May data from the Job Openings and Labor Turnover Survey (JOLTS) confirm an ongoing slowdown in the labor market, with net hiring for the construction sector (residential and nonresidential) turning negative year-to-date for 2012.
For the economy as a whole, the May JOLTS data reveal that hiring rates increased to 3.3%, one of the few pieces of good news in the report. The job openings rate (the red line below) also increased back to 2.7% after declining in April. More concerning, the separations rate was the highest in two years, driven in part by the highest layoff rate in a year. The number of quits has also been rising, which on the other hand might be a good sign in that workers feel confident in changing jobs. However, it could also be a sign of a declining labor participation rate, which is a negative for GDP growth.
Despite these changes, the overall trends remain the same. Namely, the openings rate appears to be moving along a sluggishly increasing trend, while the hiring rate remains flat. This suggests the economy is having problem creating jobs by filling open positions. We believe these facts are related to the housing market’s ongoing challenges and the ability of workers to move to locations where employers are hiring. Another explanation is that employers are unable to find workers with the needed skills necessary to fill open positions.
For the construction sector, the May JOLTS data indicate relatively unchanged levels of hiring, totaling 284,000 positions for May. The number of open positions in the construction sector remained steady in May at 77,000 positions, after a decline to 69,000 openings in April.
Overall, there is no doubt that hiring has slowed for the construction sector, with the hiring rate now at 5.2% compared to 6.7% from a year ago.
Per the JOLTS data, net hiring for the construction sector has turned negative, with 28,000 net positions lost for the sector for 2012 year-to-date.
This result is hard to reconcile with increases for 2012 in construction spending and other measures of activity. It is tempting to conclude the weakness in construction employment is due to nonresidential construction, but other Bureau of Labor Statistics data indicate that home builders have not added many jobs in 2012. As with other data series, it is also possible that the seasonal adjustment factors are causing some problems in interpreting data.