from Eye on Housing by Robert Dietz
November data from the Job Openings and Labor Turnover Survey(JOLTS) indicate that despite a downward revision for October, the number of open positions in the construction sector remains elevated. With continuing growth in housing starts predicted for 2013, these data suggest increased employment levels for the construction sector in the months ahead.
For the economy as a whole, the November JOLTS data indicate that the hiring rate (blue line below) was unchanged at 3.2% of total employment. The hiring rate has been in the 3.1% to 3.4% range since January 2011. The job openings rate (red line below) was also unchanged at a rate of 2.7% in November. The openings rate has now been in the 2.5% to 2.7% range for one year.
From 2009 to the end of 2011, the openings rate for the overall economy moved roughly along an increasing trend. However, this growth in open positions slowed in 2012. Moreover, the hiring rate trended down in 2012. All told, these conditions reflect an economy having trouble expanding employment.
The ongoing weakness in hiring has several potential explanations. One, challenges in housing markets are preventing workers from relocating to labor markets with open positions. However, this “house lock” effect was recently challenged by a paper from economists at the New York Federal Reserve. A second possible explanation is a skills mismatch between available workers and open positions. This explanation is also hotly debated among various proponents of structural or cyclical explanations of post-Great Recession unemployment. Another explanation is that government policy uncertainty is holding back employers from adding workers.
For the construction sector, the JOLTS data indicate that hiring levels picked up in November after a slight slowing during the Fall of 2012. November hiring for the construction sector totaled 351,000, marking the seventh month in a row of hiring in the construction sector above a 300,000 level. The significant month-over-month gain in hiring was consistent with the October JOLTS data, which showed an increase in job openings for the sector.
Job openings in construction remain elevated despite a downward revision for October’s spike in openings. The number of open positions for October (99,000) and November (93,000) marks the highest two-month total in a year and a half. These data lend evidence of increased demand for construction workers and future growth in construction sector employment.
The monthly BLS net employment count for December (the employment count data from the BLS establishment survey are published one month ahead of the JOLTS data) indicates that total employment in home building stands at 2.056 million, broken down as 565,000 builders and 1.491 million residential specialty trade contractors.
According to the BLS data, over the last 12 months, the home building sector has added 67,000 jobs. While an improvement over recent months, this is still below the levels of net employment many believe should have been gained given the significant pickup in home building in 2012. However, it may be the case that for many builders, increases in construction in 2012 resulted in more hours for workers rather than in significant gains in the number of workers hired.
Nonetheless, the elevated October and November numbers of job openings rate bodes well for future construction employment reports.