Tag Archives: Construction Jobs

CR: More Research on Construction Employment

More Research on Construction Employment

by Bill McBride on 2/12/2013  

A key economic question this year is how many construction jobs will be added. Here are a few excerpts from analysis Kris Dawsey and Hui Shan at Goldman Sachs: Housing Sector Jobs Poised for a Comeback

Although many indicators of housing activity improved during 2012, employment in the sector remains close to post-bubble lows. Looking only at residential construction jobs, employment declined by 1.5 million (-42%) from its peak in 2006 to its recent trough in early 2011 and edged up only a modest 100 thousand since then. However, direct residential construction employment is only a part of all residential investment-related employment. Adding in housing-related employment in manufacturing, wholesale trade, retailing, and finance & real estate, employment dropped by 2.8 million (-31%) from its peak, and gained a bit less than 300 thousand from its trough to the present …

[R]eal residential investment declined somewhat more sharply than housing-related employment in the downturn, resulting in a decline in real value added per residential investment-related worker, according to our proxy measure, from more than $80,000 in 2006 to a bit less than $60,000 in Q4:2012, in chained 2005 dollars. This pattern of declining productivity during a downturn is called “labor hoarding” by economists (although labor hoarding is probably not what most people think of during a period of sharp job cuts) and reflects businesses’ reluctance to fire workers at a rate commensurate with the decline in their sales.

The flip side of this phenomenon is more sluggish employment growth than would otherwise be the case once business activity turns around. On top of the only modest turnaround in activity, this secondary effect also argues for only a modest rebound in residential investment-related employment early on in the recovery. However, this effect may shortly be coming to an endHours per worker in the construction industry now exceed pre-crisis highs, suggesting that room to increase output on the “intensive margin” (i.e. more hours per worker) is diminishing, and that pushing on the “extensive margin” (hiring more workers) will likely account for a larger share of future increases in residential investment output.

Given that we expect real residential investment to continue growing at a roughly stable 10%-15% rate in 2013 and 2014, and that the effects of labor hoarding should be dissipating, what is our forecast for residential investment-related employment growth over the coming several years? In order to answer this question, we estimated two different econometric models: (1) an error correction model of national-level real residential investment and residential investment-related employment, and (2) a state-level panel analysis of the relationship between construction activity and employment. Both models suggest an increase in the rate of housing-related employment growth in 2013 and 2014 relative to 2012, probably to a rate around 25 to 30k per month.
emphasis added

So there analysis suggests construction companies have been increasing hours worked for current employees, but now they need to hire more workers.

Read more at http://www.calculatedriskblog.com/2013/02/more-research-on-construction-employment.html#OKpbAfueQS5EPVGs.99

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CR: Kolko: Here are the “Missing” Construction Jobs

Kolko: Here are the “Missing” Construction Jobs

by Bill McBride on 1/31/2013 

CR Note: This is from Trulia chief economist Jed Kolko:

Construction jobs are a big part of how housing recovery lifts the broader economy. But the construction rebound, so far, appears to be jobless. “Residential construction” jobs, as reported by BLS, were up just 1% in December 2012 from their lowest level since the housing bubble burst – even though new home starts in December 2012 were twice as high as their low point in 2009. Overlaying residential construction employment (monthly, in thousands, left axis) and construction starts (monthly, in thousands, right axis) data suggests a jobless housing recovery, with jobs struggling to turn around even as starts climbed sharply in 2012:

Construction JobsClick on graph for larger image.

Who is building all these new homes? If starts are now twice their lowest level, why aren’t residential building jobs also twice their lowest level, instead of up just 1%? The answer: this is the wrong way to look at construction jobs. It turns out that construction employment is approximately where it should be for the current level of construction activity. Here are three reasons why:

“Starts” aren’t the right measure of current construction activity. Units “under construction” is more relevant – especially now. The amount of construction activity this month depends not only on this month’s construction starts but also on construction starts in previous months. That’s because single-family construction takes 4-6 months between start and completion, and multi-unit-building construction takes 10-14 months, on average. Therefore, construction starts indicate what will happen to construction activity in the coming months – not necessarily where it is today. And, in this recovery, multi-unit buildings are an unusually high share of overall construction activity, so the typical new unit is under construction for longer, making starts an even-worse-than-usual proxy for current construction activity. Instead of starts, units “under construction” – also reported monthly by the Census – is the right measure of construction activity to compare with jobs. This changes the picture dramatically: while monthly starts in December 2012 were up 100% (that is, have doubled) since the bottom, monthly units under construction were up 32% from the bottom.

The “residential building” jobs category understates growth in residential construction jobs. The BLS “residential building” category covers general contractors and construction management firms but not subcontractors, which are covered under another category the BLS tracks, “residential specialty trade contractors.” Importantly, residential construction jobs have been shifting steadily from general contractors to specialty trade contractors throughout the boom, bust, and recovery, so the narrower “residential building construction” category understates recent growth in construction jobs. “Residential building” jobs in December 2012 were up just 1% from the bottom, while “residential specialty trade contractor” jobs were up 4%. The combined series is up 3% from the bottom. Of course, some construction workers might not be officially counted if they’re off the books, and others might work on both residential and non-residential projects and not fit neatly into one reporting category. Still, looking at both the “residential building” and “residential specialty trade contractors” gives a clearer picture than looking only at “residential building.”

Construction jobs do not move one-for-one with construction activity. Looking at the right measures over time – units under construction and the sum of the two jobs categories – jobs move up and down less than construction activity does. For every 10% increase (or decrease) in the number of units under construction, construction employment increases (or decreases) by a little more than 4%. One reason might be what economists call “labor hoarding” – firms hold onto more workers than they need in temporary downturns if the cost of firing and re-hiring is high relative to keeping them on. Therefore, firms might increase or reduce workers’ hours instead of hiring or firing. Another reason is other construction activities, like remodeling, might move differently with the business cycle than new construction and possibly even soften the ups and downs of demand for construction workers.

Overlaying these two series – “units under construction” (Census) and the sum of “residential building construction” and “residential specialty trade contractors” (BLS), we get:

Construction JobsUsing these measures, jobs track construction activity pretty closely, with a slight lag. Taking this lag into account, a simple time-series model suggests that construction employment is now just 2% lower than it should be for the current level of construction activity.

The picture might change tomorrow in the January jobs report. As part of tomorrow’s report, the BLS will release its annual benchmark revision of previously reported employment figures. The preliminary revision announced in September suggested that employment for construction overall (including non-residential) would be revised up 1.6% for the benchmark month (March 2012). If tomorrow’s official revision to residential employment is in that range, the jobless construction recovery might not be missing any jobs at all.

What does this mean for construction employment in 2013? Suppose starts rise another 20% in 2013 relative to 2012 – a bit slower than the 28% increase in 2012 relative to 2011. Recent trends suggest that the number of units under construction should be a hair over 20% higher in December 2013 than in December 2012. Even though units under construction didn’t grow as fast as starts in 2012, much of the effect of the increase in starts in 2012 will be on construction activity in 2013, not in 2012. As a result, construction jobs – residential building plus residential specialty trade contractors – could grow 8% in 2013. The sharp increase in construction starts in 2012 should mean more construction jobs in 2013.

Read more at http://www.calculatedriskblog.com/2013/01/kolko-here-are-missing-construction-jobs.html#OtwpdYi7sTG21o6K.99

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JOLTS Data: Seasonal Turnover Holds Back Construction Labor Market Growth

JOLTS Data: Seasonal Turnover Holds Back Construction Labor Market Growth

by Robert Dietz — Eye on Housing

September data from the Job Openings and Labor Turnover Survey(JOLTS) indicate construction hiring picked up in September after a slow August. However, an increase in layoffs held back net hiring for the month. As a result, the pace of hiring for the sector in 2012 remains lackluster, especially given the recent pickup in strength of housing construction activity.

For the economy as a whole, the September JOLTS data indicate that the hiring rate fell back to 3.1% of total employment, which was slightly lower on a year-over-year basis. In fact, the hiring rate for September was the first time in 14 months that the rate fell below 3.2% – a small difference perhaps, but one illustrating the sluggishness of growth in the labor market.

The job openings rate (the red line below) fell to 2.6%. in September from an upwardly revised 2.7% in August. The openings rate has now been in the 2.5% to 2.7% range for ten consecutive months.

labor market

From 2009 to the end of 2011, the openings rate moved roughly along an increasing trend. However, this growth in open positions has appeared to slow for 2012. Moreover, the hiring rate has remained flat for about a year,with a dip below recent levels for September. All told, these conditions reflect an economy having trouble expanding employment.  Relatively stronger reporting from the household and establishment labor market surveys for September andOctober may presage a stronger JOLTS report next month.

The ongoing weakness in hiring has several potential explanations. One, challenges in housing markets are preventing workers from relocating to labor markets with open positions. However, this “house lock” effect was recently challenged by a paper from economists at the New York Federal Reserve. A second possible explanation is a skills mismatch between available workers and open positions. This explanation is also hotly debated among various proponents of structural or cyclical explanations of post-Great Recession unemployment. Another explanation is that policy uncertainty, for example from the impending fiscal cliff, is holding back employers from adding workers.

For the construction sector, the September JOLTS data indicate that hiring picked up after a slow August. Construction hiring reached a total of 346,000 for the month of September, the third highest total for 2012. September marks the fifth month in a row of hiring in the construction sector above a 300,000 level.

After a reduced hiring rate in August (5.9%), the hiring rate for the construction sector rose to 6.3% in September. Per the JOLTS data, net hiring for the construction sector remains negative, with 17,000 net positions lost for the sector for 2012 year-to-date. This drop off is due to weak hiring in the spring, as well as relative weakness in the nonresidential sector.

Jobs openings in construction were essentially unchanged in September, coming in at 77,000 open positions compared to 81,000 in August. The openings rate was unchanged at 1.4%.

We’ve noted for the last few months that net lost jobs in construction for 2012 is hard to reconcile with significant increases for 2012 inconstruction spending and other measures of activity. For September, this effect was caused in part for an uptick in the nonseasonally adjusted measure of layoffs, which totaled 280,000 for the month, the highest monthly tally since January 2012 and the second highest since January 2011.

While it is true that weakness in construction employment is due in part to nonresidential construction, other Bureau of Labor Statistics data indicate that home builders have not added many jobs in 2012.

The monthly BLS net employment count for October (the employment count data are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.033 million, broken down as 560,000 builders and 1.473 million residential specialty trade contractors.

Net job losses at the low point of home building employment (December 2010) totaled 1.46 million. Current net job losses are 1.417 million. And according to the BLS data, over the last 12 months, the home building sector has added only 12,000 net positions.

Recent data revisions suggest construction hiring could have been stronger over the period of April 2011 to March 2012.  We will know for sure in February when the final benchmark revision is published. This might be a case where startups in the home building and remodeling sectors are being missed by the establishment survey.

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JOLTS Data: Construction Hiring Dips in August, but Sector Job Openings Rise

JOLTS Data: Construction Hiring Dips in August, but Sector Job Openings Rise

by Robert Dietz — Eye on Housing 

August data from the Job Openings and Labor Turnover Survey (JOLTS) indicate construction hiring slowed in August after an elevated July. However, construction sector job openings rose for the month. Nonetheless, the pace of hiring remains lackluster, especially given the strength in housing construction activity for 2012.

For the economy as a whole, the August JOLTS data reveal that the hiring rate stood at 3.3% of total employment, which is basically unchanged over the last year. The national hiring rate has now been in a 3.2% to 3.4% range for the last 13 months. The job openings rate (the red line below) was unchanged for August at 2.6%. The openings rate has now been in the 2.5% to 2.7% range for nine months.

From 2009 to the end of 2011, the openings rate roughly moved along an increasing trend. However, this trend  appeared to slow for 2012. Moreover, the hiring rate has remained flat for about a year. All told, these conditions reflect an economy having trouble expanding employment.

The ongoing weakness in hiring has several potential explanations. One, challenges in housing markets are preventing workers from relocating to labor markets with open positions. However, this “house lock” effect was recently challenged by a paper from economists at the New York Federal Reserve. A second possible explanation is a skills mismatch between available workers and open positions. This explanation is also hotly debated among various proponents of structural or cyclical explanations of post-Great Recession unemployment. Another explanation is that policy uncertainty, for example from the impending fiscal cliff, is holding back employers from adding workers.

For the construction sector, the August JOLTS data indicate that hiring slowed for the month. Construction hiring reached a total of 308,000 for the month of August, the lowest pace since April. However, August marks the fourth month in a row of hiring in the construction sector above a 300,000 level.

After two strong months of hiring rates (June and July (6.4% and 6.5% respectively), the rate for August dipped to 5.6%. Per the JOLTS data, net hiring for the construction sector remains negative, with 20,000 net positions lost for the sector for 2012 year-to-date. This drop off is due to weak hiring in the spring, as well as relative weakness in the nonresidential sector.

Jobs openings in construction increased from 67,000 open positions in July to 82,000 open positions in August. The openings rate consequently increased from 1.2% to 1.5%, the highest rate since the spring.

We’ve noted for the last few months that net lost jobs in construction for 2012 is hard to reconcile with increases for 2012 in construction spending and other measures of activity. While it is true that weakness in construction employment is due in part to nonresidential construction, other Bureau of Labor Statistics data indicate that home builders have not added many jobs in 2012.

The monthly BLS net employment count for September (the employment count data are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.033 million, broken down as 565,000 builders and 1.469 million residential specialty trade contractors.

Net job losses at the low point of home building employment (December 2010) totaled 1.46 million. Current net job losses are 1.417 million. And according to the BLS data, over the last 12 months, the home building sector has added only 23,000 net positions.

However, recent data revisions suggest construction hiring could have been stronger over the period of April 2011 to March 2012.  We will know for sure in February when the final benchmark revision is published.

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JOLTS Data: Construction Hiring Continues Small Summer Rebound

JOLTS Data: Construction Hiring Continues Small Summer Rebound

by Robert Dietz — Eye on Housing

July data from the Job Openings and Labor Turnover Survey (JOLTS) suggest that construction hiring continued a slight rebound for the months of July and August. While total hiring became more positive after weak months in the spring, the pace of hiring remains lackluster, especially given the strength in housing construction activity for 2012.

For the economy as a whole, the July JOLTS data reveal that the hiring rate stood at 3.2% of total employment. The national hiring rate has now been in a 3.2% to 3.4% range for the last 12 months. The job openings rate (the red line below) remained at 2.7%, a rate at which it has now stood for four out of the five last months.

The overall trends have remained constant over recent months. Namely, the openings rate appears to be moving along a long-run increasing trend, while the hiring rate remains relatively flat. This suggests the economy is having problems adding jobs by filling open positions.

There are two commonly cited explanations for this situation. One, challenges in housing markets are preventing workers from relocating to labor markets with open positions. However, this “house lock” effect was recently challenged by a paper from economists at the New York Federal Reserve. A second possible explanation is a skills mismatch between available workers and open positions. This explanation is also hotly debated among various proponents of structural or cyclical explanations of post-Great Recession unemployment.

For the construction sector, the July JOLTS data indicate that hiring continued its pick up after slow months of March and April. Construction hiring reached a total of 362,000 for the month of July, the highest level of hiring since June of 2011.

The construction hiring rates for June and July (6.4% and 6.6% respectively) are the highest rates in over a year. However, per the JOLTS data, net hiring for the construction sector remains negative, with 19,000 net positions lost for the sector for 2012 year-to-date. This drop off is due to weak hiring in the spring, as well as relative weakness in the nonresidential sector. However, total separations in construction (layoffs, quits and other separations) were also up in July.

We’ve noted for the last few months that net lost jobs in construction for 2012 is hard to reconcile with increases for 2012 in construction spending and other measures of activity. While it is true that weakness in construction employment is due in part to nonresidential construction, other Bureau of Labor Statistics data indicate that home builders have not added many jobs in 2012.

The monthly BLS net employment count for August (the employment count data are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.031 million, broken down as 564,000 builders and 1.467 million residential specialty trade contractors.

Net job losses at the low point of home building employment (December 2010) totaled 1.46 million. Current net job losses are 1.419 million. And according to the BLS data, over the last 12 months, the home building sector has added only 24,000 net positions.

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JOLTS Data: Construction Hiring Rebounds in June

JOLTS Data: Construction Hiring Rebounds in June

by Robert Dietz — Eye on Housing

June data from the Job Openings and Labor Turnover Survey (JOLTS) suggest that hiring picked up for the construction industry in May and June.

For the economy as a whole, the June JOLTS data reveal that the hiring rate stood at 3.3% of total employment. The national hiring rate has now been in a 3.2% to 3.4% range for the last 11 months. The job openings rate (the red line below) remained at 2.7%, which matches the highest rate of job openings the national economy has had since the middle of 2008.

The overall trends has remained constant over recent months. Namely, the openings rate appears to be moving along an increasing trend, while the hiring rate remains flat. This suggests the economy is having problems adding jobs by filling open positions. We believe these facts are related to the housing markets’ ongoing challenges and the ability of workers to move to locations where employers are hiring. Another explanation is that employers are unable to find workers with the needed skills necessary to fill open positions.

For the construction sector, the June JOLTS data indicate that hiring picked up after slow months of March and April. Construction hiring was upwardly revised from 284,000 to 314,000 for May and further increased to 370,000 in June. This marks the largest level of hiring for the construction sector since March 2010, when the homebuyer tax credit program was coming to a close.

The increase in June construction hiring caused the hiring rate to jump to 6.7% of total employment. This is the largest hiring rate since the summer of 2011 and is a marked contrast with the spring of 2012.

Per the JOLTS data, net hiring for the construction sector remains negative, with 14,000 net positions lost for the sector for 2012 year-to-date. This is in part due to soft hiring levels in March and April, as well as higher levels of quits in May and June.

We noted last month that net lost jobs in construction for 2012 is hard to reconcile with increases for 2012 in construction spending and other measures of activity. It is tempting to conclude the weakness in construction employment is due to nonresidential construction, but other Bureau of Labor Statistics data indicate that home builders have not added many jobs in 2012. We suggested last month that upward revisions for hiring were a possibility, and this certainly happened with the May data.  It may be the case that we see the June number revised upwards as well.

But other BLS data indicate that net home building employment has not changed much over the last year or so.

The monthly BLS net employment count for July (the employment count data are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.023 million, 567,000 builders and 1.456 million residential specialty trade contractors.

Net job losses at the low point of home building employment (December 2010) totaled 1.46 million. Current net job losses are 1.427 million. And according to the BLS data, over the last 12 months, the home building sector has added only 16,000 net positions.

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JOLTS Data: Growing Weakness for the Job Market

JOLTS Data: Growing Weakness for the Job Market

by Robert Dietz — Eye on Housing

May data from the Job Openings and Labor Turnover Survey (JOLTS) confirm an ongoing slowdown in the labor market, with net hiring for the construction sector (residential and nonresidential) turning negative year-to-date for 2012.

For the economy as a whole, the May JOLTS data reveal that hiring rates increased to 3.3%, one of the few pieces of good news in the report. The job openings rate (the red line below) also increased back to 2.7% after declining in April. More concerning, the separations rate was the highest in two years, driven in part by the highest layoff rate in a year. The number of quits has also been rising, which on the other hand might be a good sign in that workers feel confident in changing jobs. However, it could also be a sign of a declining labor participation rate, which is a negative for GDP growth.

Despite these changes, the overall trends remain the same. Namely, the openings rate appears to be moving along a sluggishly increasing trend, while the hiring rate remains flat. This suggests the economy is having problem creating jobs by filling open positions. We believe these facts are related to the housing market’s ongoing challenges and the ability of workers to move to locations where employers are hiring. Another explanation is that employers are unable to find workers with the needed skills necessary to fill open positions.

For the construction sector, the May JOLTS data indicate relatively unchanged levels of hiring, totaling 284,000 positions for May. The number of open positions in the construction sector remained steady in May at 77,000 positions, after a decline to 69,000 openings in April.

Overall, there is no doubt that hiring has slowed for the construction sector, with the hiring rate now at 5.2% compated to 6.7% from a year ago.

Per the JOLTS data, net hiring for the construction sector has turned negative, with 28,000 net positions lost for the sector for 2012 year-to-date.

This result is hard to reconcile with increases for 2012 in construction spending and other measures of activity. It is tempting to conclude the weakness in construction employment is due to nonresidential construction, but other Bureau of Labor Statistics data indicate thathome builders have not added many jobs in 2012. As with other data series, it is also possible that the seasonal adjustment factors are causing some problems in interpreting data.

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