After more than a year of strong gains, average hourly earnings for residential building workers* increased at a relatively slower pace in the past few months. Wage growth has retreated below 3%, from the peak rate of 8% in 2021.
According to the Bureau of Labor Statistics (BLS) report, average hourly earnings (AHE) for residential building workers were $29.99 per hour in August 2023, increasing 2% from $29.27 per hour a year ago. This was 13.0% higher than the manufacturing’s average hourly earnings of $26.54 per hour, 7.3% higher than transportation and warehousing’s, and 11.9% lower than mining and logging. Average hourly earnings for residential building workers grew at a relatively slower pace in the past few months, compared to the previous two years. The year-over-year growth rate reached 8% in October 2021, the highest rate since February 2019, but this rate is now decelerating. Indeed, the construction labor market continued to cool in August. As mentioned in the JOLTS blog, the construction labor market having peaked in 2022 is now entering a stop-start cooling stage as the housing market adjusts to higher interest rates.
Note: * Data used in this post relate to production and nonsupervisory workers in the residential building industry. This group accounts for approximately two-thirds of the total employment of residential building industry.
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Slower wage growth might impact construction workers’ affordability, potentially affecting the overall cost of construction projects. This factor could influence lenders when assessing borrowers’ financial capabilities, potentially impacting the terms and approval rates for construction loans. Builders and developers might face challenges in budgeting, emphasizing the need for careful financial planning while seeking construction financing.