You might call it the ‘silver lining’ to Friday’s job report – the construction industry seems to be the only bright spot when it comes to the economy.
Why?
Sustained job growth, according to Inman.com.
“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.
“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,” wrote Trulia economist Jed Kolko 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.
But there are regions that are bucking the trend of overall gains in construction employment, according to U.S. News and World Report. In especially tight markets including Washington, D.C., San Francisco and Denver, construction activity is outpacing the supply of labor. And the outlook isn’t too rosy.
“For builders who are reporting labor shortages today, that headache is likely to get worse, not better, as the recovery continues,” Kolko said.
Part of the decline in the unemployment rate was due to more than 1.5 million in the industry leaving to take other jobs, retiring or stepping out of the workforce, Associated General Contractors of America Chief Economist Ken Simonson said in an interview with the Albuquerque Business Journal.
Most categories of construction employment experienced a jolt, while infrastructure hiring lagged, according to the AGC’s latest analysis of government data. Officials cautioned that layoffs could occur unless policymakers in Washington, D.C., boost infrastructure investment and allow importation of needed workers as part of immigration reform.
“That makes shortages of skilled workers increasingly likely in high-demand crafts such as pipe fitting, welding and some residential activities,” he said.