Construction employment to lift, but slowly, with a changing mix

We have recently updated our detailed forecasts of industry and regional economic activity and employment for the next five years. The data confirms that construction has been one of the hardest-hit industries over the last couple of years, but we also see employment in the industry nearing its low point, with the largest falls in activity now likely to be behind us.

Stats NZ’s Monthly Employment Indicators show only two industries (information media and telecommunications; and rental, hiring, and real estate services) have recorded larger declines in filled job numbers than construction over the last year. Although construction’s rate of employment decline has been moderating since mid-2025, we estimate that the annual decline in employment for the year to March 2026 will still be 3.9%, slightly larger than the March 2025 fall, and worse than we were forecasting a year ago. Continued declines in construction activity have maintained financial pressure on businesses in the industry, forcing some businesses into liquidation and others to consolidate their staff numbers.

But for the first time in four years, we are forecasting an increase in construction employment over the coming year – albeit a small one. Given limited forecast growth in total construction activity throughout the next few years, Chart 1 shows that employment growth is also likely to remain modest, at 0.4% in the year to March 2027 and 0.7%pa on average over the five years to March 2031.

The connection between our projections for residential and non-residential work put in place with increasing construction employment over the next year is not immediately obvious. However, near-term employment growth is set to be underpinned by infrastructure activity, which has shown reasonable upward momentum over the last three years, and is benefiting from the government’s push to get major projects underway before November’s election. Short-term prospects in the non-residential and, to a lesser extent, residential subsectors are not quite so positive.

The near-term variation in fortunes across the different parts of the construction industry hints at longer-term considerations for the industry’s mix of employment growth as well. Chart 3 shows that residential activity made up 50% of total work put in place for the industry in September 2022. That share has since eased to 40%, and we expect it to hold around that level for the next 2-3 years before slipping towards 36%, which would be its smallest share since 2013. Non-residential activity is set to equal its all-time low share of 23% later this year, before recovering later in the forecast period. Infrastructure’s share is currently at a 12-year high of 34%, but that share is likely to continue trending higher over the next five years. In other words, we expect demand for additional workers to be more heavily concentrated around civil construction, with more stable demand for residential-related skills over the next 1-2 years and a bit of shift in the mix from residential to non-residential roles later on.

Perhaps most encouragingly for the industry, the balance of risks to our forecasts is shifting towards the upside for all three construction types. Our residential forecasts are based on an average net migration inflow of about 10,600 people per year throughout the next four years. However, net migration of about 30,000pa would require an additional 7,500 homes to be built per year, meaning that stronger population growth creates a compelling case for dwelling consent numbers to hold closer to 38,000pa, instead of drifting lower throughout the forecast period. Non-residential activity could start to pick up sooner than 2028 if this year’s economic recovery leads to a stronger lift in spending and employment, more quickly reducing spare capacity across the commercial and industrial property markets. Even in the infrastructure space, if capacity and funding issues prove to be less of a constraint than we have allowed for, growth in activity and employment has the potential to exceed our expectations.

In closing, it’s worthwhile reiterating that construction activity during the COVID-19 boom was exceptionally elevated – as were activity levels across most of the economy. In anticipating future growth, the construction industry needs to be realistic about what are sustainable activity and employment levels, and not to benchmark itself against 2022/23’s highs.