For the past couple of years, I have been keeping a close eye on national construction employment trends just to keep a pulse on the state of the workforce. We know there is a talent shortage that needs to be addressed, but it’s always important to keep a close eye on the actual number to ensure we know which way we are trending.
Earlier this month, the ADP National Employment Report was released, which is an independent measure and high-frequency view of the private-sector labor market based on actual, anonymized payroll data of more than 25 million U.S. employees. Using this data, it provides a representative picture of the private-sector labor market.
The numbers are pretty telling. According to the report, private sector employment rose some 324,000 jobs in July. Looking specifically at the construction industry, jobs were up by 9,000 while manufacturing jobs were down by 36,000. Yikes. To be fair, the report suggests manufacturing was one of the weakest, as it is an interest rate-sensitive industry that shed jobs for the fifth straight month.
All in all, though, the report suggests the economy is doing better than expected. Interestingly, as industries are adding jobs little by little, pay growth is continuing a downward trend. People who stayed in their jobs saw a year-over-year pay increase of 6.2%—which is the slowest pace of gains since November 2021. For people who changed jobs, job growth slowed to 10.2%.
Certainly, there are some trends specific to the construction industry that have unfolded in the month of August that will impact wages in construction.
Earlier this month, the U.S. Dept. of Labor announced the issuance of the final rule to modernize the Davis-Bacon and Related Acts, which states contractors and subcontractors must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. The act covers labor standards that apply to federal and federally assisted construction projects.
The AGC (Associated General Contractors of America) says the rule misses the mark to modernize regulations and says the 40-year awaited update reverts to the pre-1983 methodology for determining whether a wage rate is prevailing, also referred to as the 30% rule.
Stephen Sandherr, CEO, AGC, says the AGC holds that the department of labor’s reliance on voluntary surveys to produce and update wage determinations has created a compensation system that poorly reflects the construction labor market in many parts of the country. The AGC recommended that it should instead focus on how to collect more accurate data, instead of being able to rely on less, or even at times inappropriate data, to determine wages that are truly prevailing. If data is the lifeblood of businesses today, then it would appear Sandherr’s request is not rhetorical.
Alicia Huey, chairman of the NAHB (National Assn. of Home Builders) and a custom home builder and developer from Birmingham, Ala., says the department of labor had the opportunity to enact positive change that modernizes the system for determining prevailing wages on construction projects. Instead, this final rule fails to address many of NAHB’s concerns made during the rulemaking process, including the overly burdensome contractor requirements and wage determinations that are misrepresentative of the real wages being paid in an area.
All in all, she suggests this rulemaking will discourage builders from using covered federal programs that make rental housing affordable for low-and-moderate-income families, increase construction costs, and exacerbate the nation’s housing affordability crisis.
Certainly, this is just one of many trends impacting the construction industry today. As we move forward into a new era of work, we must consider how the market is evolving—and how it will ultimately impact construction and the worker of tomorrow.
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