By Manuel Gutierrez, Consulting Economist to NKBA
Shows Strength in Jobs, Spending
The construction industry is displaying a resilience not seen in many other industries, but is still considerably below its peak.
Industry employment has been steadily recovering since its April low. A total of 658,000 jobs have been added over the last four months. That still puts it at 5.6% below the 7.6 million pre-pandemic high in February. It is tracking better than the private sector, however, which is 7.6% below its February peak.
Of all the major sectors, only three are outperforming residential construction. Utilities tops the list, currently just 1.6% below its 546,000 peak. Financial Activities is next, having recovered all but 2.2% of its previous 8.85 million jobs. Health Services has also been doing well. It now stands at 4.3% below its 16.5 million employment peak.
Within construction, Residential Construction employment is performing far better than Non-Residential. Overall employment in the residential sector has recovered to just 2.5% below its peak, far better than the 6.7% gap for the non-residential sector.
The chart below highlights the three major residential components. Among them, employment in new multifamily housing has already exceeded its February high point.
The sectors that are topping the employment recovery are also the ones that tend to lead in overtime hours. The need to meet the demand for additional products and services in those industries, combined with the difficulty some businesses are facing trying to recall workers, have resulted in employees putting in longer days.
Overall, private sector workers have increased their hours by 25 minutes for an average weekly work week of 34.6 hours. In construction, the weekly increase is 1.1 hours, taking it to a 38.9 hour work week. Employees in construction in general work 4.3 more hours a week than the private sector average.
Project Spending Edges Higher
Another indicator of the recovery in construction is the total amount spent by consumers and businesses for construction projects currently under way. This data reflects the estimated amount spent each month on construction projects.
Total spending for all private construction projects increased 0.6% in July, to an annual rate of just over $500 billion. This is the result of a 2% increase for residential projects, offset by a 1% shortfall in non-residential spending.
Total private residential spending represents 54% of the total construction expenditures, amounting to an annualized rate of $547 billion in July.
Last month’s increase in total residential construction spending resulted from gains in new housing construction. Both single and multifamily spending rose, but the rate of spending on remodeling by homeowners fell by a half percentage point for the month.
