We’re going to be digging into the weeds regarding current labor force issues in the United States. The headlines from the monthly employment report released last Friday are ubiquitous. While a lot of folks cheered, we’re not sanguine about the labor force issues. And we certainly do NOT trust the pronouncements of politicians whether they have red stripes or blue stripes.
Contractors and construction workers are a key sector and we have a good connection for the “look into the weeds.” Ken Simonson is the chief economist for the Associated General Contractors of America. We first must thank Ken for permission to share data from his latest release of ACG’s Data DIGest, a weekly report focused on economic news and analysis relevant to the construction industry. Those readers who would like to receive Ken’s informational releases are welcome, he says, to contact him via email at [email protected]. He has given us permission to offer his email to our readers.
The following is extracted from Ken’s release dated November 4, 2021:
“Construction employment, not seasonally adjusted, rose y/y from September 2020 to September 2021 in 258 (72%) of the 358 metro areas (including divisions of larger metros) for which BLS posts construction employment data, fell in 67 (19%) and was unchanged in 33, according to an analysis AGC released on Wednesday. (BLS reports combined totals for mining, logging, and construction in most metro areas, to avoid disclosing data about industries with few employers; AGC assumes the construction-only changes in these areas match the combined change.) The largest losses occurred in the Nassau County-Suffolk County, N.Y. division (-6,000 combined jobs, -8%), followed by New York City (-5,500 combined jobs, -5%); New Orleans-Metairie (-3,100 construction jobs, -12%); and the Calvert-Charles-Prince George’s counties, Md. division (-3,100 combined jobs, -9%). The steepest percentage decline, -18%, occurred in Evansville, Ind.-Ky. (-1,800 combined jobs), followed by New Orleans-Metairie; Fairbanks, Alaska (-10%, -300 construction jobs) and Knoxville, Tenn. (-10%, -1,800 combined jobs). Sacramento--Roseville--Arden-Arcade added the most jobs (9,000 construction jobs, 13%), followed by the Seattle-Bellevue-Everett division (7,800 construction jobs, 8%); the Chicago-Naperville-Arlington Heights division (6,700 construction jobs, 5%) and San Diego-Carlsbad (6,700 combined jobs, 9%). Beaumont-Port Arthur, Texas had the highest percentage increase (20%, 3,300 combined jobs), followed by Sierra Vista-Douglas, Ariz. (19%, 600 combined jobs); Waterbury, Conn. (17%, 500 combined jobs); Albuquerque, N.M. (15%, 3,700 combined jobs); and Fargo, N.D.-Minn. (15%, 1,400 combined jobs). Six areas set new lows for September and 49 set new highs, in series dating in most cases to 1990.
“Wages and salaries in the construction industry rose 0.3%, seasonally adjusted, in the third quarter (Q3) of 2021, compared to 1.4% in Q2 2021 and 0.3% in Q3 2020, the Bureau of Labor Statistics (BLS) reported on Friday. Total compensation (wages, salaries, and benefits, including required employer payments) in construction also rose 0.3% in Q3 2021, compared to 1.2% Q2 2021 and 0.3% in Q3 2020. For all private industry employees, employer costs over the past quarter increased 1.6% for wages and salaries and 1.4% for total compensation. Over 12 months, compensation in construction increased 3.0%, vs. 2.4% in the previous 12 months, while compensation for the total private sector accelerated from 2.4% a year ago to 4.1% in the latest 12 months. The steeper increases in other sectors may be one reason contractors are having trouble filling jobs.”
Please notice Ken’s last sentence. Our takeaway is very direct. When there aren’t enough people firms have to pay up and sometimes wind up bidding against each other. The skills needed in construction limit entry but do not exclude it. We expect this competitive bidding for labor to continue.
Lastly, you cannot create people with the snap of a finger. COVID has cost the US over 1 million excess deaths and an estimated 10 million with temporary or partial or permanent Long COVID caused disability (we are only beginning to estimate those numbers). About half of those folks were in the labor force or potentially of ages and demographic cohort to be a part of the available for work component. They are no longer there.
We have more to write about this subject in future commentaries.
David R. Kotok
Chairman and Chief Investment Officer
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