Construction employment declined by 1,000 in July even though the industry's unemployment rate fell to 12.3 percent, the lowest level since 2008, says an analysis of new federal data released earlier this month by the Associated General Contractors of America.

The sector's unemployment rate has declined steadily since 2009 as hundreds of thousands of out-of-work construction workers have left the industry seeking other opportunities, says Ken Simonson, the association's chief economist.

"Employment levels in the construction industry have remained relatively stagnant for 2 1/2 years," Simonson says. "The declining unemployment rate has more to do with frustrated job seekers leaving the industry than it does any improvement in demand for construction work."

Industry employment in July was 1,000 workers lower than in June and only 5,000 workers, or 0.1 percent, higher than one year earlier, Simonson says. There are now 5.5 million construction workers employed across the country. He says, however, that construction employment patterns have varied among different industry segments.

A booming apartment sector and a revival—at least for now—in single-family homebuilding led to monthly and year-over-year gains in residential construction employment, Simonson says. He adds that total residential construction employment increased by 2,700, or 0.1 percent, for the month and 12,400 (0.6 percent) compared with July 2011 levels.

Nonresidential construction employment was mixed, reflecting gains in highway and private nonresidential activity that were offset by shrinking public investment in schools and other infrastructure, Simonson adds. He says total nonresidential construction employment edged down by 3,800 (-0.1 percent) from June to July and 6,900 (-0.2 percent) over 12 months.

Within the nonresidential category, heavy and civil engineering construction firms added 6,200 workers (0.7 percent) in July and 10,800 (1.3 percent) since July 2011. In contrast, nonresidential specialty trade contractors shed 9,500 jobs (-0.5 percent) for the month and 19,200 (-1.0 percent) over 12 months. Nonresidential building contractors had mixed results, losing 500 employees (0.1 percent) in July and adding 1,500 (0.2 percent) over the year.

The 12.3 percent unemployment rate for former construction workers was well below the rate in July 2011 (13.6 percent), 2010 (17.3 percent), and 2009 (18.2 percent), Simonson says. He adds that during those three years, nearly 700,000 experienced workers have found jobs in other industries, returned to school, retired, or otherwise left the workforce.

The industry continued to suffer from weak demand caused by slowing private-sector growth and declining public-sector investments in construction.