Washington D.C.—The overall economy has 9.2 million unfilled jobs, nearly 300,000 of which are in the construction sector, according to the latest data from the Bureau of Labor Statistics and a report by the National Association of Home Builders (NAHB). Labor is expected to be a rising challenge for construction firms as the overall labor market heals in the coming quarters.
In June, the economy added 850,000 jobs but the unemployment rate only changed to 5.9%. Residential construction added 15,200 jobs on a net basis for the month while nonresidential construction lost 22,600. More workers are needed in the construction industry for housing supply to increase, according to the NAHB. In order to reach that— both in construction and the overall economy—labor force participation must improve off its current 61.6% rate, the NAHB added.
Although labor market challenges have increased, there has been some relief for materials. Lumber market spot pricing has declined by about 50% but the price declines will take some time to reach builders. However, prices for OSB and other materials remain elevated and a large portion of deliveries continue to be delayed.
The building material issues have had a number of impacts on the industry. Sixty-two percent of builders report frequently increasing sales prices and 59% indicate they have pre-ordered materials to manage supply chain concerns. Moreover, 45% note including price escalation clauses in sales contracts and 11% reported canceling sales contracts on pending sales because of material challenges.
Th supply side challenges are affecting the types of homes available for prospective buyers as illustrated in 2020 data: The median price of new single-family built-for-sale homes last year was $336,000 and the vast majority (80%) were priced above $250,000. Therefore, the entry-level market remains the tightest part of housing inventory, exacerbating myriad challenges for first-time buyers.