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Construction job market is 'red hot' amid persistent inventory shortages

Good news for construction workers: You’re hired.

Jobs in construction grew by 23,000, including 800 jobs added in residential construction, in June, the Labor Department said on Friday. Over the last year, construction jobs have gained by 15,000 on average per month.

"The construction market is red hot," Richard Branch, chief economist of Dodge Construction Network, told Yahoo Finance. "Just another sign that we're past the trough here … and better days are on their way."

The hiring also underscores the rebound in the new home market that has boosted confidence enough for builders to push through projects. It also reveals that many homeowners are upgrading their properties rather than selling.

File - Construction workers prepare a recently poured concrete foundation, Friday, March 17, 2023, in Boston. On Thursday, the Labor Department reports on job openings and labor turnover for May. (AP Photo/Michael Dwyer, File)
Construction workers prepare a recently poured concrete foundation, Friday, March 17, 2023, in Boston. (AP Photo/Michael Dwyer, File) (ASSOCIATED PRESS)

June's report shows that jobs for residential buildings are up 11% compared to pre-pandemic levels, while employment for nonresidential buildings edged just 1.8% higher. Both gained on a monthly basis.

That syncs with previous data showing that single- and multi-family residential starts and permits were up in May and new home sales continue to surprise to the upside.

"The construction industry is very interest-rate sensitive, so many expected job growth to crater," deputy chief economist at First American Odeta Kushi told Yahoo Finance. "Yet new construction has been supported by the lack of existing-home inventory."

The number of homes in May was the lowest inventory count on record for the month, according to the National Association of Realtors after it reported that sales of previously owned homes fell 2.7% in May, highlighting the inventory woes.

"The American dream of homeownership has been a challenge for younger adults. High mortgage rates, along with the lack of housing inventory, have been the main hindrance," wrote NAR chief economist Lawrence Yun following the release of the jobs report.

Homeowners, the majority of which have a mortgage rate well below the prevailing market average of 6.81%, have been reluctant to sell and lose that low rate. Instead, many are retrofitting their current residences.

That was backed up by the jobs data. The fastest monthly clip came from the residential trade contractors, which includes workers with skilled specialties like pouring concrete, site preparation, plumbing, painting, and electrical work, adding 10,000 jobs.

"With existing homeowners rate-locked into their home and with not enough homes on the market, consumers may decide to renovate their own home instead of trading up with a new home purchase," Kushi added. "And you need more hammers at work to renovate homes."

Getting those extra hammers, though, is a continual struggle. In May, job openings for construction reached 366,000, according to JOLTS. That’s 19,000 more postings than a month ago.

Monthly hires climbed from 357,000 to 379,000, drawing in 22,000 more hires for the month. At the same time, the ratio of construction hires per job openings — a measure of how easily employers can flip those openings to new employees — increased slightly, indicating it's slightly easier to hire.

Additionally, the rate of quits among construction workers jumped by 57,000 while layoffs dipped, signaling "continued tightness in the construction labor market as new construction demand picks up," Kushi said.

"The lack of labor in the construction sector in particular is hurting the ability of small builders to attract labor," Branch said. "We still see construction material prices rising. That's also impacting margins in the construction industry and makes especially affordable single-family construction more difficult."

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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