In this edition of our Race, Jobs, and the Economy (RJE) series decoding each month’s Bureau of Labor Statistics (BLS) monthly jobs report, we focus on the construction industry to assess the state of the labor market and economy.
Analysis of Topline Figures in the September BLS Report
A staggering 245,000 jobs were added in September, smashing the consensus estimate by more than 100,000. The unemployment rate ticked down a tenth of a percentage point to 4.1%. In terms of October surprises, this BLS report is a positive one for an economy rocked by political and economic uncertainty.
In a surprising twist, this month’s biggest job gains occurred in the food and beverage industry which added 69,000 jobs, far above its 12-month average of 14,000. The rest of the largest gainers were healthcare (+45,000), government (+31,000) and construction (+25,000). The diffusion index, a measure of how widespread job creation is, indicated robust jobs growth as a majority of industries gained jobs.
Construction, Race, and Immigration
One industry that has consistently added jobs over the last few years is construction. The pandemic was a massive shock to the real estate sector as work-from-home and COVID restrictions weighed heavily on businesses, tenants and the construction industry in particular. The economy-wide supply chain crisis has been particularly pronounced in construction, where high input prices still have construction costs 40% higher than pre-pandemic levels.
Despite these setbacks, construction hiring had one of the strongest recoveries of any major industry. While overall job levels across the whole economy are now 4.5% above their pre-pandemic levels, construction’s bounceback was far greater. As of the September report, the number of construction jobs is now 9% higher than in early 2020. This is impressive because construction has been more adversely affected by labor shortages than most industries.
For example, 94% of construction firms reported difficulties filling positions for craft workers. 54% reported that projects had been delayed because they or their sub-contractors experienced shortages of workers.
This may explain the relatively robust number of job openings for construction work. Job openings in September jumped significantly, by over 300,000 relative to the -62,000 experienced over the last 12 months. The gains were led by the construction industry adding 138,000 jobs openings.
Hard-line immigration policies are one of the causes of the construction labor shortage as the industry employs a large number of immigrant and migrant labor. Furthermore, there is a racial component to both the anti-immigrant policies and the nature of construction work as a third of construction workers are Latino.
Construction laborers can be exposed to dangerous working conditions in an industry known for its links to corruption and organized crime. As the nation celebrates Latino Heritage Month we should not forget the hardships faced by Latino workers. The intersection of immigration, race and power was on full display when in March a boat crashed into the Francis Scott Key Bridge near Baltimore, sending eight construction workers into the cold Patapsco River, which ultimately claimed six of their lives.
All of these construction workers were Latino and most were immigrants. The boat’s Singaporean owners have been sued by the Justice Department for negligence because they allege the company's aggressive cost-saving measures led to the disaster.
The economy is reeling from the effects of companies carrying out excessive cost-saving measures. Such practices have caused planes to fall from the sky and trains carrying dangerous chemicals to derail. It is one of the root causes of some of the major labor strikes this year including the strike of 10,000 hotel workers and the AT&T strike of 17,000 workers, both in September.
Economic Woes, October Surprises, and Economic Storms
Last month’s analysis posed the question of whether the economy is under some kind of recession watch, i.e. whether economic conditions were favorable to a recession. Manufacturers are increasingly stating that conditions are not just favorable to a recession but that the economy is already in one.
For example, business activity among New York manufacturers increased for the first time in almost a year while new orders and shipments declined into negative territory in the Philadelphia area. The manufacturing composite index for the fifth district, covering DC, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia, recorded its worst level since 2020.
The Kansas City Fed noted that factory activity in the area had dropped to its lowest level since September 2020. One manufacturer in the district summed up the current pessimism of the industry pretty well, saying that “[w]e continue to believe that domestic industrial manufacturing is, and has been, in a recession for quite some time.”
Soft signals in manufacturing contrast with the labor market resiliency we’ve noted in this series over the past year. But while the labor market has remained a bright spot for the economy, laborers are growing more bearish on their economic fortunes too.
In September, consumer sentiment had its biggest drop since 2021 as consumers became more pessimistic about the labor market, business conditions and future income growth. The top concern among households remains prices. October could see a spike in oil prices as war in the Middle East could seize up the world’s oil supply just weeks before the US election. October could very well bring a massive surprise to the economy despite the strong September jobs report. November’s job report will show whether this month's jobs gains are a new trend for the economy or an abnormality.
Joseph Dean is NCRC's Racial Economic Junior Research Specialist.
