Home construction weakened in March, and homebuilder sentiment hasn't budged in three months — all this in the heart of the historically strong spring housing market. The common complaint from builders is that they are hamstrung by a lack of skilled labor, which is keeping production levels low.
That may have been a factor for the past several years, but today it is less and less a plausible excuse.
"Our analysis of payroll growth and wage inflation data suggests that labor shortages may not be to blame for the mediocre level of housing activity," Goldman Sachs analysts wrote in a report this week. "We find that, on the one hand, the construction sector has experienced the largest job growth over the past year."
Construction growth has led all other sectors at 5 percent, according to the Bureau of Labor Statistics, but average hourly earnings in construction gained only 2.2 percent over the past year, which is about the national average.
"Economics 101 would suggest that, if labor shortages did in fact exist, upward pressure on wages would be more pronounced and payroll growth would be anemic," the report said. "Therefore, the evidence from the industry-level employment and wage data does not support the existence of labor shortages in the construction sector."