Summary

Nonresidential building construction suffered additional job losses in May as employment declined by 5,900 jobs on a seasonally-adjusted basis, according to the June 6 employment report by the U.S. Department of Labor’s Bureau of Labor Statistics. Over the 12-month period from May 2007 to May 2008, seasonally-adjusted, nonresidential building construction employment was down by 30,000 jobs.

The downward trend in the nonresidential sector pales in comparison to those generated among firms operating in the residential building sector. Between May 2007 and May 2008, residential building contractors shed slightly more than 100,000 positions.

Total construction employment in May 2008 was 386,000 lower than in May 2007, a decline exceeding 5 percent. In terms of monthly comparison, total construction employment fell by 34,000 jobs in May and 33,100 in April. Since an employment peak in September 2006, construction has lost 475,000 jobs ending in May. Total building construction is down by 130,800 jobs over that same period, or by 7.4 percent on a seasonally-adjusted basis.

The most remarkable aspect of the May job report was the unexpectedly sharp increase in national unemployment. The unemployment rate rose from 5 percent in April to 5.5 percent in May. Total nonfarm payroll employment also continued to trend lower, falling by 49,000 in May compared to April. The change in April employment was also revised lower, from an initial reading of a decline of 20,000 jobs to a decline of 28,000 jobs.  

What This Means

Associated Builders and Contractors (ABC) notes that today’s report will shift the debate about whether the U.S. is or is not in a recession – toward those economists who believe the nation is currently in a recession or is headed into one. The marked increase in unemployment is likely to further suppress both consumer confidence and spending in the months ahead, despite the recent national distribution of tax rebate checks.

Because indices for many nonresidential construction segments lag behind the nation’s other economic indicators, today’s report could also be interpreted as a precursor of nonresidential construction’s near-term future. Despite the positive news from April’s nonresidential construction spending report, ABC suggests that there may be further slowing of many nonresidential construction activities through the balance of 2008 and into 2009.