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Construction Labor Force Took a Hit: Contractors Should be on Guard


It’s been eight years since the construction industry (and the economy itself) was knocked flat by the “housing bubble” recession. The construction sector has been clawing back to full recovery ever since. However, U.S. Bureau of Labor Statistics (BLS) figures in recent weeks have put the brakes on too much optimism.  

According to AP News:

May was a brutal month for the U.S. labor market, with job losses hitting multiple industries. 

Manufacturers cut 10,000 positions, construction companies 15,000. And temporary-help firms shed 21,000 jobs.

The Verizon workers' strike weighed on the telecommunications sector, which lost more than 37,000 jobs.

In May, the construction industry unemployment rate declined to 5.2 percent––its lowest level since October 2006.

A rare bright spot was education and health, where job growth accelerated to 67,000 in May. Among all occupational sectors, employers in education and health have added the most jobs over the past 12 months.

Overall, employers added just 38,000 jobs in May, the fewest in more than five years. The unemployment rate fell to 4.7 percent from 5 percent, mainly because nearly a half-million jobless Americans stopped looking for work and so were no longer counted as unemployed.

Industry (change from previous month)

May 2016

April 2016

Past 12 months













Transportation, warehousing




Information (Telecom, publishing)




Financial services




Professional services (Accounting, engineering, temp work)




Education and health




Hotels, restaurants, entertainment








But how nervous should we be about the construction industry’s health?

For years, the nation’s construction industry has grinded toward full recovery. Though public sector spending on construction has been generally slow to bounce back, private investment has continued to expand, including in categories like apartments, office space, hotel rooms, casinos, and retail space. That recovery has helped to push the construction industry’s unemployment rate lower.

Construction remains healthy along the dimension of labor force dynamics according to Procore’s Construction Health Indicator. However, recent weeks have ushered forth at least a partial reversal. The U.S. construction industry lost 15,000 net jobs in May according to the U.S. Bureau of Labor Statistics––the industry’s worst performance since December 2013. What makes matters more alarming is that April figures were revised lower from an estimated 1,000 net job gain in construction to a loss of 5,000 positions on net.

It gets worse. 

“The construction unemployment rate has fallen by 3.5 percentage points in just the past two months, but it happened for all the wrong reasons. Rather than being driven by job growth, the decline in construction unemployment occurred because many workers dropped out of the labor force. In May, the construction industry unemployment rate declined to 5.2 percent––its lowest level since October 2006,”  says Procore Chief Economist, Anirban Basu.

The hope is that these workers come back. Many contractors have already been wrestling with human capital shortfalls. While it is common for people to drop out of the labor force during winter months, one cannot attribute the shift in the most recent data to the weather.

What does this mean?

The message is that contractors should be on guard. While many continue to boast lengthy backlog, many developers believe that the commercial real estate cycle is now in its seventh inning. There are growing concerns regarding overbuilding in certain key markets. Procore will continue to monitor data to determine whether the recent weakness in construction spending and job growth is just an anomaly, or the beginning of a new stage in the cycle.


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