The count of open, unfilled jobs for the overall economy declined again in February, falling to 9.9 million, after an 11.2 million reading in December, which was the highest level since July, and 10.6 million in January. The count of total job openings should fall in 2023 as the labor market softens and the unemployment rises. From an inflation perspective, ideally the count of open, unfilled positions slows to the 8 million range in the coming quarters as the Fed’s actions cool inflation.
While higher interest rates are having an impact on the demand-side of the economy, the ultimate solution for the labor shortage will not be found by slowing worker demand, but by recruiting, training and retaining skilled workers.
The construction labor market saw a rebound for job openings in February after a sharp (and odd from a data perspective) decline in January. The count of open construction jobs increased from a revised reading of 283,000 in January to 412,000 in February. This came after a data series high of 488,000 in December 2022. The January data point appears to be an outlier, but the overall trend is one of cooling for open construction sector jobs as the housing market slows and backlog is reduced.
The construction job openings rate decreased to 4.9% in February after a 5.8% data series high in December 2022 (and an outlier reading of 3.5% in January). The combination of these estimates points to the construction labor market having peaked in 2022 and is now entering a cooling stage as the housing market weakens.
Despite the weakening that will occur in 2023, the housing market remains underbuilt and requires additional labor, lots and lumber and building materials to add inventory. Hiring in the construction sector ticked down to a still solid 4.7% rate in February. The post-virus peak rate of hiring occurred in May 2020 (10.4%) as a post-covid rebound took hold in home building and remodeling.
Construction sector layoffs edged up to a 2.2% rate in February. In April 2020, the layoff rate was 10.8%. Since that time, the sector layoff rate has been below 3%, with the exception of February 2021 due to weather effects. Nonetheless, the layoff rate has been at or above 2% for four of the last three months, which is consistent with a weakening trend.
Looking forward, attracting skilled labor will remain a key objective for construction firms in the coming years. While a slowing housing market will take some pressure off tight labor markets, the long-term labor challenge will persist beyond the ongoing macro slowdown.