Construction Jobs Up, But Not in Housing
Washington — While the nation has regained all the jobs lost during the recession, the home-building sector clearly has not done its part, as the government jobs data released Friday show.
When the government tracks construction jobs, it looks at everything from building homes to building roads. The home-building portion of the data shows that the number of construction jobs has been climbing, rising about 7 percent to 2.6 million last month from a year earlier, if electricians and other speciality trade contractors are included.
But that is way down from the high of 3.45 million in April 2006, the housing market’s frothy days.
Jed Kolko, chief economist for Trulia, puts the data into context this way: While jobs overall are back to their pre-recession peak, residential construction jobs are 34.5 percent below their peak.
Even if the specialty contractor jobs are stripped away, the residential construction jobs are still off, almost 27 percent down from the peak, according to a Freddie Mac analysis.
These numbers are another reminder that the housing market, usually a strong contributor to economic growth, is not playing a pivotal role in turning the economy around. Instead, the housing market is relying on the economy to bounce back and household income to rise so that it can get the boost it needs to fully recover. The thinking in housing circles is that, if income grows, consumers will have more confidence to buy.
“We’ve got the cart before the horse,” said David Crowe, chief economist for the National Association of Home Builders. “Since 2009, the housing market has not been the horse bringing the economy along.”
Here are some of the factors at play.
Builders are not convinced enough demand exists for new homes. Mortgage rates have climbed since a year ago. First-time home buyers have retrenched. The younger set — facing student debt and underemployment — may not be able to save for a down payment or qualify for a mortgage as lending standards remain tight. Prices also have soared in the past two years, although they have moderated in recent months.
These factors are not inspiring builders to break ground and hire more people, at least not for single-family homes. Instead, they are focusing on apartment buildings that cater to renters. Construction for single-family homes increased only 0.8 percent in April from the previous month, federal data show. But construction jumped nearly 43 percent for multifamily homes with at least five units.
That phenomenon is a drag on construction jobs. About 3,000 jobs are generated for every 1,000 single-family homes built, according to the NAHB. By contrast, 1,000 jobs are generated for every 1,000 multifamily units built.
Many builders tried to keep their crews employed during the worst of the housing crisis. They learned from past boom-and-bust cycles that it is tough to bring back employees once a crisis passes, Crowe said. Also, many builders are small, family-owned firms that have long-term relationships with their workers, and they dislike letting them go, he said.
Besides, it is expensive to hire and fire, Kolko said. So while builders did lay off aggressively because of the housing bust, it was not as much as one might expect given the steep drop in construction activity at the time.
A sizable number of homeowners remain “underwater,” meaning they owe more on their mortgages than their homes are worth.
About 6.3 million homes, or 12.7 percent of properties with a mortgage, were underwater in the first quarter, according to CoreLogic, a mortgage research firm.
Millions of these homeowners cannot move — and buy a new house — unless they bring cash to the table. This is another reason that builders are not rushing to build and hire. The builders are not confident, and neither are the potential buyers.
In a survey from the MacArthur Foundation last week, more than half of those polled said buying a home has become less appealing than it once was, and 70 percent said they think the nation is still in the middle of a crisis and that the worst is yet to come.