Do Construction Jobs Have Further To Fall?


The U.S. construction industry has lost 2.14 million jobs since August 2006. Given the turmoil of the real estate industry -- both residential and commercial -- this probably isn't surprising. Yet as bad as this looks, it's actually better than might have been expected. In fact, construction workers may have to endure even more layoffs in the months to come.

It's important to understand the job losses of this industry in a context of the total population. The U.S.'s population is larger now than it was in past economic cycles. Thus, to understand just how deep the losses to construction jobs really are, it would be helpful to consider how the ratio of construction jobs to the total civilian noninstitutional population has changed. Here's a chart:

Construction Jobs to Pop 2010-06 v2.GIF

The green line is the ratio for June 2010, which stood at 2.35%, a new low for this recession. Yet, as the graph clearly shows, this isn't that low in a historical context. The ratio went down to 2.37% during the comparably mild 1992 recession. During the recession in 1982, it actually went even lower than it is now -- to 2.27%. It was also at about that level in the mid-1970s.

So in comparison to other bad recessions, construction hasn't suffered much worse than usual. But shouldn't the sector have performed even worse this time around? This recession was caused by the real estate market. Both residential and commercial properties were overvalued, which resulted in historic price declines, not seen in those previous recessions. Real estate market problems have resulted in record foreclosures and unprecedented amounts of empty office space. That has flooded supply and lessened the demand for building new structures. Indeed, we learned last month that May's new home sales hit a record low. So why haven't construction jobs sunk to a lower level in this recession than they had in prior ones?

One explanation is that the government attempts to prop up the real estate market, like the home buyer credit, have staunched the bleeding so far. But with those gone, the labor market may readjust. After construction jobs rose in March and April, they declined again in May and June, once the credit was gone. In June, they were at the lowest level the recession has seen yet. And remember, many construction projects initiated to obtain the credit are still ongoing. When those end, there likely won't be as many new projects to keep those workers busy.

Once the government's influence dissipates through the end of the summer, you may continue to see construction jobs, and the ratio above, decline. Even if it only reaches the low seen during the early 1980s, an additional 186,000 construction jobs would be lost using the June population as a baseline. And considering how much worse the real estate industry is doing in this recession compared to prior downturns, the ratio should logically decline even further.

Note: You get a similar picture if you use total workforce for the ratio's denominator instead of total population.

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

What Do You See When You Look in the Mirror?

In a series of candid video interviews, women talk about self-image, self-judgment, and what it means to love their bodies

Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus


Adventures in Legal Weed

Colorado is now well into its first year as the first state to legalize recreational marijuana. How's it going? James Hamblin visits Aspen.


What Makes a Story Great?

The storytellers behind House of CardsandThis American Life reflect on the creative process.


Tracing Sriracha's Origin to Thailand

Ever wonder how the wildly popular hot sauce got its name? It all started in Si Racha.


Where Confiscated Wildlife Ends Up

A government facility outside of Denver houses more than a million products of the illegal wildlife trade, from tigers and bears to bald eagles.


Is Wine Healthy?

James Hamblin prepares to impress his date with knowledge about the health benefits of wine.


The World's Largest Balloon Festival

Nine days, more than 700 balloons, and a whole lot of hot air



More in Business

Just In