Higher employment led by nonresidential sector.
According to the establishment survey of the Bureau of Labor Statistics (BLS), nonfarm payrolls rose by a seasonally adjusted 339,000 in May, far exceeding expectations and marking the 29th straight monthly increase in employment. The BLS household survey shows that the nation’s unemployment rate rose from April’s 3.4% to 3.7%, as the number of unemployed households rose.
Construction employment rose by 25,000 in May, following an increase of 13,000 in April. Employment gains were broad-based with gains in nonresidential sectors amounting to 22,100. Over the prior 12 months, construction had added a monthly average of 17,000 jobs. The May increase in residential building construction (+2,400 jobs) was particularly heartening and perhaps another sign that single family home construction is at the bottom of the cycle and will show improvement in the second half of the year.
The construction unemployment rate dropped to 3.5% in May, from 4.1% a month earlier. Meanwhile, average hourly earnings in construction increased 0.4% in May (+5.1% on a year-over-year basis), faster than overall wage growth as construction labor continues to be scarce in the face of strengthening starts activity.
Despite its resiliency, construction employment faces strong headwinds in the short term. The BLS jobs report increases the odds of another Federal Reserve rate hike at the June meeting. Higher interest rates for a longer period, tighter lending standards and turmoil in the banking sector do not bode well for construction starts and employment. Job cuts announcements in the sector, as reported by Challenger, Gray & Christmas, eased in May but are significantly higher in the first five months of this year (+2,585) than during the same period a year earlier (+1,150). Such announcements could increase over the next several months.
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