Summary
Going against the tide of the nation’s rising unemployment rate, the nonresidential construction sector gained 2,900 jobs in August, according to the September 5 employment report by the U.S. Labor Department. The figures are on a seasonally-adjusted basis. In July, the nation’s nonresidential construction sector saw in increase of 4,400 jobs. In contrast, the residential construction industry continues to lose jobs. In August, residential construction shed another 4,400 jobs and has now lost 111,100 jobs over the past year.
Total construction employment in August 2008 was 437,000 lower than in August 2007, a decline of 5.7 percent. On a monthly basis, total construction employment fell by 8,000 jobs in August. Over the past ten years (see graph below), construction employment grew from August 2004 to its peak in September 2006. Since then, the industry has shed 564,000 jobs.
Overall, the national unemployment rate in August shot up to 6.1 percent as employers cut 84,000 jobs. This is the highest rate since September 2003.
What This Means
"While there has been small job growth in July and August, we anticipate that there will see nonresidential construction job losses in the remaining months of 2008 and into 2009," said Anirban Basu, Associated Builders and Contractors (ABC) Chief Economist. "One of the construction industry’s key leading indicators, the architectural billings index, though up slightly last month, still remains below levels achieved earlier in the decade indicating a substantial slowing in nonresidential construction starts. The good news is that recent declines in the prices of a number of key commodities could help foment more construction starts going forward.
"During the second quarter of 2008, the U.S. economy expanded 3.3 percent on an annualized basis, causing some to conclude that the worst portions of the economic cycle are now behind us. That’s probably not true," said Basu. "Much of the ongoing credit crunch has yet to show up in various measures of economic activity, and it is quite likely that the second half of 2008 will be worse in most respects than the first half.
"This is true for at least two reasons. First, much of the effect of the tax rebate checks has now dissipated and do not appear to have been sufficient to position the U.S. economy for sustained and significant expansion," said Basu. "Second, the global economy is now slowing, which will likely dampen U.S. export growth in the quarters ahead," added Basu.
