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Jobs in the Construction Industry Recession

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					    Construction Employment: Showing Few Signs of Recovery 
                                                              Sondra Albert
                                                             Chief Economist
                                                      AFL-CIO Housing Investment Trust
                                                              August 4, 2010

The construction industry has suffered especially hard in this economic downturn, caught in an economic
vise between a financial crisis that has dried up lending for real estate, and the collapse of a housing bubble
that has seen foreclosures skyrocket as housing prices fall. While some segments of the economy are
showing signs of recovery, the construction sector remains weak with a staggeringly high unemployment rate.

Tool Belt Recession 

The current recession has been named the “tool belt recession” because it has had the most devastating
impact on the construction trades.1 Even a year after many sectors of the economy have begun to show
improvement, the construction sector remains at depression era levels with an unemployment rate of 20.1%
in June. This is more than double the national rate of 9.5%. While construction employment is affected by
seasonal factors, it has never deviated by so much from the national rate. The unemployment rate in
construction was below 6% at the peak of the housing market boom and has risen from 17.1% a year ago. 2
This tool belt recession in the construction trades spills over to other parts of the economy because the
declining demand for building products affects many manufacturing industry sectors. Many of the
construction suppliers are currently operating at half of their production capacity. 3

                                   Unemployment Rate in Construction Significantly 
                                           Higher than the National Rate 
                                         (percent, not seasonally adjusted)
                     30
                     25
                     20
                     15
                     10
                      5
                      0
                                                                                                                    May‐06
                          Jul‐00
                                   Feb‐01
                                            Sep‐01
                                                     Apr‐02
                                                              Nov‐02
                                                                       Jun‐03
                                                                                Jan‐04
                                                                                         Aug‐04
                                                                                                  Mar‐05
                                                                                                           Oct‐05


                                                                                                                             Dec‐06
                                                                                                                                      Jul‐07
                                                                                                                                               Feb‐08
                                                                                                                                                        Sep‐08
                                                                                                                                                                 Apr‐09
                                                                                                                                                                          Nov‐09
                                                                                                                                                                                   Jun‐10




                                                                           National Unemployment Rate
                                                                           Construction Unemployment Rate
                                                                                                                                                                                             
                                                              Source: Bureau of Labor Statistics 

1
   “Taking on the Tool Belt Recession,” by Bracken Henricks and Matt Golden, Center for American Progress 
(3/2010). 
2
   Bureau of Labor Statistics. 
3
   “Taking on the Tool Belt Recession,” by Bracken Henricks and Matt Golden, Center for American Progress 
(3/2010). 

                                                                                                  1
Construction companies shed 22,000 jobs in June, pushing the total number of jobs lost in the industry since
the recession began in December 2007 to 1.9 million. The U.S. Department of Labor reported that the
“commercial specialty trade” sector, which include building equipment and structure contractors, was hit the
hardest in June with 17,600 jobs lost, for a total second quarter loss of 30,400 jobs. Since the recession
began, specialty trades have lost over 1.2 million jobs.

                            Construction Sector Hit the Hardest During the Recession:  
                                       Jobs Lost Since the Recession Began 
                                                   (June, 2010) 
                     Residential Buildings                                        ‐309,700 
                     Heavy & Civil Engineering 
                     Construction                                              ‐201,700 
                     Nonresidential Buildings                                  ‐151,300 
                     Specialty Trade Contractors                              ‐1,246,200 
                     Total Construction jobs                                  ‐1,908,900 
                     Source: Bureau of Labor Statistics 
 

Today, nearly 2 million construction workers are out of a job. Construction jobs are down 28% since
residential construction peaked during the summer of 2006.4 As devastating as these numbers are, the
unemployment figures for construction are likely an understatement, because the large number of self-
employed construction workers do not show up in payroll statistics. Economic Census data shows that the
self-employed share of workers is significantly higher in the construction industry than in other sectors, at
16.6% in 2008. Further, more than 90% of contractors in the construction industry are small businesses,
another hard-hit segment of the economy.



                                      Construction Jobs Down 28% From Peak
                                         (thousands; seasonally adjusted)
                        8000
                        7500
                        7000
                        6500
                        6000
                        5500
                                  Jun‐03
                                  Oct‐03
                                  Feb‐04
                                  Jun‐04
                                  Oct‐04
                                  Feb‐05
                                  Jun‐05
                                  Oct‐05
                                  Feb‐06
                                  Jun‐06
                                  Oct‐06
                                  Feb‐07
                                  Jun‐07
                                  Oct‐07
                                  Feb‐08
                                  Jun‐08
                                  Oct‐08
                                  Feb‐09
                                  Jun‐09
                                  Oct‐09
                                  Feb‐10
                                  Jun‐10




                                                                                               
                                            Source: Bureau of Labor Statistics 




4
    Bureau of Labor Statistics.

                                                            2
While the severity of job losses has varied across the U.S., many of the states hit hardest by the housing crisis,
such as California and Florida, have suffered significant declines in construction employment. Michigan and
Ohio have experienced declines in both construction and manufacturing, which have contributed to their
high job loss rates. Unemployment in these states is causing people to lose their homes because they are
unable to afford their mortgages. The high unemployment rates also place additional strains on state budgets.




                                 Top Ten States: Job Loss Since the Recession Began 
                                                     (June 2010) 
                                                                   Construction Job       Construction Job Loss 
    State                                     Total Job Loss              Loss            as a Percent of Total 
    California                                   ‐1,300,100            ‐311,400                  24.0% 
    Florida                                       ‐720,800             ‐209,500                  29.1% 
    Michigan                                      ‐390,800              ‐45,800                  11.7% 
    Ohio                                          ‐372,800              ‐50,700                  13.6% 
    Illinois                                      ‐366,400              ‐68,800                  18.8% 
    Georgia                                       ‐328,500              ‐68,700                  20.9% 
    New York                                      ‐247,900              ‐51,100                  20.6% 
    North Carolina                                ‐235,600              ‐80,300                  34.1% 
    New Jersey                                    ‐220,200              ‐44,400                  20.2% 
    Tennessee                                     ‐201,600              ‐33,400                  16.6% 
    Source: Bureau of Labor Statistics 
 

 

Housing Market Likely to Remain Weak: Further Impacting Construction Jobs 

The single family housing market has yet to show any sustainable signs of recovery. The Census Bureau
indicated that new home sales in June rose 23.6% from May to 330,000. However, the rise followed a sharp
May decline resulting from the end of the federal government’s $8,000 home-buyer tax credit. The June
home sales figure was the series’ second lowest since the Census began tracking the data in 1963. At the
current sales rate, the supply of unsold homes fell to 7.6 months’ supply in June from 9.6 months in May.
While this is close to the average six months it takes to sell a house in “normal” times, the improvement in
supply has not been due to a rebound in demand, but rather to the dramatic decline in construction over the
last year.5




5
    Census Bureau.

                                                        3
                                     Housing Market Remains Weak
                              New Single Family Sales Versus Months' Supply
                    14.0                                                                 1600
                    12.0                                                                 1400
                    10.0                                                                 1200
                                                                                         1000
                     8.0
                                                                                         800
                     6.0
                                                                                         600
                     4.0                                                                 400
                     2.0                                                                 200
                     0.0                                                                 0
                           Jan‐02
                            Jul‐02
                           Jan‐03
                            Jul‐03
                           Jan‐04
                            Jul‐04
                           Jan‐05
                            Jul‐05
                           Jan‐06
                            Jul‐06
                           Jan‐07
                            Jul‐07
                           Jan‐08
                            Jul‐08
                           Jan‐09
                            Jul‐09
                           Jan‐10
                       Months' Supply (left axis)      Single Family Sales, thousands (right axis)
                                                                                                       
                                             Source: Census Bureau 

A major obstacle to recovery of the construction trades and the housing market is the difficulty firms have in
gaining access to financing. According to the recent assessment of the economy by the Federal Reserve,
residential construction remains weak in most parts of the U.S., and homebuilders do not expect construction
to recover this year. Commercial and industrial real estate markets were recently described as weak across all
12 Federal Reserve Districts.6 According to Kyle Wheeler of the Plumbers and Steamfitters Union in Napa
and Solano counties, “Once the banks start loaning money, then we can build this stuff, and we can build our
way out of this economy.”7 In order for the housing market to recover builders must be able to gain access
to credit, demand for housing must increase and home foreclosures have to decline, limiting the supply of
existing homes on the market.

Preserving and Creating Construction Jobs Is Critical to Achieving Sustainable Economic 
Growth 

The tool-belt recession has a deep and far-reaching impact on communities. Construction job losses touch
every state and hit many local economies especially hard. Construction unemployment spills over to other
parts of the economy as well.8 The AFL-CIO Housing Investment Trust has redoubled its efforts since the
recession began to increase the availability of credit to construction projects that create and save construction
jobs. These projects are not only creating direct construction jobs, but they also increase the demand for
local goods and services and have broader economic impacts down the supply chain.




6
   Federal Reserve Beige Book, July 28, 2010. 
7
   “California’s Building Bust Chocking Off Job,” by Cari Tuna, The Wall Street Journal (7/29/2010). 
8
   “Taking on the Tool Belt Recession,” by Bracken Henricks and Matt Golden, Center for American Progress 
(3/2010). 

                                                        4
This document contains forecasts, estimates, opinions, and other information that is subjective. Statements concerning economic,
financial or market trends are based on current conditions, which will fluctuate. There is no guarantee that such statements will be
applicable under all market conditions, especially during periods of downturn. It should not be considered as investment advice or
a recommendation of any kind. All statistics are current as of August 4, 2010, unless otherwise noted.

 




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