The U.S. construction industry faced challenges in October with 423,000 job openings, as reported by an analysis from the Associated Builders and Contractors (ABC) based on the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS).
Despite a decrease of 4,000 job openings from the previous month, there was an increase of 25,000 compared to the same period last year. The economywide trend showed a decline in job openings to 8.7 million, the lowest since March 2021, indicating a slowdown in labor demand. However, the construction sector still grapples with worker scarcity, with 5% of positions remaining unfilled on the last day of October, surpassing the 3.9% industry job opening rate observed in February 2020.
ABC Chief Economist Anirban Basu noted that while labor market tightness is easing across various economic segments, the construction industry continues to face challenges in finding available workers. With almost half of contractors planning to increase staffing levels in the next six months, the shortage of workers is expected to persist as a significant obstacle for the construction sector in the coming quarters.
CONSTRUCTION BACKLOG
ABC reported a slight uptick in its Construction Backlog Indicator, reaching 8.5 months in November, compared to 8.4 months in October. The survey results showed a decrease of 0.7 months from November 2022. Despite the monthly increase, the backlog is currently 0.8 months lower than the peak in July. Notably, contractors with annual revenues exceeding $100 million reported fewer than 10 months of backlog in November for the first time since the second quarter of 2018.
ABC's Construction Confidence Index revealed positive trends in sales and staffing levels for November, while profit margins saw a decline. All three readings, however, remained above the growth threshold of 50, indicating expectations for growth over the next six months.
Basu said a growing number of contractors are reporting declines in backlog, attributing the impact to interest rate hikes by the Federal Reserve. The cost of capital has risen over the past 20-plus months, and credit conditions are tightening, posing challenges for project financing. Despite some relief with certain interest rates falling in anticipation of Federal Reserve rate cuts in the coming year, Basu cautioned that 2024 may be weaker from a construction demand perspective, particularly for firms heavily reliant on private developers. However, those in public construction and industrial segments are expected to encounter less resistance on average.
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