Jobs Report Understates Non-Residential Construction Health

Nov 12, 2007 10:42 AM

Non-residential construction is still boosting the economy, despite the homebuilding meltdown, says Ken Simonson, chief economist for Arlington, Va.-based Associated General Contractors of America (AGC). According to the AGC, non-residential construction is far stronger than the Oct. 5 payroll employment report from the Bureau of Labor Statistics (BLS) reveals. "Seasonally adjusted total construction employment fell 14,000 in September and was down 112,000, or 1.5%, compared to September 2006," says Simonson. "But that masks divergent trends in nonresidential and residential construction.”

”The BLS numbers show that over the past 12 months, employment in the three nonresidential categories — nonresidential building, specialty trades, plus heavy and civil engineering — climbed 42,000, or 1% percent," says Simonson. "Meanwhile, residential building and specialty trades employment supposedly shed 154,000 jobs, or 4.5%.” That gap understates the actual difference, says Simonson. Census figure for August revealed residential construction spending was down 16% from the year before, and non-residential spiked almost 15%. With forecasts predicting less homebuilding activity, residential employment could potentially be down roughly 16%. Therefore, almost 400,000 “residential” specialty trade contractors are now performing non-residential electrical, plumbing, and other work.

"A proper classification of these workers would show nonresidential construction has actually added more than 10% to its payrolls, outpacing nearly every other industry," says Simonson. "Moreover, the BLS report shows there is more growth ahead. Architectural and engineering employment rose 3% in the past 12 months. Their output will turn into construction jobs in the next several months. “In the year ahead, I expect some pullback in office, retail, and hotel construction, but more growth in energy, power and hospital work," Simonson concludes. "Highway construction is also vulnerable unless Congress and the states add more revenue to fund highway programs. And accelerating costs of labor and materials will again be tough for contractors, private owners, and public agencies doing construction."