Arizona, along with Florida, Las Vegas, Southern California and Michigan, as most people know, has been one of the places in the country hardest hit by the popping of the housing and mortgage bubble. So, it was interesting to see that in an early summer employment report, construction jobs in Arizona had finally begun to stabilize.
In June 2011, construction jobs totaled 112,500, down just 0.3 percent from 112,800 in June 2010, according to the state’s major newspaper, The Arizona Republic. The decline was so slight, the data indicated a plateau.
Arizona is not out of line with the rest of the country.
Job data from Bureau of Labor Statistics shows construction hires in June hit 348,000, which is a good sign considering May construction hires were revised upward to 355,000, according to the National Association of Home Builders (NAHB).
NAHB also noted that, considering all the construction hiring through the first six months of 2011, this could be the first year since the "Great Recession" in which total hires for construction will outpace total separations, even if it was just by a small margin, as hires exceeded separations by only 20,000.
These are total construction jobs. If one looks just at residential construction, the market for jobs is still very weak. Again, according to the most recent report in June from NAHB, residential construction was down 9,000 jobs as compared to the year before and off an astounding 1.44 million jobs below its peak in April 2006.
All eyes have been on jobs since the national, midyear employment reports were so weak.
When scrutinizing employment data, economists generally focus on manufacturing or service jobs, yet a considerable portion of the economy consists of construction employment, and when we talk about jobs lost to the Great Recession, it’s doubtful that any sector got hit harder than in construction. So, if the economy needs a boost its important that construction jobs come back.
"It’s an underappreciated fact that the employment base in the homebuilding sector has really taken a bigger hit than some of the other sectors," said Robert Denk, NAHB’s assistant vice president for forecasting and analytics. "There may be a certain insensitivity to (a) homebuilder’s plight. The general impression is builders made plenty of money during the boom so they shouldn’t cry during the bust, but it’s more complicated than that."
That’s because most people focus on the big builders — like Toll Brothers, KB Home, etc. — which is the wrong thing to do because homebuilding is really a small-business story. Even at NAHB, 80 percent of the membership comes from companies that build fewer than 25 homes a year, and these guys did not make money hand over fist during the boom years, although these were probably some of the best years in business for the small firms.
Then one has to consider all the ancillary jobs that are involved in the construction of a house — the small companies that are subcontracted to do the plumbing, drywall, stucco, landscaping and electrical wiring.
Everybody parses the job numbers differently, but most economists would agree that 2 million to 2.2 million construction jobs were lost since the peak of employment in April 2006. That year, there were 7.7 million construction jobs, but the total number has fallen to 5.5 million since then, said Ken Simonson, chief economist for the Associated General Contractors of America.
"The job losses started in single-family in early 2006, then in 2008 the losses hit multifamily and condominium construction," said Simonson. "Private nonresidential construction was still on a plateau until 2008 when the financial meltdown hit. Since 2010, everything has been flat or shrinking."
The problem going forward is that so many experienced construction workers, including those who have subcontracting specialties, have left the field that when the industry finally turns around, the bodies might not be there to fill the jobs.
"For a long time, fired workers stayed and the unemployment rate in construction got as high as 27 percent," Simonson said. "Even though the jobs had been disappearing, people still wanted to work construction. However, in the last year, from June 2010 to June 2011, the construction unemployment rate dropped from 20.1 percent to 15.6 percent."
While that looks like a good sign, it’s actually not.
Over that period of time, 2,000 construction jobs came back, but that was not enough to account for the drastic decline in the construction unemployment rate. What the numbers really indicate: Thousands have quit the construction labor force, retired or went back to school to retrain for other kinds of jobs.
Denk remembers going to a conference in South Florida and three out of four taxi drivers were former construction workers. Denk asked them all if they would go back to construction if work returned, and all of them said, "I have my tools and truck; I don’t like driving a taxi."
Nevertheless, Denk is not entirely optimistic because many other construction workers have gotten rid of their tools and trucks, plus many small-business owners — i.e., suppliers or owners of lumber yards, etc. — are out of business and they will never come back to the industry.
The key to getting construction going is the growth of the overall economy, and there have been some hopeful signs, mostly in the public sector. Also, multifamily starts are beginning to lift off; the apartment sector could be one of the big winners in the next year and a half.
"It’s a worry for the construction industry," Simonson said. "When we finally do have more jobs, will we be able to still find the skilled workers who will be needed?"