Data as of August 18, 2026. BLS releases its preliminary payroll benchmark revision on August 28, which may revise the payroll figures cited here.

Payrolls Decline as Construction Hiring Grows

Payrolls fell by 23,000 in July, against an expected gain of roughly 83,000—the first monthly decline since February. May and June were revised down by a combined 103,000, though both months stayed positive.

The unemployment rate still improved, falling to 4.1%. Construction added 22,000 jobs and accounted for nearly all net private hiring.

Together, those readings point to a workforce that is shrinking faster than demand is cooling. Suggesting labor supply is beginning to constrain the 2027 pipeline.

Labor Force Participation Continues to Fall

Labor force participation explains the contradiction, falling 0.7 percentage point since January to 61.4%—the lowest since February 2021. Meaning workers are exiting the labor pool rather than moving onto unemployment.

A smaller labor force lowers the hiring pace needed to hold unemployment steady. So, the July decline is less concerning than it would have been in prior years.

Retirements Reduce the Pool of Experienced Workers

BLS does not attribute the exits, but the data does not indicate worker discouragement. The evidence points instead to retirements.

More than one in five construction workers is 55 or older, and their departure is pulling experienced talent out of the industry. Participation among these workers sank 1.2 points over the past year, while prime-age participation remained flat.

Household net worth also stands at a record $183 trillion, per the Federal Reserve. So, many of these are likely well-funded exits.

Immigration Policy May Tighten Labor Supply

In our view, the speed of this year’s slide also points to tightened immigration policy shrinking the foreign-born workforce. NAHB analysis of Census data puts immigrants at a record 26% of the construction workforce in 2024—and about one-third of the trades.

Construction Employment Reaches a Record High

Construction industry headcount reached 8.34 million in July—the highest in federal data since 1939. The industry’s share of all U.S. jobs has climbed for five straight years, to about 5.2%.

That is still short of the 5.7% housing-boom peak in 2006, when labor force participation was rising.

Nonresidential Projects Compete for Skilled Trades

The nonresidential specialty trades category also sits at a record level, adding 15,400 jobs. Driven by data center, power and manufacturing projects pulling capacity from the same trades every other segment needs.

Heavy and civil engineering hiring was essentially flat, up just 400—even with federal infrastructure money still flowing. That points to staffing limits and is the signal to watch for infrastructure work.

Contractors in these sectors still report strong backlogs across FMI’s midyear sentiment indices.

Residential Construction Remains the Softest Sector

Residential construction remains the softest sector, down 44,200 jobs over the past year and reaching its seventeenth consecutive month of year-over-year declines.

Homebuilding employment typically drops in the runup to a recession. But today’s slide is moving at a fraction of the usual recessionary pace.

Mixed Signals Complicate the Fed’s Decision

The Federal Reserve enters its September meeting stuck between these mixed signals. July’s report flipped rate expectations, with futures now placing roughly 70% odds of a hold on September 16—and almost nothing on a cut, per CME FedWatch.

A rate cut into strong wage growth risks inflation, while hiking into falling payrolls risks accelerating the slowdown already challenging much of the industry.

Over the next few weeks, the August 28 benchmark revision could mark employment levels down further. Ahead of the August jobs report that lands September 4.

Firms with rate-sensitive work should plan on borrowing costs holding near current levels into early 2027.

Labor Shortages May Outpace the Demand Slowdown

Even with FMI’s Q3 Outlook projecting total construction spending down in 2026, an industry hiring from a shrinking pool will feel the labor shortage before the demand slowdown.

Budgets and forecasts already reflect intense competition for workers, with national private-sector average hourly earnings rising 3.2% over the year. Comparatively strong for a month when payrolls fell.

For precast producers, labor cost escalation is driven by supply, and declining demand will not put workers back in the field.

The Case for Offsite Investment

The labor squeeze creates a strong argument for more offsite investment. Precast moves labor hours out of a scarce field workforce and into a controlled plant with better productivity per worker.

A producer who can staff a plant is able to hold schedules and take share from field-built methods that struggle to staff crews. Making workforce development a good demand-side strategy.

Brian Strawberry, a chief economist in the construction industry, leads FMI’s efforts in market sizing, forecasting, building products and construction material pricing, and consumption trends. He focuses on primary research methods, including the implementation and analysis of surveys and interviews. Brian also leads and manages various external market research engagements and constructs tools and models for efficiently performing high-quality analyses.