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Construction Industry Hit Hard by Labor Market Fluctuations
Defining the future of real estate
Franco Faraudo
May 03, 2024
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PARTNER ENGINEERING & SCIENCE, INC.
Propmodo Daily
By Franco Faraudo · May 3, 2024
Greetings!
Today’s newsletter is brought to you by Partner Engineering and Science, Inc., the leading provider of engineering, environmental, construction, energy, and valuation consulting for the commercial real estate industry. Tired of equipment failures and budget surprises? A Facility Condition Assessment (FCA) can be your solution. Join Partner's webinar next week to learn how.
Elevated interest rates have significantly reduced job openings, especially in the construction sector. This downturn stems from decreased housing starts and the rising costs of capital, labor, and materials. In today's email, we'll explore how this slowdown could impact the Fed's interest rate decisions and the persistent housing affordability crisis that contributes to inflation.
As you probably already know, RealPage is embroiled in lawsuits alleging its rent-suggesting software facilitates collusion among landlords. In a new article, we explore how these cases could impact algorithmic pricing across industries and raise questions about antitrust law in the digital age.
Now, let's dig in!
Construction Industry Hit Hard by Labor Market Fluctuations
The new jobs numbers are in, and they tell a lot about the current state of the economy. As a result of elevated interest rates, job openings fell to their lowest point since February 2021, during the height of the pandemic. One of the industries that accounted for this drop was construction. More than half of the 325,000 job listings that went away in March were construction jobs.
The dwindling supply of construction jobs stems primarily from a slowdown in new construction activity. Single-family housing starts declined by 7 percent for the month, while multifamily starts saw an even sharper 23 percent decrease. The combined pressures of higher capital costs, escalating labor prices, and limited material availability have hindered builders' abilities to scale up their projects.
While a lower supply of jobs could theoretically bring wages down, that trend isn't materializing. New data from the National Association of Homebuilders reveals a 5% year-over-year increase in seasonally adjusted average hourly earnings for construction labor. Interestingly, the states experiencing the highest construction wage growth tend to be those with lower starting wages – Idaho, Iowa, and Wisconsin saw increases exceeding 8%.
The job slowdown offers both positive and negative implications. On one hand, it's another data point that could encourage the Fed to lower interest rates. On the other, it raises concerns for the real estate industry and the broader economy. The NAHB estimates that new construction accounted for over a third of homes on the market this spring, a stark contrast to the usual 13%.
Limited housing supply continues to drive up prices nationwide. Expanding the housing stock is crucial for addressing the affordability crisis that fuels the very inflation the Fed combats with rate hikes. As the Fed monitors job numbers to inform interest rate decisions, it's important to consider the impact on the housing market – a key driver of current inflation.
Your Capital Plan is Failing. Is Your FCA the Problem?
How’s your capital plan working for you? Tired of unexpected equipment failures and budget surprises? There’s a solution. Done right, a Facility Condition Assessment (FCA) is your secret weapon for smarter, more proactive facility management.
Forget reactive repairs. Stop struggling with runaway projects. A well-executed FCA is your roadmap for predictive maintenance and strategic capital planning. In this webinar, top experts will show you how to get an effective FCA and, more importantly, how to use it to reduce risk, get a real-time picture of facility health, and boost performance metrics across your entire organization – from the maintenance team to the C-Suite.
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Overheard
We've already seen more inflation in just 51 months of the 2020s decade than in the entire decade of the 2010s
+33.1% - ‘90s decade
+28.8% - ‘00s decade
+19.0% - ‘10s decade
+20.7% - ‘20s decade twitter.com/i/web/status/1…— Lance Lambert (@NewsLambert)
5:06 AM • May 2, 2024
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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.
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