Jobs in the construction industry seem to be going in the opposite direction of the rest of the economy as it recovers from the pandemic. The May jobs report for the US Bureau of Labor Statistics showed that although much of the economy added jobs, employment in the construction industry fell by 20,000 jobs in that month. Overall, there are 225,000 fewer jobs in construction than there were in February of 2020. However, this contradictory decline is being caused by both the pandemic and long-term factors.
The increased costs of construction supplies is helping to depress employment in the construction industry. Supplies such as lumber, concrete, steel and more have risen sharply due to the pandemic. Some materials have risen to more than four times their pre-pandemic pricing. The supply shortage for construction is due to an increased demand as well as a disrupted supply chain. During the lockdown, many people decided that it was a good time to make improvements to their house. This increased demand for labor was also met by disruptions to the supply chain. Many businesses who support the construction industry drastically reduced their output last year. Additionally, the highly globalized supply chain ran into bottle necks at ports and intermodal stations, reducing the available supply of materials even further. The dramatic increase in costs have pushed developers and rehabbers alike to postpone less urgent projects until the costs are closer to their historical average. In the long-term, the rise in supply costs will have very little impact on employment in the construction industry.
In a normal business cycle, demand for construction workers increases in one area of the country, while falling in another. Many workers are used to travelling to different cities to follow booms in the construction industry. However, this year all regions in the US are experiencing increased demand for workers. There are no areas of the country where construction jobs are falling, so there are no workers who are available to supplement the demand in one region. Additionally, there has been a wave of consolidation in the industry, leaving fewer independent contractors available to follow the demand in different regions.
Before the pandemic, the construction industry was struggling with a long-term structural job shortage. Robert Dietz, the Chief Economist for the National Association of Home Builders, estimates that there are 344,000 unfilled jobs in the multifamily, commercial and residential construction industry. The shortage of skilled workers is due to the lack of young people pursuing trades. With a college degree presented as the only way to have a middle class life, many high schoolers never even consider going to trade school. Developing a pool of skilled labor to fill these jobs will take a greater commitment than just this year.
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