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A Harder Pill To Swallow!

4-8-17

I’ve been saying for a long time the data doesn’t show a construction jobs shortage.

In total, construction jobs have been increasing faster than construction volume (spending minus inflation). But, to get a better picture we need to look at jobs vs volume by sector, Residential and Nonresidential. Then we need to look at history.

Since 2009, RESIDENTIAL volume has increased 49%, jobs increased 22%. This is partly explained by absorption of excess staff retained during recession.

From 2006 to 2009 volume decreased 53% but jobs decreased only 36%, leaving a significant amount of excess jobs.

It looks like from 2009 to 2016 there has not been enough jobs growth to support the volume growth, BUT…

Residential net changes just since 2006, volume is down 29% while jobs are down 22%. We are not nearly back to pre-recession productivity.

Since 2009, NONRESIDENTIAL BUILDINGS volume is down by 10% but jobs are up 13%. By no means, if we look at just these 7 years, does this look like a jobs shortage.

Even previous years imbalance would not account for a need to add that many jobs. From 2006 to 2009 volume increased 2% but jobs decreased 15%. In a previous report Is There a Construction Jobs Shortage? I explained why this may occur following a prior top-heavy jobs expansion during a period of high inflation.

Nonresidential net changes just since 2006, volume is down 8% but jobs are down only 3%. Again, we are not nearly back to pre-recession productivity.

For both residential and nonresidential buildings, comparing post-recession growth to pre-recession 1996-2006 $ Put-In-Place per Job, productivity is down 21%, or we currently have 100/(100-21) = 27% more jobs now than it took before to get the same amount of work done.

If the current construction expansion period is viewed as having a jobs shortage, that claim demands that we must accept, since pre-recession, productivity has declined by 21% and the reason there is now a jobs shortage is that it takes 27% more jobs to put in place construction than it did on average from 1996 to 2006.

In my opinion, that’s a harder pill to swallow than a jobs shortage.

jobs shortage 1 4-8-17jobs shortage 2 4-8-17jobs shortage 3 4-8-17.JPG

 

For more related to this discussion see Is There a Construction Jobs Shortage?

 


3 Comments

  1. Scott Littlehale says:

    Got it now. It’s easier to read on a PC than on a phone! I wholeheartedly agree, if the productivity numbers are more or less accurate. I spoke with a BLS economist who is working on measuring productivity at the sub-sectoral level. He thinks that those more specific productivity stories are more positive than depicted at the industry level. He uses hours, rather than employees, as his labor input. I am dubious that hours reported in government surveys for residential blue collar construction workers are accurate.

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  2. I do not quite get the second to last sentence in this post.

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    • edzarenski says:

      example: $1,000,000 of construction put in place by 100 men = $10,000 per man (represents 1996-2006). But then $1,000,000 put in place by 127 men = $7,874 per man (represents 2009-2016). Productivity now is only 78.74%, down 21% from previous.

      If contractors are perceiving that they need more labor and there are shortages, then they are accepting that it takes this much more labor to complete work. That is a dramatic change in productivity, even if it is over 10 to 15 years. Alternatively, rather than think they need more labor, contractors might consider that they need to ramp up the productivity of their crews.

      Frankly, I do think some of this productivity loss will go away without totally increasing labor at the current rate. I don’t think the current situation is all labor shortages. It’s certainly not the case in nonresidential buildings.

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