Hiring slows down, likely to level off

July 01, 2006 |

Contractors hired only 1,000 people in May, drawing from a pool of 647,000 unemployed construction workers and nearly 1.5 million unemployed men age 25 or younger. Only 142,000 new construction workers are expected to be hired over the next year, a significant drop from last year when 268,000 individuals joined the construction workforce.

The current trend is that nonresidential general contractors and their subcontractors, as well as remodeling contractors, are hiring, while heavy contractors are holding employment steady. Residential construction jobs are declining. Net hiring is expected to resume as soon as homebuilders adjust their crew sizes to the current level of reduced housing starts. It's expected that monthly job reports will understate the loss of residential construction jobs through the summer because they do not include the self-employed or the many workers who were hired "off the books" during the housing boom.

This hiring pace will cause only a modest tightening of construction labor markets, and labor supply is sufficient compared to what is available to other industries. Wage rate growth is lagging in construction with average hourly earnings up only 2.3% during the last year, a percentage significantly below wage gains in many service and technology industries and below recent inflation. As a result, expect some construction workers to leave the trade in search of higher paying jobs.

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