This is a preliminary estimate of what it might take to rebuild buildings and infrastructure lost to the incredible firestorms we are witnessing in Los Angeles. We don’t yet know precisely the vast extent of damages, but there has been some early projections of 10,000 buildings lost and $150 billion in damages. So, there is a lot of estimation here, but also some necessary information on which to base this estimate of reconstruction.

Census tracks employment by metro areas. Although all cities and towns are not listed, the total employment is captured within these sometimes broad areas. To understand how many construction jobs currently exist in the LA metro area, I’ve included all Census defined metros around LA. The Los Angeles metro area, to approximately a 50 mile radius, which includes Los Angeles, Long Beach, Glendale, Anaheim, Santa Ana, Irvine, Santa Barbara, Oxnard, San Bernardino and Riverside, currently has approximately 400,000 construction jobs. https://www.bls.gov/regions/west/california.htm#tab-1

In the most recent years, 2021, 22, 23 and 24, this entire pool of jobs had annual growth of 1%/yr., or only about 4,000 jobs per year. From 2011 thru 2019 the jobs growth rate averaged 6%/yr, or about 15,000 to 20,000 jobs per year. Once in 20 years (2015) jobs increase 10%, which at that time was about 25,000 jobs and that occurred in a year when volume posted the largest increase ever. Jobs have not increased more than 4%/yr since 2017.

Nationally, jobs growth (excluding the losses in 2020) has averaged 3.5%/yr since 2011. Growth has not exceeded 5%/yr since 1999.

We need to predict jobs growth at a reasonable rate of growth. With recent LA metro construction jobs growth at 1%/yr., not more than 4% growth in the last 8 yrs., and national average growth of 3.5% over the last 15 years, but currently with excessive demand influencing growth, I will use a future growth rate of 5%/yr. Currently that works out to adding 20,000 jobs per year.

The Harvard Joint Center for Housing Studies‬ recently posted that In Texas, California, New Jersey, and the District of Columbia, immigrants make up more than half of construction trade workers. This analysis will make no effort to discuss the potential impact of immigrants in the workforce, but we must recognize the makeup of who is filling these jobs. Keep in mind after this analysis reaches some conclusions that this aspect may weigh heavily on the outcome.

We do not know the average value of the buildings destroyed, nor do we know how many are residential buildings and how many are civic or retail buildings, but we have a preliminary estimate of 10,000 buildings lost and $150 billion in damages. As of yet we don’t know how much of that $150 billion is buildings. We do know some is autos and some is public utilities, but we don’t know how much. Expecting we will know some of this information at a future date, at best, all we can do is predict for a portion of that lost that will be easily used to expand our estimate at a later date.

Rather than work with a quantity of buildings, which creates some difficulty because buildings have different total value, we can work with the dollar value of the damage estimates, because we have some historical information of how much in dollar value can be put-in-place by some number of jobs.

Let’s work with an increment of $10 billion dollars of damaged buildings and determine how much labor might be available to rebuild those losses and how long it would take. Recognize that $10 billion is very likely low when compared to the total estimated value of damage, but it gives us an easily workable increment to adjust our estimate in the future when we know more about the true extent.

Historical construction data shows it takes 4000 to 5000 jobs for 1 year to put-in-place $1 billion worth of construction. Therefore we would need 40,000 to 50,000 jobs 1 year to replace $10 billion in reconstruction. This is a combination of residential and nonresidential buildings and infrastructure.

You can see why I went with calculating labor to replace a dollar value. Home values in those areas can range from $1mil to $5mil+. Value per unit dwelling is variable. But I know it takes at least 4,000jobs/$1bil to put-in-place construction work.

The area damaged is certainly less than the total metropolitan areas used to develop our labor pool estimate of 400,000 jobs. We must recognize that the largest part of that pool remains occupied on planned workload in backlog in the remaining areas not affected by the fires. But, to fill the reconstruction need, let’s assume that 10% of the existing workforce of 400,000 plus expected annual growth of 20,000 is available to work on replacing buildings lost. So, we take 42,000 jobs away from normal construction over the surrounding metro area. That’s a big hit to the remaining metro areas. Seldom, if ever, that labor in your area falls 10%. That also means those surrounding areas, since they may see a reduction in jobs, may also see a reduction in work put-in-place.

Some of these jobs may be filled by workers traveling into the area from afar to take advantage of the expected workload. That would mean a lower demand on reconstruction jobs supported from the existing 400,000 workforce. But those workers came from somewhere, just not this metro area.

If I can’t get the labor (minimum 40,000 jobs) to replace $10 bil/year, it’s not the cost that changes, the timeline moves out. It’s not likely there would be more labor available, but there could be less.

So we have 42,000 jobs available to support a reconstruction effort. The growth rate of 2,000 jobs/yr. can be assumed to fill the gap over a few years in the range of 40k to 50k jobs per year needed. This sits well with the above estimate that it would require 40k to 50k jobs 1 year to replace $10 billion of damaged buildings.

As you can see, the labor pool may support $10 billion of reconstruction in one year. If the estimates of building damage turns out to be $100 billion, the labor pool available for reconstruction, based on this estimate, would require 10 years to accommodate that extent of workload.

This does not include demolition and removal of damage. Nor does it address logistics or demand and supply. Expect increased demand and potentially longer than normal waits for all residential building products; lumber, doors, windows, roofing, siding, drywall, flooring, HVAC, plumbing, electrical and appliances, primarily or exclusively in the affected areas. This estimate does not address inflation, which, even if normal, is a lot over 10 years. So, damage estimates today will take more than today’s value to reconstruct. Furthermore, it is not intended to address insurance issues which may have an impact on how much damaged property does or does not get rebuilt.

1-11-25

This link points to a recorded interview (36min) conducted by @EconstratPB (a mutual follower on X(twitter) and BlueSky) and hosted on his Substack, where we discuss in a little more detail how the above estimate was prepared and some of the issues that will pose difficulties to accomplish this rebuilding effort. www.pinebrookcap.com/p/after-the-…

1-24-25

This link points to a Wall Street Journal brief article referencing their discussion with me regarding this article. https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-01-21-2025/card/how-many-workers-will-it-take-to-rebuild-burned-out-los-angeles–ubf4wXyri8Xcflb24AO8

6-12-25 This original article was written Jan. 11, 2025. In light of recent events in June in Los Angeles , I expect the conclusions reached in this reconstruction analysis will be extended further out in time as there will not be as many workers available to complete the work needed.