,200 jobs.
Building contractors added 8,800 jobs, with nonresidential building contractors contributing 5,700 positions. Heavy and civil engineering construction saw a gain of 6,300 jobs.
The U.S. Census Bureau and the U.S. Department of Housing and Urban Development have published the seasonally adjusted annual rates (SAAR) for building permits, housing starts, and housing completions for June 2024. The key data and information is summarized below.
Building permits were issued at a rate of 1,446,000 units, housing starts at 1,353,000 units, and housing completions at 1,710,000 units. Permits for buildings with five or more units jumped by 19.2% to 460,000 units. Overall building permits increased by 3.4% to a rate of 1.446 million units, indicating future housing demand.
The Commerce Department reported a notable rebound in new residential construction in the U.S. for June. Housing starts increased by 3.0% to an annual rate of 1.353 million, recovering from a 4.6% decline in May. This rise surpassed economists' expectations of a 2.6% increase. The rebound was driven by a 19.6% surge in multi-family starts, which offset a 2.2% decline in single-family starts.
Multi-family permits spiked by 15.6%, while single-family permits dropped by 2.3%. Despite these positive indicators, the National Association of Home Builders reported a dip in homebuilder confidence in July, with the Housing Market Index falling to 42, its lowest since December, due to high mortgage rates.
Residential investment likely reduced GDP in the second quarter, following a positive contribution in the first quarter. The Atlanta Fed forecasts GDP growth at a 2.7% annualized rate for the second quarter, up from 1.4% in the first quarter.
In the first half of 2024, 30-year mortgage rates hovered around 7%. As of June 26, the average rate for a 30-year fixed mortgage was 7.02%, according to Bankrate’s survey of lenders. This rate is slightly up from July’s average of 6.89%, which had dropped from a six-month high of 7.22% in May.
Mortgage rates are expected to trend lower with anticipated interest rate cuts by the Federal Reserve in September, November, and December.
Fannie Mae analysts predict rates will drop to 6.7% by the fourth quarter, while Freddie Mac researchers expect rates to be at or above 6.5%. The Mortgage Bankers Association's June outlook projects 6.6% rates by the fourth quarter. The National Association of Realtors also forecasts rates will be 6.7%.
The continued demand for workers amid a hiring shortage remains a stress point for industry firms.
According to Ken Simonson, chief economist for the Associated General Contractors of America, the main challenge is finding qualified workers rather than securing projects.
The industry's unemployment rate has dropped to 3.3%, one of the lowest recorded by the Bureau of Labor Statistics, underscoring the labor shortage. Moreover, Anirban Basu, chief economist for ABC, noted that labor shortages are hindering even faster job growth in the industry.
The June report offers a reminder that the post-pandemic recovery is uneven.
While construction's strength and the labor market's overall resilience are positive signs, the uptick in unemployment and potential for a broader slowdown suggests cautious optimism. As the Federal Reserve System navigates these complexities, a data-driven approach will be crucial to ensuring a sustainable economic recovery.