Construction loses 7,000 jobs on net, sees input prices rise 2.8% in June
By Riley SimpsonJuly 14, 2021
June 2021 wasn’t a stellar month for construction’s continued recovery from the Covid-19 pandemic: In the past month, the industry lost 7,000 jobs on net, experienced a rise in construction unemployment (up to 7.5%) and saw construction input prices increase by 2.8% from the previous month, according to data from the U.S. Bureau of Labor Statistics (BLS) and the Producer Price Index.
In the job count column, nonresidential construction employment declined by 22,600 positions on net in June; nonresidential specialty trade contractors made up 14,800 new jobs lost, and heavy and civil engineering employment fell by 10,900 jobs.
Despite these losses, the nonresidential building sector added 3,100 jobs on net – and according to analysis from Associated Builders and Contractors (ABC), the industry has recovered 875,000 (or 78.6%) of the jobs lost during the earlier stages of the pandemic.
“[This data is not] consistent with optimistic projections for industry activity generated by ABC’s Construction Confidence Indicator,” said ABC Chief Economist Anirban Basu.
Basu called the current employment report is “an utter mess” and “difficult to reconcile,” especially when considering a BLS survey of employers, which shows that the country’s economy added 850,000 jobs last month
“In other words, today’s data regarding the U.S. labor market supply more questions than answers,” Basu said. “Most economists pay more attention to the establishment survey, which means that most assessments regarding today’s jobs report will be upbeat. Nonetheless, contractors and other economic stakeholders should be concerned by ongoing labor market dysfunctions, including an inordinate level of difficulty finding workers, elevated numbers of people quitting their jobs and rising wages.
“While wage growth moderated in June, that may be because disproportionate numbers of entry-level workers re-engaged the economy given the lapse of enhanced unemployment benefits in certain states and their imminent cessation elsewhere,” Basu said. “The entry of these workers in large numbers would tend to suppress average wage measures. Most contractors are likely continuing to experience substantial upward wage pressure.”
As for the rising figures for input prices, in total, construction input prices are 24.8% higher (nonresidential rose 24.6%) than a year ago.
And compared to 2020, all three energy subcategories have experienced significant year-over-year price increases: Crude petroleum is up 108.8%, and natural gas and unprocessed energy materials prices have increased 105.9% and 83.5%, respectively.
Softwood lumber prices are up 125.3% over the past year, but those figures are trending back down at a 2.1% rate on a monthly basis. However, over the same period, steel mill product prices are 88% higher, and iron/steel prices have increased by 73%.
“The inflation drumbeat continues,” Basu said. “With each passing month, the possibility that meaningful inflation will be long-lived increases. For various reasons ranging from sky-high shipping costs to labor shortages and global supply chain disruptions, construction input prices continue to march higher.
“This is becoming a real challenge for America’s nonresidential construction industry,” Basu said. “Not only are these rising materials prices likely to induce more project owners to delay project starts, but ongoing inflation also makes it more likely that the Federal Reserve will have to begin tightening monetary policy sooner than anticipated and with greater force. Should that occur, interest rates will be pushed higher, adding to project financing costs. That could further forestall nonresidential construction’s recovery despite ABC’s Construction Confidence Indicator suggesting rising contractor optimism.”