Mar 12 2007 12:03PM | Permalink | Email this | Comments (1) |
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Contractors cut 62,000 jobs in February as winter weather finally caught up with job site scheduling. The monthly jobs report showed cutbacks across all types of projects so this was not simply a further weakening of demand in the residential building market. The construction work week fell 0.4% and the aggregate hours worked in construction declined a huge 2.6% to the lowest total in over a year, according to the Bureau of Labor Statistics. With the weather forecasts for March survey week (the week including the 12th) more typically seasonal than in early February, a share of the 62,000 jobs are expected to be restored in March.

But not all of the lost February jobs will be back in March. The current construction hiring trend remains negative. The ongoing reduction in the number of homes under construction and the political impasse on approving scheduled increases in federal civil construction funding will more than offset the rising labor needs of nonresidential building contractors and residential remoldelers for a few more months.

Resist the temptation to blame too much slack in the construction market on weakness in the general economy. It is the weakness in construction, and manufacturing, that is causing the slack in construction markets. Excluding the two weak markets, 173,000 new jobs were added in February and an average of 186,000 over the last three months. This is only a little short of the strong employment gains in 2004-05. The hiring pace continues to improve in business and professional service industries which explains the recent surge in office construction starts. The value of office starts has more than doubled in the first two months of 2007 compared to early 2006.

The overall construction labor outlook is still for improving labor availability and modest wage growth. However, contractors in the booming nonresidential building market and some civil contractors not highly dependent on federal funding should expect rising wage demands and more frequent shortages of skilled labor that reach into the problem zone but do not reach the panic zone.