The construction labor market continued to cool in July, with the count of open construction jobs decreasing to 363,000. The count of open jobs for the overall economy also decreased in July, falling to 8.8 million. According to an analysis by the NAHB, the Job Openings and Labor Turnover Survey indicates an ongoing but gradual cooling of macro conditions due to elevated interest rates.
The count of open jobs was 11 million a year ago in July 2022. The count of total job openings will continue to fall in 2023 as the labor market softens and the unemployment rises. From a monetary policy perspective, ideally the count of open, unfilled positions slows to the 8 million range in the coming months as the Fed’s actions cool inflation. The economy is approaching that level according to this new data release.
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. This is where the risk of a monetary policy mistake can be found. Good news for the labor market does not automatically imply bad news for inflation.
The overall trend is one of cooling for open construction sector jobs as the housing market slows and backlog is reduced, with a notable uptick in month-to-month volatility since late last year.
Despite additional weakening that will occur in the second half of 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 up to 4.8% in July after a 4.7% reading in June. 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.
