The number of job openings in construction collapsed in January, a sign that the Federal Reserve's campaign to raise interest rates is finally beginning to tear through the industry.
The construction industry reported just 248,000 job openings in January. That is a decrease of a whopping 240,000 jobs from the month before and represents a 37.4% decline from a year ago, according to data released on Wednesday by the Bureau of Labor Statistics. The plunge shows that construction jobs are evaporating as old projects come to a close and aren’t being replaced by new ones, while soaring mortgage rates have led to a dramatic pullback in home sales.
“Today’s construction job openings number was simply shocking,” said Anirban Basu, chief economist for Associated Builders and Contractors.
“Yesterday’s commentary by Federal Reserve Chair Jerome Powell suggests that interest rates are set to go higher and stay elevated for longer than many had previously thought, which means that it may be a long time before construction job openings return to their previous highs,” Basu added.
WHY CONSTRUCTION JOBS ARE UP DESPITE HOUSING ‘RECESSION’—AND WHY IT WON’T LAST
The declines come amid the central bank’s efforts to curb inflation by hiking rates, which have caused mortgage rates to soar and sent housing into what the National Association of Home Builders has characterized as a “housing recession.”
New and existing home sales have fallen fast over the course of the year as demand has dried up, and starts of new construction have also declined steeply. But despite the recent plunge, for quite some time, jobs in the construction industry remained strong.
One reason is that the housing market went from overheated to cold so fast that there were still a lot of homes under construction. As those construction projects finally start to come to an end, which it appears is now happening (and as far fewer new projects are begun), those jobs will soon go away.
Nonresidential construction might also be a factor keeping the labor market for the construction industry somewhat buoyant.
“Job openings figures are not broken down by residential versus nonresidential construction, and while many nonresidential contractors continue to report lengthy backlog and numerous open jobs, the single-family homebuilding segment has entered a period of significant retrenchment,” Basu said.
More broadly, job openings across the entire economy were still pretty strong in January despite the Fed’s tightening. Openings across all sectors decreased to 10.8 million in January, down from 11.23 million the month before, according to the Bureau of Labor Statistics.
“It’s March Madness in the labor market,” said Andrew Crapuchettes, CEO of RedBalloon, a work site. “Although there has been a surge of layoffs in Big Tech and other major corporations, the labor market continues to burn red hot, indicating that small businesses are still in need of talent.”
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The Fed’s rate hikes have dramatically shaped the course of the entire housing market. The average rate on a 30-year fixed-rate mortgage has soared from nearly 3% at the start of last year to nearly 6.65%, putting home purchases out of reach for many would-be borrowers.