The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
The Regional Housing Recovery: Where Are the Jobs?
We’ve been reporting for some time that our business contacts in the homebuilding industry were observing an increase in sales and construction. This growth is clear in the Atlanta Fed’s monthly Residential Construction and Real Estate poll and can be seen in the charts below.
With sales and construction of new homes on the rise, we should expect an increase in the number of workers employed in the construction industry. But these employment increases have not been readily observed. The chart below shows total construction employment for the six states in the Sixth Federal Reserve District. It has barely budged for the last three years.
Another way of looking at construction employment is to measure the change from peak to trough and from the trough to the most recent data point—March 2013—for each state in the region. The table below shows that the region as a whole has added more than 27,000 construction jobs since the low point, but this number pales in comparison to the number of construction jobs lost during the downturn—more than a half-million.
This observation is not to suggest that we should be looking for a return to the 1.35 million total people who were employed in the construction sector during the peak of the housing boom, but it does help add perspective. Also, looking at the state-by-state data, we see that each state has performed a bit differently. That said, the question still stands: Given the increase in construction activity, shouldn’t we be seeing stronger gains in construction employment? The answer appears rather straightforward, as the chart below shows.
While our contacts in the homebuilding sector are reporting an increase in activity—both sales and construction—the increase in permits for new home construction has been modest and is coming off very low levels. The trend is clearly in the right direction and appears to have momentum, but even stronger gains are needed if we are to see more significant increases in construction employment.
My colleagues Jessica Dill and Whitney Mancuso blogged on this subject back in December:
Perhaps the situation with construction employment simply boils down to a comment recently made by a real estate developer contact: "Capacity is lacking in all trades throughout the homebuilding process, which has limited how quickly production can be increased. Such capacity issues are always largest on the front end of the recovery. It is likely that labor will fill in at a quicker pace as the recovery picks up more steam."
By Mike Chriszt, a vice president in the Atlanta Fed’s Public Affairs department
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