Jobs report understates nonresidential construction's vigor, AGC says

Housing even weaker than total shows, economist Simonson asserts

News Associated General Contractors of America October 08, 2007
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“Today’s employment report shows nonresidential construction is still boosting the economy, despite the homebuilding meltdown,” Ken Simonson, Chief Economist for The Associated General Contractors of America (AGC), said Oct. 5. Simonson was commenting on the June 1 payroll employment report from the Bureau of Labor Statistics (BLS). “In fact, nonresidential construction is far stronger than first inspection of the data reveals.

“Seasonally adjusted total construction employment fell 14,000 in September and down 112,000 or 1.5% compared to September 2006,” Simonson remarked. “But that masks divergent trends in nonresidential and residential construction.

“The BLS numbers show that over the past 12 months, employment in the three nonresidential categories—nonresidential building, specialty trades, plus heavy and civil engineering—climbed 42,000 or 1%,” Simonson commented. “Meanwhile, residential building and specialty trades employment supposedly shed 154,000 jobs or 4.5%.

“That gap, while large, vastly understates the actual difference,” Simonson asserted. “Census Bureau figures for August show residential construction spending was down 16% from a year before and nonresidential was up almost 15%. With all signs pointing to still less homebuilding ahead, it’s likely that residential employment is also down roughly 16%. That means about 400,000 ‘residential’ specialty trade contractors are now doing nonresidential electrical, plumbing and other work.

“A proper classification of these workers would show nonresidential construction has actually added more than 10% to its payrolls, outpacing nearly every other industry,” Simonson noted. “Moreover, the BLS report shows there is more growth ahead. Architectural and engineering employment rose 3.0% in the past 12 months. Their output will turn into construction jobs in the next several months.

“In the year ahead, I expect some pullback in office, retail, hotel construction, but more growth in energy, power and hospital work,” Simonson concluded. “Highway construction is also vulnerable unless Congress and the states add more revenue to fund highway programs. And accelerating costs of labor and materials will again be tough for contractors, private owners and public agencies doing construction.”

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