Monthly New Residential Construction, January 2024
Source: U.S. Census Bureau, HUD, February 16, 2024
Building Permits
Privately‐owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,470,000. This is 1.5 percent below the revised December rate of 1,493,000, but is 8.6 percent above the January 2023 rate of 1,354,000. Single‐family authorizations in January were at a rate of 1,015,000; this is 1.6 percent above the revised December figure of 999,000. Authorizations of units in buildings with five units or more were at a rate of 405,000 in January.
Housing Starts
Privately‐owned housing starts in January were at a seasonally adjusted annual rate of 1,331,000. This is 14.8 percent (±10.2 percent) below the revised December estimate of 1,562,000 and is 0.7 percent (±11.7 percent)* below the January 2023 rate of 1,340,000. Single‐family housing starts in January were at a rate of 1,004,000; this is 4.7 percent (±11.6 percent)* below the revised December figure of 1,054,000. The January rate for units in buildings with five units or more was 314,000.
2024 Construction Workforce Shortage Tops Half a Million
The construction industry will need to attract an estimated 501,000 additional workers on top of the normal pace of hiring in 2024 to meet the demand for labor, according to a proprietary model developed by Associated Builders and Contractors. In 2025, the industry will need to bring in nearly 454,000 new workers on top of normal hiring to meet industry demand, and that’s presuming that construction spending growth slows significantly next year.
“Broadly, there are two factors shaping the interaction between construction worker supply and demand,” said ABC Chief Economist Anirban Basu. “There are structural factors, including outsized retirement levels, megaprojects in several private and public construction segments and cultural factors that encourage too few young people to enter the skilled construction trades. There are also structural factors, including those related to interest rates, consumer sentiment and general economic performance.
“While construction employment is growing, it is not growing fast enough to meet the demand to complete the work on the books for 2024,” said Bellaman. “To address this shortage and grow the construction talent pool, ABC has a network of more than 800 apprenticeship, craft, health and safety and management education programs—including more than 450 government-registered apprenticeship programs across 20 different occupations. ABC chapters also have 323 entry point programs in place nationally to welcome all to begin a career in construction. To address workforce demand that drives the U.S. economy, Congress must also look toward much-needed reforms to our legal immigration system and provide high-demand industries, like construction, with access to new or expanded visa programs.”
View the methodology of ABC’s
2024 construction workforce shortage model.
Construction prices
Construction input prices increased 1.0% in January compared to the previous month, according to an Associated Builders and Contractors analysis of the U.S. Bureau of Labor Statistics’ Producer Price Index data released on February 16. Nonresidential construction input prices increased 0.9% for the month.
Overall construction input prices are 0.4% higher than a year ago, while nonresidential construction materials prices are 0.7% higher. Prices increased in 2 of the 3 energy subcategories last month. Crude petroleum input prices were up 6.1%, while unprocessed energy materials prices were up 3.8%. Natural gas prices decreased 2.4% in January.
“Construction materials prices surged in January, ending a streak of three consecutive monthly declines,” said ABC Chief Economist Anirban Basu. “While this represents the largest monthly increase since August 2023, input prices are essentially unchanged over the past year, up less than half a percentage point. As a result of relatively tame input costs, a plurality of contractors expects their profit margins to expand over the next six months, according to ABC’s Construction Confidence Index.
“Additionally, the broader PPI measure of prices received by all domestic producers of final demand products and services rose 0.3% in January, well above the expected 0.1% increase,” said Basu. “This, along with the hotter-than-expected Consumer Price Index data released earlier this week, suggests that the Federal Reserve may keep interest rates elevated for longer than previously expected.”
Construction Jobs
The construction industry added 11,000 jobs on net in January, according to an Associated Builders and Contractors analysis of data released today by the U.S. Bureau of Labor Statistics. On a year-over-year basis, industry employment has expanded by 216,000 jobs, an increase of 2.7%.
Nonresidential construction employment increased by 7,600 positions on net, with growth in 2 of the 3 subcategories. Nonresidential specialty trade added 13,700 positions, while nonresidential building added 1,600 jobs on net. Heavy and civil engineering lost 7,700 jobs.
The construction unemployment rate rose to 6.9% in January. Unemployment across all industries remained unchanged at 3.7% last month.
“The construction industry added jobs for the 10th straight month in January,” said ABC Chief Economist Anirban Basu. “That was hardly the biggest story from today’s release, however, with total U.S. payroll employment increasing by a staggering 353,000 positions. That’s nearly twice the consensus forecast and represents yet another economic indicator that has surprised to the upside.
“The construction unemployment rate stood at 6.9% for the month, which is tied for the third-lowest January rate on record,” said Basu. “As a result of labor scarcity, construction wages surged in January, increasing at the fastest rate since July 2023. With both the construction industry and the broader economy continuing to grow at a rapid pace, contractors will struggle to remain adequately staffed over the coming quarters, especially with a majority of contractors intending to increase their staffing levels over the next six months, according to ABC’s Construction Confidence Index .”
Spending on nonresidential buildings will see a modest 4% increase in 2024, after increasing by more than 20% last year, according to the latest Consensus Construction Forecast by the American Institute of Architects.
The pace will slow to just over 1% growth in 2025, a marked difference from the strong performance in 2023. Spending on commercial facilities will be flat this year and next, manufacturing construction will increase almost 10% this year before stabilizing in 2025, and institutional construction will see mid-single-digit gains this year and next.
Factors of the slowdown
The Consensus Construction Forecast panelists, a group comprised of the leading construction forecasters from across the country, found there are many factors fueling the projected slowdown:
- Tighter credit conditions continue to put pressure on many regional banks that account for a sizeable share of construction lending.
- Higher construction input costs due to inflation in materials costs and labor in recent years.
- Declines in commercial property values as weak demand continues in many sectors.
- Structural changes in demand, disrupting notoriously cyclical construction industry.
What AIA says
“There are several economic headwinds behind the projected slowdown,” says AIA Chief Economist Kermit Baker. “We already started to see construction starts either slow dramatically or turn negative in virtually all construction sectors in the latter part of 2023 and the weaker conditions are expected to stay into 2025.”
Solidus Construction Materials Price Report for February —
After a year in which the economy and starts slowed considerably, the coming year should provide a transition to stronger growth for construction. In 2024, total construction starts are expected to gain 7% to $1.2 trillion after growth slowed to just 1% in 2023 (and was down 2% after adjusting for inflation). In 2024, Dodge predicts U.S. economic growth will slowly begin to improve as inflation subsides and the Federal Reserve begins to lower interest rates. During the first six months of the year, however, the nation’s economy will need to weather several potential storms, such as an extended government shutdown, potential new union strikes and higher energy prices due to the conflict between Israel and Hamas. In general, if the economy can weather the storm over the next six months, the outlook becomes much clearer. In early 2024, economic growth will continue to ebb, and job growth will slow. But this downshift will take a bite out of inflation bringing the core Consumer Price Index down to 3% by mid-2024. That will allow the Fed to begin easing and the economy to recover in the latter part of the year.
Every month, Solidus compiles a construction material price report to help subcontractors navigate the market with ease. Don’t miss this opportunity to gain insider knowledge about the current state of the construction industry and how it may affect your business.
