April 14, 2013

Construction Sector Adds 18,000 Jobs in March

Construction employment experienced an increase for the tenth month in a row in March, as the sector added 18,000 jobs, according to analysis of federal data by the Associated General Contractors of America (AGC). The sector surpassed 5.8 million employees for the first time since September 2009.

“The nearly steady expansion of construction payrolls since hitting bottom in January 2011 brought the industry’s unemployment rate down to 14.7 percent last month, the lowest March rate since 2008,” said Ken Simonson, AGC’s chief economist. “Unfortunately, the decline is less a result of the 370,000 construction hires than because more than a million and a half experienced workers have left the industry since its peak by taking other jobs, retiring or leaving the workforce. That makes shortages of skilled workers increasingly likely in high-demand crafts such as pipefitting, welding and some residential activities.”

The 5.802 million construction workers employed in March constituted an increase of 162,000 or 2.9 percent from a year ago and included many, but not all, nonresidential segments as well as residential construction, Simonson noted. Residential building and specialty trade contractors added 14,800 workers in the month and 77,800 (3.8 percent) over 12 months. Nonresidential building and specialty trade contractors, along with heavy and civil engineering construction firms, boosted employment by 3,000 in March and 84,400 (2.3 percent) since March 2012.

“In contrast to the broad gains in most construction segments, employment in public works construction has been flat or falling,” Simonson said. These counts, which lag the overall industry totals by one month, show a drop of 3,500 employees (1.5 percent) in highway, street and bridge construction from February 2012 to February 2013 and a pickup of only 1,000 (0.7 percent) in water and sewer system construction. At the other extreme, Simonson said, oil and gas pipeline construction employment soared by 16,300 (14.5 percent) and power and communication system construction employment jumped by 14,400 (13.0 percent).

Construction job growth hits 7-year high

While today’s job’s report was disappointing on nearly all fronts, there was one bright spot that shone through the dismal numbers: sustained construction-job growth.

"The solid increase in construction employment in March, which brought the average monthly gain during the first quarter to 30,000 jobs, the biggest in seven years, supports the view that the housing recovery will continue to march on despite headwinds from fiscal drags," said Fannie Mae Chief Economist Doug Duncan in a statement.

Indeed, the economy continues to add construction jobs at a fast clip. At 3.8 percent year over year in March, the growth rate of residential-construction jobs towers over the overall jobs growth rate of 1.4 percent. In the last two years construction has added 317,000 jobs to the economy, with over half of that increase occurring in the last six months, the White House said in a statement on the jobs report.

Even still, the rate of construction job growth lags far behind growth in actual home construction — which was a whopping 28 percent year over year in February, according to the Census Bureau. Today, Trulia economist Jed Kolko offered an explanation for why this is:

"A key reason for this seemingly slow rebound in construction jobs is that construction activity (in units or dollar value) fell much more than employment did after the housing bubble burst. Economists point to "labor hoarding": firms often hold on to more workers than they need in temporary downturns if the cost of firing, rehiring, and retraining is high relative to keeping them on," Kolko wrote in a blog post. "That means jobs declined less than construction activity during the bust and are therefore now rebounding less."

The number of construction jobs for every housing unit actually appears bloated, Kolko found. In February, there were about 3.7 jobs per unit, up 40 percent from a February 2001 level of 2.6 per unit, he said.

As home construction continues to rise, the sector will continue to generate jobs, but the number of jobs per unit should gradually decline to pre-bubble levels, he said.

"For builders who are reporting labor shortages today, that headache is likely to get worse, not better, as the recovery continues," he added.

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