Data presented by CoreLogic in its new
edition of MarketPulse raises an
interesting question about employment in the construction sector. Is the slow pace of hiring the result of a
fundamental change in the construction industry or is the industry self-correcting
to a more sustainable level of employment?
Thomas Vitlo, author of "Hesitation in
the Construction Industry," says that, while overall construction spending has
increased since the end of the recession, construction employment has not kept pace. He based his analysis on the Census Bureau's "Value
of Construction Put in Place Survey" and the Bureau of Labor Statistics "Job
Openings and Labor Turnover Survey. Vitlo
used a six-month moving average to iron out the strong seasonality of activity
in the construction industry.
In the resulting chart it is clear that,
before the Great Recession, the two series were fairly well correlated. Construction hiring fell as spending declined
and rose as spending increased. Then in
early 2010 the two diverged. Spending
fell to a low of 16.8 percent in December 2009 and increased to a peak of 9 percent
year-over-year in October 2012. Total
construction hires, however peaked at 14.6 percent in June 2010 and have been
decreasing by 8 percent year-over-year as of October 2013. "Therefore," Vitlo says, "as spending has
generally increased over the past few years, construction hires have declined,
averaging only a 1 percent increase since June 2010."
Coinciding with the shift in the
relationship between hiring and spending is a reversal in construction
employment. The BLS employment figures
show that in the eight years before the recession construction employment
averaged 7.1 million but since September 2008 the average has been 5.8
million. Even more intriguing, Vitlo
says, is the share of employment going to construction. Pre-recession construction employment
averaged 5.1 percent share and it is now 4.1 percent. After the peak-to-trough decline the share
has plateaued for 50 months.