Eye On Housing
September data from the Job Openings and Labor Turnover Survey (JOLTS) indicate construction hiring picked up in September after a slow August. However, an increase in layoffs held back net hiring for the month. As a result, the pace of hiring for the sector in 2012 remains lackluster, especially given the recent pickup in strength of housing construction activity.
For the economy as a whole, the September JOLTS data indicate that the hiring rate fell back to 3.1% of total employment, which was slightly lower on a year-over-year basis. In fact, the hiring rate for September was the first time in 14 months that the rate fell below 3.2% – a small difference perhaps, but one illustrating the sluggishness of growth in the labor market.
The job openings rate (the red line below) fell to 2.6%. in September from an upwardly revised 2.7% in August. The openings rate has now been in the 2.5% to 2.7% range for ten consecutive months.
From 2009 to the end of 2011, the openings rate moved roughly along an increasing trend. However, this growth in open positions has appeared to slow for 2012. Moreover, the hiring rate has remained flat for about a year,with a dip below recent levels for September. All told, these conditions reflect an economy having trouble expanding employment. Relatively stronger reporting from the household and establishment labor market surveys for September and October may presage a stronger JOLTS report next month.
The ongoing weakness in hiring has several potential explanations. One, challenges in housing markets are preventing workers from relocating to labor markets with open positions. However, this “house lock” effect was recently challenged by a paper from economists at the New York Federal Reserve. A second possible explanation is a skills mismatch between available workers and open positions. This explanation is also hotly debated among various proponents of structural or cyclical explanations of post-Great Recession unemployment. Another explanation is that policy uncertainty, for example from the impending fiscal cliff, is holding back employers from adding workers.
For the construction sector, the September JOLTS data indicate that hiring picked up after a slow August. Construction hiring reached a total of 346,000 for the month of September, the third highest total for 2012. September marks the fifth month in a row of hiring in the construction sector above a 300,000 level.
After a reduced hiring rate in August (5.9%), the hiring rate for the construction sector rose to 6.3% in September. Per the JOLTS data, net hiring for the construction sector remains negative, with 17,000 net positions lost for the sector for 2012 year-to-date. This drop off is due to weak hiring in the spring, as well as relative weakness in the nonresidential sector.
Jobs openings in construction were essentially unchanged in September, coming in at 77,000 open positions compared to 81,000 in August. The openings rate was unchanged at 1.4%.
We’ve noted for the last few months that net lost jobs in construction for 2012 is hard to reconcile with significant increases for 2012 in construction spending and other measures of activity. For September, this effect was caused in part for an uptick in the nonseasonally adjusted measure of layoffs, which totaled 280,000 for the month, the highest monthly tally since January 2012 and the second highest since January 2011.
While it is true that weakness in construction employment is due in part to nonresidential construction, other Bureau of Labor Statistics data indicate that home builders have not added many jobs in 2012.
The monthly BLS net employment count for October (the employment count data are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.033 million, broken down as 560,000 builders and 1.473 million residential specialty trade contractors.
Net job losses at the low point of home building employment (December 2010) totaled 1.46 million. Current net job losses are 1.417 million. And according to the BLS data, over the last 12 months, the home building sector has added only 12,000 net positions.
Recent data revisions suggest construction hiring could have been stronger over the period of April 2011 to March 2012. We will know for sure in February when the final benchmark revision is published. This might be a case where startups in the home building and remodeling sectors are being missed by the establishment survey.
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