The Preconomist

At first glance, the report looked encouraging. Nonresidential construction input costs were essentially flat in July, marking a second consecutive month of easing after a period of significant cost acceleration. For owners and contractors fatigued by years of cost volatility, that sounds like welcome news. But the more important story may not be the headline. It may be the relationship between construction input costs and construction bid prices. Why should we focus on the spread between inputs and outputs? Because contractor margins live in the gap. Input costs represent what contractors pay for labor, materials, equipment, and other project requirements. Bid prices represent what contractors can charge in the marketplace. When input costs rise faster than bid prices, margins come under pressure. When bid prices rise faster than input costs, pricing power improves and margin pressure eases. For much of the past year, contractors have faced exactly the wrong side of that e...

What did the July employment data tell us about construction labor? At first glance, the message appears contradictory. Construction employment reached a record 8.34 million workers in July. Yet year-over-year employment growth slowed to just 22,000 jobs , a fraction of the gains seen during the post-pandemic expansion. At the same time, average hourly earnings for construction workers increased 5.2% year-over-year , remaining well above the industry's long-term trend. In other words, construction employment remains at a record high, but hiring growth has slowed dramatically. Wage growth, however, remains elevated. That raises an important question. If hiring growth has slowed, why are wages still rising so quickly? The answer may have less to do with current hiring activity and more to do with the structural dynamics of the labor market. Recent multi-year union settlements continue to support wage growth across many trades. At the same time, specialized labor rema...