Thursday, January 9, 2014

Keeping Construction Statistics in Perspective

The ADP National Employment Report for December showed one rather surprising data point that was totally unexpected as shown on this bar graph:

You will notice that there was significant growth in the jobs created in the construction sector (in light green), in fact, the U.S. economy added a whopping 48,000 construction jobs between November and December 2013, accounting for 20 percent of the 238,000 total jobs added, beating manufacturing, trade/transportation/utilities and financial activities.  This was the best month for construction workers since February 2006 and more than twice the rate of construction job growth in November when only 21,000 construction workers found themselves back at work.

Admittedly, new residential construction in November 2013 was robust with 1,091,000 privately-owned housing starts taking place, up 29.6 percent from November 2012 and the highest rate since February 2008 when 1,103,000 new privately-owned housing starts took place as shown on this graph from FRED:

While those statistics look positively rosy, here is a look back at historical housing starts:

Over the 659 sample months from January 1959 to the present, on average, there were 1,458,000 housing starts, 33.6 percent higher than the number of starts in November 2013.  It is also important to keep in mind that over the 54 year period from 1959, the population of the United States grew from 177,829,628 to its current level of 317,336,000, an increase of 78 percent.  Here's another way of looking at the housing start data; the 1,091,000 housing starts in November 2013 are only the 120th highest in the last 54 years, tied with April 1967 when the population of the United States was only 198,712,000!

Now, let's go back to the growth of employment in the construction sector.  Here is a graph showing changes in the number of Americans employed in the construction sector since the end of the Great Recession:

Here is a graph showing the monthly change in the number of construction employees (excluding December 2013's data point:

Certainly, everything looks rosy for construction workers in America, doesn't it?  Since its low point of 5.435 million construction workers in January 2011, the economy has added 416,000 construction jobs excluding those added in December 2013.  That works out to an average of 12,000 new construction jobs every month over the past 34 months.

Once again, let's put things into perspective.  Here is a graph showing the number of Americans employed in the construction sector all the way back to 1980:

Other than August 2009 when construction employment was falling, the last time that the United States saw construction employment levels that matched the current level was August 1997! 

Here is a graph showing the monthly change in the number of Americans employed in the construction sector back to 1980:

This graph gives us a sense of just how hard-hit the construction sector was during the Great Recession and how the ADP report of 48,000 construction jobs added is not terribly significant unless it continues over the long-term.  For the six month period between November 2008 and April 2009 alone, a total of 818,000 construction jobs were lost, an average loss of 136,330 jobs per month.  Looking out further, over the three year period from February 2008 to February 2010, the economy saw 2.203 million construction jobs evaporate, an average loss of 59,540 jobs per month over a 37 month period.

To summarize, while the housing and construction sectors of the economy are showing some signs of life, there is no doubt that this sector is still lagging behind.  As tapering takes hold and interest rates rise, already heavily indebted households may find it increasingly difficult to invest in America's housing market, leaving the construction sector lagging once again and millions of unemployed construction workers out in the cold.


  1. This construction is due to the artificially low interest rates and QE. I have owned an apartment complex for many years and we are currently experiencing the largest number of vacancies we have ever had. Many houses in the area are empty or under leased. In 2005 and 2006 prior to the housing collapse many people were looking at second homes, for investments or as a vacation getaway, today not only have they shed the extra home many have doubled up with family or friends reducing the need for housing. We are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. We have a shortage of "qualified" buyers and renters. This new building will all come at a horrible price more on the subject below.

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