Construction Employment Is at a Record High. Hiring Growth Is Not.

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 remains in high demand for projects involving data centers, healthcare, advanced manufacturing, power infrastructure, and other mission-critical facilities.

The result is a labor market where wage growth can remain elevated even as hiring growth slows.

The labor market is not simply responding to the number of workers being added. It is responding to the availability of specific skills in specific markets.

Doesn't a slower labor market usually reduce wage pressure?

Eventually, it can.

But today's construction market is not behaving like a broad-based slowdown.

Instead, many indicators point to a market that is becoming increasingly concentrated.

Nationally, labor market conditions have softened. July nonfarm payrolls declined by 23,000 jobs, average hourly earnings growth slowed to 3.2%, and labor force participation continued to edge lower.

Construction is sending a different signal.

Construction wage growth remains substantially above economy-wide wage growth, even as construction hiring slows. That suggests labor pressure is not disappearing. It may simply be concentrated in a smaller number of sectors and geographies.

Is this consistent with other economic data?

Yes.

A similar pattern is emerging across multiple datasets.

Recent GDP data showed nonresidential structures investment declining for a tenth consecutive quarter, even as equipment and intellectual property investment remained positive. At the same time, June construction spending data showed strong growth in data centers while many traditional commercial sectors continued to contract.

The common thread across these reports is that growth has not disappeared. It has become more concentrated.

Some sectors continue to attract capital, labor, and subcontractor capacity, while others experience slower demand and greater competition.

Construction labor markets may be following the same pattern.

What does this mean for owners and contractors?

For owners, slowing hiring growth should not be confused with easing labor cost pressure. Elevated labor costs remain a key planning consideration.

For contractors, a slower pace of hiring should not necessarily be interpreted as meaningful relief from labor-related cost pressures. Wage growth, productivity, staffing availability, and project scheduling will likely remain important competitive differentiators.

For preconstruction teams, the implication is even broader.

National labor statistics may no longer tell the full story. Conditions can vary significantly depending on project type, geography, and trade availability. A contractor pursuing data center or advanced manufacturing work may be operating in a very different labor market than one focused on traditional commercial construction.

What should we watch next?

The question is not whether hiring has slowed.

The question is whether labor cost pressures can remain elevated even as employment growth moderates.

If demand remains concentrated in a handful of high-growth sectors, labor costs may continue to rise faster than many would expect based solely on national employment data.

Bottom Line: Construction employment remains at a record high, but hiring growth has slowed sharply. Wage growth, however, remains well above trend. The same theme emerging across GDP, construction spending, and labor markets continues to hold:

Growth exists. Demand is concentrated.

The next question is whether that concentration keeps labor cost pressures elevated, or whether growth begins broadening across a wider range of sectors and project types.