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Nonresidential Construction Spending and Employment Reports At Odds

Sep 1, 2007 12:00 PM

Despite reports of year-to-year gains of 14% to 15% in nonresidential spending and investment in nonresidential structures, the Bureau of Labor Statistics (BLS) recently reported a year-to-year job gain of only 1.5% in its three nonresidential categories — nonresidential building, specialty trades, and heavy/civil engineering. Even more baffling is that the Census Bureau reported a 16% year-to-year decline for residential construction spending, yet the BLS estimates a conservative drop of only 3.4% for residential building and specialty trades employment. What could be behind these discrepancies?

The mislabeling of workers, in part, may explain the contradictory reports, says Ken Simonson, chief economist for The Associated General Contractors of America (AGC), Arlington, Va. Many subcontractors who formerly concentrated on residential work are now performing commercial work. These companies may still be using their former industry code, causing the workers — as many as 400,000 — to be miscounted as part of the residential trade industry by BLS. These numbers — about one out of six residential specialty employees — would bring the decline in residential employment into line with the decrease in spending, potentially explaining the increase in nonresidential projects without an increase in nonresidential employment.

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