Due to tightened monetary policy, the count of total job openings for the entire economy has trended lower over the last year. This is consistent with a cooling economy that is a positive sign for future inflation readings. However, the number of open jobs for the aggregate economy was relatively unchanged in February per the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS). In February, the number of open jobs for the economy ticked up to 8.76 million. This is lower than 9.85 million reported a year ago. NAHB estimates indicate that this number must fall back below 8 million for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. While the Fed intends for higher interest rates to have an impact on the demand-side of the economy, the ultimate solution for the labor shortage will not be found by slowing worker demand, but by recruiting, training and retaining skilled workers. This is where the risk of a monetary policy mistake had some risk of arising. Good news for the labor market does not automatically imply bad news for inflation. The number of open construction sector jobs increased for the most recent data, rising from 425,000 in January to 441,000 in February. The count was 409,000 a year ago during a period of weaker home construction. The construction job openings rate increased slightly to 5.1% in January. The recent, increasing trend for unfilled construction jobs indicates an ongoing skilled labor shortage for the construction sector. The construction sector layoff rate increased to 2.6%, compared to 2.1% a year ago, an indication of some labor market churn. The hiring rate increased to 4.9% in February, compared to 4.7% from a year ago.

The volume of total outstanding acquisition, development and construction (AD&C) loans posted a decline during the fourth quarter of 2023 as interest rates increased and financial conditions tightened. However, AD&C loan conditions will improve in 2024 as the Fed begins easing monetary policy. The volume of 1-4 unit residential construction loans made by FDIC-insured institutions declined 2.5% during the fourth quarter. The volume of loans declined by $2.5 billion for the quarter. This loan volume retreat places the total stock of home building construction loans at $97 billion, off a post-Great Recession high set during the first quarter of 2023. On a year-over-year basis, the stock of residential construction loans is down 7.4%. This contraction for construction financing is a key reason home builder sentiment has moved lower at the end of 2023, even as building activity accelerated. Nonetheless, since the first quarter of 2013, the stock of outstanding home building construction loans is up 138%, an increase of more than $56 billion. It is worth noting the FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Lending remains much reduced from years past. The current amount of existing residential AD&C loans now stands 52% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years. The FDIC data reveal that the total decline from peak lending for home building construction loans continues to exceed that of other AD&C loans (nonresidential, land development, and multifamily). Such forms of AD&C lending are off a smaller 7% from peak lending. For the third quarter, these loans posted a 1.7% increase.

Due to tightened monetary policy, the count of total job openings for the entire economy has trended lower in recent months. This is consistent with a cooling economy that is a positive sign for future inflation readings. The number of open jobs for the aggregate economy was relatively unchanged in January. In January, the number of open jobs for the economy fell back to 8.86 million. This is notably lower than the 10.4 million reported a year ago. NAHB estimates indicate that this number must fall back below 8 million for the Federal Reserve to feel more comfortable about labor market conditions and their potential impacts on inflation. While the Fed intends for higher interest rates to have an impact on the demand-side of the economy, the ultimate solution for the labor shortage will not be found by slowing worker demand, but by recruiting, training and retaining skilled workers. This is where the risk of a monetary policy mistake had some risk of arising. Good news for the labor market does not automatically imply bad news for inflation. The number of open construction sector jobs was relatively unchanged in the most recent data, declining from 434,000 in December to 413,000 in January. The count was just 293,000 a year ago during a period of weaker home construction. The construction job openings rate decreased slightly to 4.8% in January. Nonetheless, a recent, increasing trend indicates an ongoing skilled labor shortage for the construction sector.