March data from the Job Openings and Labor Turnover Survey indicate a noticeable slowdown in construction sector hiring. Evidence suggests that this slowdown is more likely related to unusually warm weather and not underlying economic factors.
For the economy as a whole, hiring rates have remained basically flat since the beginning of 2010. This is reflected in recent payroll employment reports that show weak levels of monthly job creation. At 3.3%, the March hiring rate represents the 14th consecutive month of hiring falling in a narrow band ranging from 3.1% to 3.3% of total employment.
The job openings rate (the red line below) increased to 2.7% in March, the highest rate of job openings since the middle of 2008. Since the end of the Great Recession, the rate of job openings has had an upward trend and is a cause for optimism about household formations and housing demand in the medium term.
An important question is raised by these data. Why is the number of open positions rising, but the level of job hiring relatively flat?
It is possible that a skills mismatch exists between jobs in supply and available workers. It may also be the case that without a healthy housing market, the job market itself cannot function efficiently. This can occur if credit for homebuyers is too tight (particularly first-time homebuyers who form new households), if existing homeowners cannot sell their homes to relocate for employment reasons, and/or if rental housing cannot be developed for areas with rising labor demand. And if people cannot relocate easily, then open positions do not transform into hires.
For the construction sector, the March JOLTS data indicate a significant decline in hiring, falling from 318,000 hires in February to 286,000 in March. However, the February number was upwardly revised, and it is possible the decline in March was due to accelerated hiring in February due to unusually warm weather for much of the nation. Nonetheless, March was the first month in over a year for which the level of hiring for the construction sector fell below 300,000.
Perhaps more reflective of fundamental economic conditions, the number of open positions in the construction sector increased somewhat in March. The number of open positions in the sector increased to 96,000, the highest level since September of last year.
For the first quarter of 2012, per the JOLTS data, net hiring for the construction sector stood at 28,000 positions. While disappointing given initial hopes for 2012, the first quarter stills stands favorably compared to all of 2011, for which net hiring for the sector totaled 67,000 for the entire year (although it was the first year of net job creation for construction since 2006).
Narrowing in on the residential construction sector, per the BLS Current Employment Statistics data, total employment for April stands at 2.038 million (566,000 builders and 1.472 million in associated trades). Total net job losses from the peak of employment (April 2006) fell slightly in April to 1.41 million.