Manufacturing and Construction Sectors Show Job Growth

Key sectors of the economy that spent years squeezed by high interest rates are gaining momentum. Manufacturing and construction are among the sectors that are showing signs of growth, with manufacturing expanding for seven straight months after contracting for much of the past two years. The Institute for Supply Management's monthly factory survey reported that its employment gauge climbed into expansion territory for the first time in nearly three years, with more surveyed manufacturers reporting increasing employment rather than reducing it.

The AI infrastructure buildout has pushed demand for data center equipment into full procurement and manufacturing ramp-up, with booming orders for semiconductors, networking, and power equipment. Nonresidential construction employment has also climbed to a record high this year, adding about 15,000 jobs in the first six months of 2026. The commercial side of the industry accounted for virtually all of construction's net employment growth, as residential building construction shed about 10,000 jobs over the same period.

The housing sector, however, is an exception, with residential investment subtracting from GDP growth in 12 of the 18 quarters since the Fed started its rate-hiking campaign in 2022. According to Troy Ludtka, senior economist at SMBC, housing is weak because affordability is depressed, and he does not see much prospect for improvement unless home prices or mortgage rates come down.