Homebuilders haven’t halted their bulldozers, but a seasonal slowdown may be on the way.
Jobs in the residential construction sector rose in August, increasing by 2,400 jobs from the month before, the Labor Department said on Friday. Overall, the construction sector gained 22,000 jobs in August, bolstered by heavy and civil engineering construction.
The residential construction figure is “in-line with expectations,” Nick Grandy, a construction and real estate senior analyst with RSM US, told Yahoo Finance.
"Month-over-month variations can be noisy," Odeta Kushi, First American deputy chief economist, wrote in a statement. "From a pre-pandemic historical (Jan. 2015- Feb. 2020) perspective, a monthly increase of 2,400 jobs is below average. However, it was the highest month-over-month increase since December 2022."
Homebuilding in the US rose 3.9% in July as the resale inventory remained muted. Housing starts, a measure of new construction, clocked in at a seasonally adjusted annual rate of 1.452 million in the month, according to separate data from the Census Bureau.
Meanwhile, completed homes dropped 11.8% from June and were 5.4% lower than a year ago, further cementing the shift in builders' mindset to ramp up production on new projects.
"Crews would transition from completions to starts, so we would expect a slight increase to accommodate this," Grandy said.
The lack of homes on the resale market has pushed up construction activity.
New home inventory made up nearly 31% of the total for-sale pie in July. In comparison, from 2000 until the pandemic, the slice of new homes accounted for 11% of the total inventory, according to analysis from Kushi.
“A lack of existing-home inventory means new home construction is essential in meeting shelter demand,” Kushi wrote following the release of the jobs report. “You need more hammers at work to build more homes. That's why res building jobs are still up more than 10% compared to pre-pandemic despite the rate environment.”
According to experts, seasonality could be showing up in the stats. For instance, residential specialty contractors lost 1,000 jobs in August.
"There's a little bit of seasonality in [this] work especially across the country," Grandy said. “I think that's kind of what's contributing to a little bit of this. August, we tend to see home construction start to slow in the fall and winter months, and then it picks back up in the spring, so I think this might be part of what's going on there.”
But there are still reasons for optimism among construction workers. Wage growth has notched up, with average hourly construction wages rising 5.16% year over year in August.
“Contractors in this space continue to be the beneficiaries of a severely undersupplied housing market,” Grandy said. “Many residential contractors are finding that even with mortgage rates [over 7%], there is a cohort of buyers that are not mortgage-rate dependent, which should continue to lead to opportunities.”
Construction counted 363,000 job openings at the end of July, according to data from the Bureau of Labor Statistics released Tuesday, a drop of 23,000 jobs from June. That’s still 10,000 more unfilled positions compared to the same time last year.
The percentage of open construction jobs that went unfilled declined to 4.4% in July. That's still greater than a year ago and at the beginning of the pandemic, according to Anirban Basu, chief economist for Associated Builders and Contractors.
“Unfortunately, the demand for construction workers remains elevated relative to supply,” said Basu in a statement. “As a result, contractors remain reluctant to lay off workers. With a majority of contractors expecting to increase their staffing levels over the next six months, according to ABC’s Construction Confidence Index, labor scarcity should remain a headwind through the end of 2023.”
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.