Financial conditions continue to tighten, as the 10-year Treasury rate increased to above 4.75%. Among the factors leading to higher rates — such as more debt issuance, higher-for-longer monetary policy expectations, long-term fiscal deficit conditions and strong current GDP growth forecasts — was a surprise jump in August for the total number of open, unfilled jobs.
In August, the number of open jobs for the economy as a whole rose to 9.6 million, a significant increase over the 8.9 million estimated total for July. NAHB estimates indicate that this number must fall below 8 million for the Federal Reserve to feel more comfortable about labor market conditions and their corresponding impact on inflation.
Although the Fed intends for higher interest rates to have an impact on the demand side of the economy, the ultimate solution for the labor shortage will not be found by slowing worker demand, but by recruiting, training and retaining skilled workers. This is where the risk of a monetary policy mistake can be found. Good news for the labor market does not automatically imply bad news for inflation.
The construction labor market continued to cool in August. The count of open construction jobs decreased to 350,000. This estimate comes after a data series high of 488,000 in December 2022. The overall trend is one of cooling for open construction sector jobs as the housing market slows and backlog is reduced, with a notable uptick in month-to-month volatility since late last year.
Looking forward, attracting skilled labor will remain a key objective for construction firms in the coming years. While a slowing housing market will take some pressure off tight labor markets, the long-term labor challenge will persist beyond the ongoing macro slowdown.
NAHB Chief Economist Dr. Robert Dietz delves into the specifics of the construction labor market in this Eye on Housing post.