Construction Wage Escalation Reaccelerates
What's fueling the rise?
Construction Trend Tuesday covers one (hopefully) interesting industry trend in a quick, two-minute read. You can access the archive of CTT posts here.
Construction wage growth, which slowed in 2023 and most of 2024, reaccelerated starting November 2024. As of February, earnings for production employees were up 5.1% year over year, the fastest growth in more than two years.
That’s had a lot to do with specialty trade contractors, whose production employees (i.e., not managers) have experienced a 6.5% jump in earnings since that reacceleration began.
[Note that these data are grouped by the kind of work the employer primarily does, not what the employees themselves do.]
There are two popular theories regarding why construction wages are rising while construction spending is falling.
Immigration policy has reduced labor supply, causing contractors to more aggressively compete for laborers even when work is scarce.
The boom in data center work has led to sharp competition for certain skilled trades workers, boosting wages.
There’s evidence to support both theories.
The sharpest rise in earnings since the rebound began is for roofers, with average hourly earnings up nearly 10%, and over half of roofers are foreign born, according to data from NAR. This is exactly what you’d expect to see if the loss of undocumented workers was weighing on labor supply.
The second largest increase is in electrical and wiring installation contractors, whose earnings are up 7.7% since November 2024. This supports the data center theory, as does the 5.7% increase in plumbing and HVAC wages.
While these theories check out, there are obviously other factors at work. New building construction has slowed over the past several quarters, for instance, so it’s not surprising that framing contractor wages have actually fallen. The same goes for the modest increase in site prep wages.
What’s Next
Next up is a critically important BLS jobs report and Week in Review, our every-Friday post that covers all the economic news and data in a breezy, five minute read.
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