The start of any calendar year comes with numerous predictions for the coming 12 months. That's true for January 2024, as in past years.
On the heels of the latest jobs report from the U.S. Bureau of Labor released on Jan. 5, numerous media outlets and industry trade associations are making predictions for the economic health of the year ahead. The jobs report performed better than expected, with employment increasing by 216,000 in December and unemployment stabilizing at 3.7%.
In construction, December employment increased by 17,000 as a whole and by 8,000 in nonresidential. On average, the industry added 16,000 jobs per month last year. In 2022, the average monthly gain was 22,0000.
Also on Friday, the Institute for Supply Management issued its monthly report for services sector, which includes the construction industry. The ISM Services Report on Business registered at 50.6 percent. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent indicates it is generally contracting. December's index is the lowest since May 2023, when it came in at 50.3 percent. The last time the index indicated a contraction was in December 2022.
ISM
While lowered, the index overall shows continued growth.
“The past relationship between the Services PMI and the overall economy indicates that the Services PMI for December (50.6 percent) corresponds to a 0.3-percent increase in real gross domestic product (GDP) on an annualized basis," said Anthony Nieves, chair of the ISM Services Business Survey Committee. The report's Employment Index was down 7.4 percentage points from November, mostly due to layoffs in the professional and staffing industries, but construction employment was up.
The ISM PMI is created from surveys of executives in multiple industries. Each month, ISM shares insights from those surveys, from various industry executives.
"Congestion at the Panama Canal is expected to continue for the next several months. The effect of this is rerouting marine cargoes at the expense of cost and schedule," stated on construction executive.
Associated Builders and Contractors (ABC) also released its monthly economic report on Friday. Its analysis pegged year-over-year employment in the construction industry as up 197,000 or 2.5%.
Associated Builders and Contractors (ABC) and Bureau of Labor
“Despite strong construction industry employment growth, today’s jobs report was highly contradictory,” said ABC Chief Economist Anirban Basu. “On one hand, economywide payroll employment expanded faster than expected in December, and the unemployment rate remained unchanged at 3.7%, close to the lowest level in over a half a century. Construction employment increased for the ninth consecutive month, with the nonresidential segment adding jobs at a particularly rapid pace.
Associated Builders and Contractors (ABC) and Bureau of Labor
“On the other hand, the labor force shrank by 676,000 persons in December, the largest decline since early 2021,” said Basu. “Wage growth also accelerated, with average hourly earnings up 4.1% year-over-year across all industries. That’s faster than expected and a level not consistent with a return to 2% inflation. Construction industry earnings have increased at an even faster rate over the past year."
Basu continued, "This is only one month’s data and could contain significant statistical noise. That said, the combination of faster wage growth and a smaller labor force suggests that interest rates could remain higher for longer.”
