by Calculated Risk on 7/06/2012 02:21:00 PM
Friday, July 06, 2012
Back in 2006, I predicted we'd see construction job losses in the seven figures. All through 2006 and into 2007, I was constantly asked: "Where are the construction job losses you predicted?"
And then it started ... and the BLS reported construction employment fell 2.27 million from peak to trough. No one asks that question any more.
There were several reasons why construction jobs didn't decline at the same time as housing starts. First, construction includes residential, commercial and other construction (like roads). Even after housing starts began to collapse, commercial real estate was still booming and workers shifted from residential to commercial (many commercial projects have long time frames - and many developers remained in denial). Also some construction workers are paid in cash (illegal immigrants), and these workers weren't counted on the BLS payrolls.
Now people are asking "Where are the construction jobs?"
Oh, Grasshopper ... the construction jobs are coming.
The graph below shows the number of total construction payroll jobs in the U.S. including both residential and non-residential since 1969 compared to housing starts. Unfortunately the BLS only started breaking out residential construction employment fairly recently (residential specialty trade contractors in 2001).
Right away we can see that construction employment isn't just tied to housing starts. There are other categories that have been generally increasing over the decades.
Click on graph for larger image.
Notice that housing starts collapsed in 2006, but construction employment didn't start falling until 2007 - and didn't collapse until 2008. Some people will look at the sub-categories for construction, but there are two problems: 1) construction workers shift between categories, and 2) the BLS hasn't been tracking these categories for very long.
Even though construction is down since the beginning of the year, and only increased by 2,000 jobs in June, construction employment appears to have bottomed, and should add to both GDP and employment growth in 2012.
Other construction indicators - housing starts, new home sales, construction spending, builder comments - are all improving (although public construction spending is decreasing), and construction employment will follow.
A little Kung Fu:
Young Caine: "Old man, how is it that you hear these things?"
Master Po: "Young man, how is it that you do not?"
The housing recovery is here. The construction jobs are coming.
Earlier on employment:
• June Employment Report: 80,000 Jobs, 8.2% Unemployment Rate
• Employment: Another Weak Report (more graphs)
• All Employment Graphs