Residential housing recession, faulty job numbers, commerical construction expansion….oh my!
Posted by Mark Avera on 25 May 2007 at 01:38 pm | Tagged as: Construction Jobs, Industry News
What is going on in the construction industry these days?
A Wall Street Journal article (find a brief synopsis here) proposed today that the official monthly labor statistics may contain substantial errors. According to Sudeep Reddy, the author of the article, “some economists believe the true employment picture may be less rosy [than the monthly statistics indicate], amid new signs official data may have overstated job growth.”
This is an idea that has been kicked around for months. On May 22, 2007, Northern Trust Global Economic Research of Chicago, Illinois, released an interesting article on a possible cause of these faulty numbers: undocumented workers. While this is a common opinion, it is far from the only one. For example, it has also been suggested that residential construction layoffs have simply lagged behind the housing slump, and this ‘overemployment’ will be corrected in the near future. Alternatively, the Labor Department’s Bureau of Labor Statistics could be overestimating employment for any number of different reasons.
An interesting Econbrowser entry on May 9th, 2007, titled Why hasn’t construction employment plunged?, covers the undocumented workers theory and couples it with other possible explanations.
Meanwhile, commercial construction is growing in most US markets, in stark contrast with the floundering residential sector (as I examined in my last post). “Never before have…nonresidential and public construction decoupled from housing,” points out the director of global economic research at AllianceBernstein, Joe Carson. This article in The Economic Times examines this historically unique conundrum. The Orange County Register published an article on May 27 on this same issue. “We were prepping for a slowdown,” expounds Rob Guthrie, CEO of Guthrie Development Co., “instead, we’re on pace to have our best year ever.”
How will the construction industry emerge from this situation? Only time will tell, but before then, I invite you to chance a prediction or two.
I really enjoyed your post…it drew information from all over together in siccinct way. One small note: the Econbrowser article ended in an appropriate way, “…is residential construction employment about to follow completions off the cliff? Maybe. Or maybe not.” Since that was written, however, information such as the new WSJ article shows that residential construction employment has most likely already started to follow completions, it is just not reflected in the numbers. Also, I’m not even going to get into the BLS’s use of the Birth/Death model, which the WSJ article didn’t even get into. I’d highly recommend everyone reading the articles you referenced in this post!
[...] Those of us involved in the construction industry should be paying close attention to this situation and legislation that affects it, such as S.1348. Regardless of your position on the legislation and the issue at large, the fact remains that it stands to have a significant impact on the industry, which is in the midst of a possible, yet-to-be-adequately-explained employment and performance divergence, as well as an unprecedented residential and commercial split (see my post on this here). No one knows how this situation will “pan out”, but what we can do is make the best decisions possible by scrutinizing the information available. [...]
[...] The U.S. Department of Labor’s official building job numbers, especially homebuilding labor statistics, have become repudiated on boards and in articles all over the web. I highlighted the issue in my past post including the residential housing sectors’ faulty job numbers. This article makes me ponder even further: why even have construction labor statistics? It seems that lately, the only thing being focused on is all the different ways in which they are wrong! [...]