Labor Market Trends

Construction jobs still below pre-global financial crisis levels

Modest residential home building in the aftermath of the late 2000s housing market crash prolonged the job recovery for the construction sector and prompted many workers to move into other industries.

Construction employment peaked at 7.7 million in April 2006, but employment levels tanked when the housing market crashed, reaching a low of 5.4 million in January 2011.

In contrast, after an initial steep decline in employment caused by the pandemic, construction jobs returned quickly, exceeding the February 2020 pre-pandemic peak by 4,000 jobs in March 2022.

Strong demand for residential construction should continue to push up construction employment if employers are able to find appropriate workers in an extremely tight labor market, though many have trouble doing so. A recent U.S. Chamber of Commerce study revealed 45% of contractors reported turning down work due to skilled labor shortages.

Figure 22: U.S. historical construction employment

Note: Latest data as of March 2022. In the chart’s dotted line, the private employment growth rate since January 2006 was applied to the construction employment level in January 2006 to show how construction jobs would have grown if the sector mirrored the pace of the overall private sector.
Source: U.S. Bureau of Labor Statistics, CES, CBRE Strategic Investment Consulting, April 2022.

Construction unemployment remains elevated, but people are returning to the labor force

The unemployment rate for construction workers remains higher than the overall unemployment rate but has come down dramatically and is on pace to return to pre-recession levels.

The recent growth of the construction labor force is keeping the unemployment rate elevated since it takes time for job seekers to find the right employer, but labor force growth, combined with declining unemployment, is a healthy sign for a sector that is poised to remain tight in the coming years.

Labor force growth still lags previous periods when the labor market was tightening, and the recent uptick may not be enough to fill construction job openings in 2022.

Construction trade organizations anticipate that wages will continue to grow in 2022 amid a tightening labor market. Bid costs are expected to increase to maintain margins and keep up with wage inflation. 

Figure 23: Historical construction unemployment rate and labor force growth

Note: Latest data as of March 2022, not seasonally adjusted. Construction employment indicators fluctuate month to month due to significant seasonal effects.
Source: Bureau of Labor Statistics, CBRE Strategic Investment Consulting, April 2022.

Figure 24: March construction unemployment rate and labor force size, 2019-2022

Note: Construction employment indicators fluctuate month to month due to significant seasonal effects. Because seasonally adjusted data is unavailable for these indicators, Figure 24 shows only the most recent month for each year historically.
Source: Bureau of Labor Statistics, CBRE Strategic Investment Consulting, April 2022.

Job openings accelerating faster than companies can hire

The labor shortage is impacting most sectors of the economy, including construction.

The construction job opening rate (monthly openings as a share of employment) jumped nearly two percentage points from March 2020 to March 2022. Though demand for labor increased, the hiring rate (monthly hires as a share of employment) declined slightly, indicating employers are finding it difficult to fill positions. Construction typically has a high turnover rate, meaning companies need to hire at a higher rate than most private businesses, and typically that number increases when job openings are up.

This trend is pervasive throughout the economy, particularly in the private sector, though hiring has improved slightly. The extremely tight private sector in 2022 will make construction hiring more challenging, especially for positions with low barriers to entry where construction companies compete fiercely with employers from other private sectors.

As of March 2022, there were 396,000 construction job openings, an 18% increase from 2021. There were 10.5 million private sector openings, up 37% year-over-year. Openings for both sectors are the highest on record, going back to 2001.

Figure 25: Job opening and hiring rates, construction sector vs. total private employment

Note: Job opening and hiring rates are calculated by dividing the number of job openings (or hires) by the sum of employment plus job openings (or hires) then multiplying by 100.
Source: Bureau of Labor Statistics, Job Openings and Labor Turnover Survey (JOLTS), April 2022.

Talent pipeline for construction trades back at historic highs

Degrees awarded for construction trades fell significantly in the mid-2010s, but climbed back to a record high in 2020.

This is especially important as the sector’s workforce ages. In 2006, just prior to the Great Recession, workers under the age of 25 made up a larger share of the construction workforce than workers 55 and older. As of 2021, those figures have flipped, with workers 55-and-up now accounting for about one in five construction workers, nearly double the share of those under 25 years old.

Proactive education and recruitment efforts championed by industry groups, alongside the relatively high pay for skilled trade construction jobs, are helping attract younger workers to the degree and certificate programs in the field. This will be critical in relieving some hiring pressure but will need to accelerate to fully offset the large share of the existing workforce nearing retirement age.

In a recent U.S. Chamber of Commerce survey, 91% of contractors reported moderate to high levels of difficulty finding skilled workers, and almost all expect it to stay the same or get worse in the next six months, underscoring the importance of training skilled professionals. 

Figure 26: Degrees and certificates awarded for construction trades

Note: This table presents data collected from Title IV institutions in the United States. Prior to 2009-10, the data include only Title IV primarily postsecondary institutions.
Source: U.S. Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System (IPEDS), Completions component final data (2001-02 - 2018-19) and provisional data (2019-20).

Figure 27: Share of construction workforce by age group, 2006 vs. 2021

Source: U.S Census Bureau, IPUMS, CBRE Strategic Investment Consulting, April 2022.

Slow international immigration straining labor pool

The construction sector has historically relied on foreign-born labor, with immigrants accounting for three out of 10 construction workers.

With labor force participation falling across the U.S. even prior to the pandemic, immigration is increasingly critical to fill the labor gap, especially for low barrier-to-entry occupations within construction. However, U.S. net migration began falling in 2017 due to federal policy changes and hit a record low in 2020 due to pandemic conditions.

According to Oxford Economics, immigration is expected to remain well below the levels of the previous 30 years until the latter half of the 2020s. This will put an increasing strain on employers who are already struggling to find enough employees amid a tight and shrinking labor pool. 

Figure 28: Net migration to the U.S.

Source: Oxford Economics derived from U.S. Census Bureau data, April 2022.

Figure 29: Share of foreign-born workers by occupation, 2021

Source: U.S. Census Bureau, IPUMS, CBRE Strategic Investment Consulting, April 2022.

Construction employment mostly recovered, but wages not keeping up

Construction wage growth is accelerating, which will be important to attract and retain the labor required to fill demand for new construction, but rising inflation is outpacing wage gains.

During the pandemic construction jobs fell substantially but recovered quickly. The net 1% growth from December 2019 to March 2022 exceeded gains for the overall private sector. However, construction wage growth has lagged overall wage growth during this period, particularly during the early pandemic months. Moreover, construction wages also grew at a slightly slower pace during the two years prior to the pandemic, despite construction employment increasing at twice the pace of the overall private sector during that time.

As of March 2022, year-over-year construction wage growth was 4.4%, lagging both the private sector (5.2%) and the Consumer Price Index (7.9%), which could create challenges for attracting and retaining construction labor, especially for positions that compete for workers with a broad range of sectors.

While the average hourly wage is the primary driver of labor costs, the number of hours worked, especially overtime hours, is also important. As of March 2022, the average weekly hours for nonresidential construction employees reached 41.1, the highest since the Bureau of Labor Statistics began keeping track in 2006, and 18% higher than the overall private sector.

Figure 30: Construction employment and wage change by period

Source: U.S. Bureau of Labor Statistics, CBRE Strategic Investment Consulting April 2022.

Union workers receiving higher wages, but membership is declining

The average hourly wage for a unionized construction worker was 39% higher than a non-union worker in 2021, but the gap is shrinking and membership is declining.

Union membership fell dramatically from 2001 to 2021, though union membership in the construction sector remained higher than the 6.1% private sector average.

The union wage premium has been shrinking steadily since the mid-1980s, when union wages were 69% higher than non-union wages. Union workers even took a 1.2% pay cut in 2020 while non-union wages grew 8.3%. Non-union workers have been the primary drivers of rising construction labor costs during the pandemic recovery, as union wages are much more likely to have been previously negotiated in a multi-year agreement.

Locations and occupations with greater union coverage will likely see higher labor costs due to the union wage premium, but are also likely to see less wage inflation in the near future, making those costs slightly more predictable. 

Figure 31: 2021 construction wages by union affiliation

Source: Bureau of Labor Statistics, Union Stats, CBRE Strategic Investment Consulting April 2022.

Figure 32: Union membership and coverage, construction sector

Source: Bureau of Labor Statistics, Union Stats, CBRE Strategic Investment Consulting April 2022.

Job growth most dramatic in metros with strong wage increases

Wage increases and job growth correlates moderately when comparing major metropolitan areas in the U.S., with growth in both measures most notable in secondary, Sun Belt and Mountain West metro areas.

Large metros like New York were less likely to see a rebound in job growth, likely due to lower demand for residential construction amid pandemic aftereffects, but some large metros like San Francisco had above average wage growth despite lagging job growth. Metros with strong wage growth but slow job growth could indicate pent up labor demand.

Metros like Austin, Nashville, Boise and Sacramento have seen strong demand for residential construction since the pandemic, which is likely driving both job and wage growth. 

Figure 33: Change in construction jobs, top and bottom 10 metro areas, March 2020-March 2022

Note: Among top 50 MSAs by number of construction employees as of March 2022.
Source: Bureau of Labor Statistics, Oxford Economics, CBRE Strategic Investment Consulting, April 2022.

Figure 34: Change in construction wages, top and bottom 10 metro areas, Q4 2019-Q4 2021

Note: Among top 50 MSAs by number of construction employees as of March 2022.
Source: Bureau of Labor Statistics, Oxford Economics, CBRE Strategic Investment Consulting, April 2022.