Don't Drink the Tea. Think With the WE.

Is the Odd Combination of Rising Housing Starts and Stagnant Construction Employment Cause for Concern?

The newest monthly employment report from the Bureau of Labor Statistics shows that despite a resurgent housing market, the construction sector lost 20,000 jobs in November. The industry’s unemployment rate currently sits at 12.2 percent although housing starts were up 3.6 percent in October. These pieces of data seem to be at odds with one another.

One potential insight into this duplicity may be the influx of multifamily housing units being built. These projects require less manpower to complete. Robert Dietz, an economist at the National Association of Home Builders, told ARCHITECT magazine,

“We know from looking at Bureau of Economic Analysis data,” Dietz says, “that every single-family home project employs, on average, three people” for one year of full-time work.”

As noted by ARCHITECT,

This compares with just one man-year for a unit in an apartment or condominium building, according to an analysis done by NAHB in 2007. This is partly a result of the smaller average size of multifamily units—just 1,159 square feet compared to 2,480 square feet for single-family homes—but is also due to economies of scale inherent in larger buildings, which share walls and utilities.

This begins to settle the matter, but Dietz also weighs in on the possibility of faulty numbers being to blame:

“The establishment survey surveys established businesses,” says Dietz, referring to the latest numbers showing a net loss of 20,000 construction jobs in the last month. The initial survey “is not as precise as later surveys that involve calling households directly and asking them about employment. Establishment surveys do not capture new entrants into the market, which could be significant in highly decentralized industries like construction, and especially homebuilding.”

Those crunching the numbers face further hurdles because the construction industry is much more decentralized than other sectors, according to Dietz:

“It’s probably much harder for the the BLS to survey a sector that’s dominated by subcontractors and small firms, than it is in manufacturing, for example, which may be more dominated by long-term established, more corporate businesses.”

Naturally, free-market loving contractors associations are ignoring all positive outlooks and commissioning data that allow them to blame “taxes” and the so-called “fiscal cliff.” A survey conducted by The Associated General Contractors of America (AGC) states that 54 percent of firms say the threat of higher taxes has forced them to adjust their plans. Of those firms, 67 percent have said they are postponing hiring, 62 percent have said they will cancel or delay capital expenditures, and 32 percent have already laid off workers. According to Stephen E. Sandherr, chief executive officer.CEO of the AGC,

“The fiscal cliff is already having a significant, negative impact on construction firms and their middle class workers. Considering the impact the threat of tax hikes and spending cuts is having already, it is clear that many more construction workers will suffer should Washington officials allow the fiscal cliff to occur.”

The AGC’s lock-step involvement in the GOP’s scare campaign vis a vis taxes and employment is to be expected. Fabricating a crisis in order to benefit employers when other sources suggest the recovery is real is not helpful. It may simply be a matter of time before the influx of work finds the workers. In October, a piece in The Atlantic noted rising housing permits as well as housing starts being up 25 percent from last year. A return to normal is all anyone can ask for, they say:

If residential investment simply returns to its long-term average (going back to the 1990s), “it would add 1.7 percentage points to overall growth in the coming year,” Neil Irwin writes, putting overall growth in the coming year at about 3.2%.


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