Construction unemployment hit 20.7 percent in December 2010

January 14, 2011
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Despite a slight drop in the nation’s unemployment rate, the construction industry ended 2010 with a jobless rate of 20.7 percent, according to the Jan. 7 report by the U.S. Labor Department. The construction industry lost 16,000 jobs last month, and 93,000 jobs, or 1.6 percent, compared to December 2009. While the unemployment rate was up from 18.8 percent last November, it is down from 22.7 percent in December 2009. The average annual unemployment rate for the construction industry in 2010 was 20.6 percent. That compared to 19.0 percent in 2009 and 10.6 percent in 2008.

The nonresidential building construction sector lost 400 jobs in December, but was up by 5,700 jobs, or 0.8 percent, from the same time one year ago — the first year-over-year growth since August 2008. Employment in that sector was 688,300 in December on a seasonally adjusted basis.

Employment in heavy and civil engineering construction decreased for the second straight month, down 12,700 in December. However, employment in that sector was up by 18,100 jobs, or 2.3 percent, from December 2009. Specialty trade contractors gained 3,300 jobs last month, but the segment is down 79,000 jobs, or 2.2 percent, from the same time last year.

The residential building construction sector shed 5,900 jobs for the month, and 37,000, or 6.2 percent, for the year.

The nation gained 103,000 jobs in all industries in December, with the bulk of job growth in leisure and hospitality, up 47,000 jobs; education and health services, up 44,000 jobs; and trade, transportation and utilities, up 31,000 jobs. Year-over-year, the nation has gained 1,124,000 jobs, or 0.9 percent. The nation’s unemployment rate dropped to 9.4 percent in December from 9.8 percent the previous month.

The nation’s construction industry should be glad to see 2010 in the rearview mirror, as the sector ended the year on a dismal note. It is noteworthy that heavy and civil engineering has lost jobs for two consecutive months, which may be a reflection of the steadily slowing impact of federal stimulus spending. For much of the past year, that segment had been adding jobs.

The expectation is that the nation will continue to add jobs. However, the construction sector is poised to underperform in the year ahead due to a number of factors, including dwindling direct impact from stimulus spending and the ongoing malaise in commercial real estate.

With a national unemployment rate now at 9.4 percent — the lowest rate since May 2009 — this is an indication that the labor market is improving reasonably quickly. However, this does not seem to be the case with the construction industry as these numbers may be a reflection of numerous factors in the economy, including still subdued confidence among business owners and decision-makers.

Also, increased spending on federal projects and residential construction, private nonresidential construction spending fell 0.1 percent in November, according to the Jan. 3 report by the U.S. Census Bureau. Compared to the same time in 2009, private nonresidential construction spending is down 16.5 percent. In contrast, total nonresidential construction, which includes both privately and publicly financed construction, was up 0.3 percent for the month, but down 6.8 percent from November 2009. Nonresidential construction spending totaled $563.4 billion in November on a seasonally adjusted annual rate. Six of the 16 construction subsectors registered decreases last November including communication, down 3.4 percent; manufacturing, 2.6 percent lower; and lodging construction, down 1.5 percent. Those subsectors experiencing decreases from the same time last year include lodging, down 48.4 percent; manufacturing construction, 34.7 percent lower; and office construction, down 18.9 percent.

Meanwhile, 10 of the 16 construction sectors posted spending increases in November 2010. Conservation and development was up 6.1 percent; water supply was 3.9 percent higher and religious construction was up 3.3 percent. On a year-over-year basis, six construction subsectors posted spending increases, including conservation and development, up 35.7 percent; amusement and recreation, 11.1 percent higher; and sewage disposal, up 8.3 percent.

Public nonresidential construction represented 54.5 percent of total nonresidential construction spending in November 2010. Spending for that segment was up another 0.6 percent in November and is up 3.3 percent from November 2009. Residential construction spending was up 0.7 percent for the month, but down 4 percent from the same time one year ago. Overall, total construction spending — which includes both private and public construction – was up 0.4 percent from October, but down 6 percent from November 2009.

Publicly financed construction segments continue to dominate the growth story while private-financed ones continue to hemorrhage volume. More specifically, total construction spending was led by both the conservation and development segment and the water supply segment, while declines in construction spending were led by communication, manufacturing and lodging. It is for this reason that public nonresidential construction spending now represents nearly 55 percent of total nonresidential construction spending.

The expectation is that at some point in 2011, this set of circumstances will begin to shift as the broader economic recovery takes hold and federal stimulus-financed activities wind down toward a close. The U.S. economy is expected to expand 3 percent or more this year, which should elevate the fortunes of a number of privately financed construction segments, though certain overbuilt segments such as hotel and office may take considerably longer to begin to recover.

Anirban Basu is chief economist for the Associated Builders and Contractors, a national association with 77 chapters representing 25,000 merit shop construction and construction-related firms with two million employees.

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