by Robert Dietz
Despite the expansion of home building activity in 2012, construction sector employment growth remains positive if tepid, according to government statistics.
For the construction sector, Job Openings and Labor Turnover Survey (JOLTS) data from the Bureau of Labor Statistics (BLS) indicate that hiring levels continue to be strong enough to create net jobs (hiring minus separations). However, December hiring was notably weak,with the hiring total for the construction sector at only 287,000 positions, down from 380,000 in November.
While it seems likely that this low number will be revised up next month, December still marked the seventh consecutive month for which the three-month moving average of hiring remained above 300,000.
The number of open positions in the industry remained relatively high. At 92,000 open positions, the month of December had the second highest number of unfilled positions for 2012. Successfully filling open positions with qualified workers is a top concern for home builders going into 2013.
After benchmark revisions, monthly employment data for January 2013 (the employment count data from the BLS establishment survey are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.091 million, broken down as 575,000 builders and 1.516 million residential specialty trade contractors.
According to the BLS data, over the last 12 months, the home building sector has added only 53,000 jobs. Since the point of peak decline of home building employment, when total job losses for the industry stood at 1.466 million, 107,000 positions have been added to the residential construction sector.
An outstanding puzzle remains the fact that the increase in building has outpaced employment growth for the industry. This could be due to increased hours for existing workers, but if true, it is not a sustainable situation. Expected increases in building should lead to significant growth in home building employment in 2013.
For the economy as a whole, the December JOLTS data indicate that the hiring rate dipped slightly to 3.1% of total employment from 3.3% in the previous month. The hiring rate has been in the 3.1% to 3.4% range since January 2011. The job openings rate was also relatively unchanged at a rate of 2.6% in December. The openings rate has now been in the 2.5% to 2.7% range for more than one year.
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.