Contractors hired 14,000 people in April on top of the revised gain of 26,000 jobs in March. These are the first job gains in construction in more than three years. The almost 3% rise in the average April work week signals that further job gains are ahead. This is a quicker turnabout from layoffs to hiring than had been expected. Although a few monthly setbacks are possible the hiring trend has changed from negative to positive. The 40,000 job gain in the last two months suggests that the Census Bureau estimates of monthly job site construction spending may be too low. The recent increases in construction materials production and construction equipment shipments also suggest that construction spending may have been underestimated.
The April job gain was almost entirely in the non-building market and probably the result of a burst of new stimulus funded infrastructure projects. In the building market, job declines in residential were offset by job increases in nonresidential construction. This pattern seems to be the reverse of what would be expected in the current market. It could be that homebuilders cut back as the homeowner tax credit deadline approached. If so, this is temporary as happened early in the winter when the first tax credit expired.
The overall jobs report was very positive for the second month. Employers added 230,000 jobs in March and 290,000 in April. These job gains will drive a rise in the Conference Board Consumer Confidence Index in the next few months. This is a necessary step for the housing market recovery to resume at a sustainable pace.
The pattern of April job changes is positive for continued job growth. Cyclical employers have begun to hire rapidly while other employers have reduced hiring or begun layoffs. Manufacturing added an astounding 44,000 jobs, the largest monthly increase in a decade. Hiring was led by the two most cyclical industries – industrial machinery and fabricated metals. High labor productivity in manufacturing typically permits the job count to fall slightly even when manufacturing is expanding a little faster than the overall economy.
Temporary help services added 24,000 jobs. The annualized growth pace is 35% in the last six months. Professional and technical service industries added 13,000 jobs, suggesting that the corporate hiring freezes are largely over. Government jobs fell slightly other than temporary Census hiring. When the recession catches up with the government it has passed out of the private sector. Education and healthcare continued to hire but at a much slower pace than in recent months. This reflects the weakening of their financial support from the government.
The labor market environment has changed dramatically in the last few months. Hiring has shifted from taxpayer supported to private market employers. The workweek is expanding although not yet wage rates. Manufacturing overtime jumped to nearly four hours per week in April. Sensing the improved environment, employers boosted online job ads 11% according to Monster.com. Also sensing the improved environment, 850,000 people returned to the labor force in April, although most are still unemployed.
The abrupt improvement in the labor market will speed the process of absorbing surplus building space and facility capacity and shorten the lag between the economic and construction recoveries.