The U.S. economy added 172,000 jobs in May, the third straight month of job gains, according to the Bureau of Labor Statistics. The unemployment rate held at 4.3%. On the surface, that’s a stable read, neither boom nor bust, with the labor market continuing to absorb new workers despite inflation and broader economic uncertainty.
But for anyone watching the home improvement industry, the headline number isn’t where the interesting reading happens. The interesting reading is in the construction sector breakdown and what it says about a divide that’s been opening up for over a year now.
A Tale of Two Construction Sectors
Construction added 17,000 jobs in May, building on a 9,000-job gain in April. That sounds healthy. Pull apart the components, though, and the picture splits in two:
- Non-residential construction: +15,700 jobs in May
- Residential construction: +900 jobs
Of the 17,000 construction jobs created last month, more than 92% came from the non-residential side — offices, warehouses, retail buildouts, healthcare, infrastructure, manufacturing facilities. Residential builders, by contrast, added a rounding-error number of workers.
It gets starker when you zoom out. According to NAHB analysis of the BLS data, the six-month moving average for residential construction employment is negative — an average loss of 1,300 jobs per month. Over the past year, the residential construction sector has shed a net 33,300 jobs. Construction unemployment as a whole rose to 5.2% on a seasonally adjusted basis in May, still low by historical standards but trending the wrong direction.
In plain English: the part of the construction economy that builds homes is contracting, even as the part that builds everything else continues to hire.
Why That Matters
The hardware and home improvement industry doesn’t ride or fall on construction employment alone — but it does follow the underlying housing cycle that the residential employment numbers are reflecting.
A weakening residential construction sector is the supply-side echo of the same story we’ve been seeing on the demand side for over a year. Elevated mortgage rates have suppressed home sales. Existing homeowners with low-rate mortgages aren’t moving. First-time buyers can’t afford to enter. New home demand has softened, builders are pulling back, and the workers who frame, drywall, and finish those homes are being let go.
That has direct implications for the hardware aisle. Fewer new homes means fewer move-in project baskets — the paint, blinds, tools, and small fixtures that come with settling into a new house. Fewer builder relationships forming in growth markets. Fewer of the entry-level customers building a tool kit from scratch in a starter home.
It also has indirect implications. Construction workers who are out of work are also households cutting back on discretionary spending — including discretionary home improvement.
What It Means
For hardware and home improvement retailers, the May jobs data is another signal that the strategic posture set over the past 12-18 months continues to be the right one. A few angles:
- The renovation and maintenance customer is still the bedrock. With residential construction contracting, the homeowner who’s staying put and investing in the house they have is doing more of the lifting. Lean into the kitchen refresh, the bathroom update, the paint project, the deck repair. That customer isn’t going anywhere — and is increasingly the only customer.
- Non-residential is the bright spot to watch. The strength in non-residential construction is worth paying attention to. Small commercial contractors — the ones building out a coffee shop, finishing a medical office, retrofitting a warehouse — are still hiring and still buying. Retailers with a pro counter, contractor accounts, or a strong commercial supply mix can capture share here.
- Price-sensitive customers are out there. A 5.2% construction unemployment rate isn’t catastrophic, but it’s a real number of households tightening their belts. Value tiers, smaller-package SKUs, and accessible price points matter more in this stretch than they would in a hotter cycle.
- The supply chain may loosen. If residential builders continue to slow hiring and pull back on starts, manufacturer allocations for builder-grade products may ease. That can mean better availability and potentially better pricing on categories that have been tight.
The Bigger Picture
The May jobs report is a Rorschach test. Read one way, it’s evidence of a steady, resilient economy. Read another way, it’s evidence of a slow-motion contraction in the part of construction that hardware retailers care about most.
Both readings are accurate. The right response from the industry is the one that’s already underway: keep doubling down on the renovation customer, watch the non-residential lane for upside, and prepare for a residential market that probably won’t unstick until mortgage rates move meaningfully lower.
The job market is holding. The housing job market isn’t. Plan for both.
Sources: U.S. Bureau of Labor Statistics, National Association of Home Builders.
