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January Job Gains Down Compared to Prior Three Months as Nonresidential Contractors Shed Employees; Slowdown May Reflect Broader Economic and Financial Market Uncertainty or Lack of Qualified Workers

Construction firms added 18,000 workers in January, as the industry’s unemployment rate declined to a 17-year low of 8.5 percent, according to an analysis of new government data by the Associated General Contractors of America. Association officials noted that the number of construction jobs added in January was down compared to the last three months of 2015 and could reflect either a slowdown in nonresidential construction activity or an inability of contractors to find qualified workers.

“While the construction industry continues to add jobs, the January figures mark a significant decline in the rate of growth compared to the end of last year,” said Ken Simonson, the association's chief economist. “It will take a few months to evaluate whether firms are running out of people to hire or if broader economic uncertainty is leading to a decline in demand for many types of construction services.”

Construction employment totaled 6,615,000 in January, the most since December 2008, and is up by 264,000 jobs compared to a year ago, a 4.2 percent increase. Residential construction increased by 20,100 in January and by 149,500, or 6.2 percent, compared to a year ago. Nonresidential construction employment declined by 2,300 jobs for the month but was up 115,000 jobs compared to last January, a 2.9 percent increase.

The number of unemployed jobseekers in January who last worked in construction totaled 729,000. The unemployment rate for such workers was 8.5 percent. Both the number and the rate were the lowest January figures since the series were introduced in 2000. Meanwhile, Census Bureau data released on February 1 showed that construction spending experienced only slight growth between November and December, and has been limited to residential building. Nonresidential construction spending by both the private and public sectors has been flat or declining since July 2015.

Among nonresidential construction employment categories, only the nonresidential building segment added jobs in January, expanding by 5,300. But those gains were offset by a decline of 2,400 jobs in the nonresidential specialty trade contractors segment and a loss of 5,200 jobs in the heavy and civil engineering construction segment. Simonson noted that heavy and civil engineering construction employment should expand later this year as new federal investments in transportation and other infrastructure enacted last year begin to enter the market.

Association officials said they were encouraged by the fact the industry continues to expand at a brisk annual clip. They noted that the 4.2 percent increase in construction employment in the past 12 months was more than double the 1.9 percent growth in total nonfarm payroll employment. But they added that the drop in nonresidential construction employment for the month was cause for concern. After several months of robust construction employment growth, they cautioned that January’s market sell-offs and broader economic uncertainty may sap demand for construction.

“Hopefully the nonresidential construction sector is just experiencing a temporary slowdown while investors catch their breath,” said Stephen E. Sandherr, the association’s chief executive officer. “But if the broader economic recovery continues to slow, the construction industry will have a tough time expanding at the rates we saw late last year.”