Immigrant Workers in Construction

A new study from NAHB Economics examines where construction workers come from by analyzing the most recent 2011 American Community Survey (ACS). The results show that immigrants have been an important source of new recruits to the construction industry—accounting for 22 percent of the overall labor force. The inflow of foreign born labor into construction is cyclical and coincides with the overall housing activity. Their share was rising rapidly during the housing boom years when labor shortages were widespread and serious. But even during the severe housing downturn and a period of high unemployment the construction labor force continued to recruit new immigrants to partially replace native and foreign born workers leaving the industry.

Particularly, immigrants are concentrated in some of the trades needed to build a home, like carpenters, painters, drywall/ceiling tile installers, brick masons, and construction laborers – trades that require less training and education but consistently register some of the highest labor shortages in the (HMI) surveys. The two most prevalent construction occupations, laborers and carpenters, account for about 30 percent of the construction labor force. More than a third of all construction laborers and one out of four carpenters are of foreign born origin. Immigrants account for almost half of drywall/ceiling tile installers and tapers, a trade where 44 percent of workers do not have a high school diploma. More than a third of all carpet/floor/tile installers and painters did not finish high school, immigrants account for 43 percent of workers in these occupations.

 The immigrant presence in construction trades that require more years of education and advanced skills looks less relevant. The trades with low presence of foreign born labor, such as electricians, construction and building inspectors, first-line supervisors, elevator installers – tend to recruit better educated workers. Only 4 percent of construction and building inspectors and 7 percent of electricians did not graduate from high school.

 It turns out the trades with high concentration of immigrant workers also tend to have more vacancies and labor shortages. According to NAHB’s monthly Housing Market Index (HMI) surveys, construction trades with the most consistent labor shortages are framing crews, carpenters and bricklayers. About 30 percent of surveyed builders were still reporting some shortages of labor in these trades in June 2012, even though the shortages were not nearly as severe as in the midst of the housing boom. Nine months later, in March 2013, reported labor shortages got worse across all trades but particularly among framing crews and carpenters, with more than a half of respondents reporting shortages of framing crews and carpenters-rough subcontractors.

The study further shows that the distribution of immigrant construction workers is not even across the US, with some states drawing more than a third of their construction workers from abroad. States that traditionally rely on foreign born labor but lost its significant share during the housing downturn – such as Arizona, California, Colorado, Florida, Nevada, and Georgia – are most likely to experience difficulties in filling out construction job vacancies once home building takes off.

The Employment Situation for February – Mixed, But With Homebuilding on Top

The Bureau of Labor Statistics (BLS) released the Employment Situation report for February and the results look good but are more mixed than they look. The establishment survey shows payroll employment increased by 236,000, a decent number, but once again private sector payrolls increased (by 246,000) while the government sector continued to shrink (a loss of 10,000). The estimate for December was revised up by 23,000 while January was revised down 38,000, for a net loss of 15,000.

The household survey shows the unemployment rate dropped two tenths from 7.9% to 7.7%, but the decline was roughly a 60-40 split between people finding jobs and dropping out of the labor force.

The report was more unambiguously positive for the home building sector, adding 19,000 jobs in February and 56,000 since October with a four month string of 10,000+ gains.

So overall the payroll gains are bouncing up and down in a way that raises or lowers the monthly average depending on how far back you look and the unemployment rate in “trending” downward at too slow a pace and owes too much to declines in the labor force.

This mixed labor market report reflects other mixed signals in the economic data of late. On the negative side, fourth quarter GDP growth (+0.1%) was much weaker than both third quarter growth (3.1%) and what forecasters expected. On the positive side GDP growth is expected to rebound in the first quarter based on the transitory nature of the fourth quarter weakness (federal defense spending and inventory investment).

Also on the positive side, the Federal Reserve reported that household networth posted strong gains in the fourth quarter. Unfortunately now that house prices have stabilized (and begun to move up modestly) gains in household networth mainly reflect gains (and losses) in the stock market, and these gains are far less likely (than housing wealth gains) to underpin a strong rebound in consumer spending and more robust GDP growth.

So the employment report has some strengths and weaknesses and reflects a recovery treading water. Our forecast anticipates an acceleration in economic and labor market recovery as 2013 unfolds and today’s report shows we’re not quite there yet.

 

The Employment Situation for December – Gaining Strength? Not Really.

The Bureau of Labor Statistics (BLS) released the Employment Situation report for December on Friday. The establishment survey indicated payroll employment increased by 155,000 with private sector payrolls increasing by 168,000 and a loss of 13,000 in the government sector. Estimates for the prior two months were revised upward by a net of 14,000.

The household survey indicated the unemployment rate held steady at 7.8% in December after revising the November figure up to 7.8% from 7.7%, based on updated seasonal adjustment factors. The updated factors had little effect on the overall pattern in the unemployment rate for 2008 forward, the period covered by the revisions.

However, the stability in December’s unemployment rate did benefit from some favorable rounding. November’s unrounded rate was 7.753%, rounding up to 7.8%. December’s rate was 7.849%, rounding down to 7.8%. The labor force expanded by 192,000 persons in December, 28,000 of them employed, 164,000 of them unemployed. A swing of 2,000 from employed to unemployed would have pushed the unemployment rate to 7.9%.

December’s payroll gain of 155,000 was in line with the monthly average of 153,000 in 2012 and helped expand payrolls by just over 1.8 million for the year, only marginally lower than in 2011. So last month, last year and 2012 have come in consistently at a level too low to make rapid progress lowering the unemployment rate. In all of 2011 and 2012 the rate has come down just over one percentage point, from 9.0% to 7.8%. At this rate it will take the better part of 4 years to lower the unemployment rate to 6.0%, the high end of the range economists consider “normal.”

Unfortunately, this math is consistent with the Federal Reserve’s economic projections, which anticipate the unemployment rate will be between 6.0% and 6.6% by the end of 2015. A more robust (and not unrealistic) recovery would have job creation at twice this pace. With monetary policy arguably nearing the limits of its effectiveness and the tax rates part of the fiscal cliff behind us, let’s hope the remaining fiscal policy issues can be resolved in a way that adds to rather than subtracts from growth. The labor market, a broader economic recovery and the housing market all would benefit.

The Employment Situation for November – Still Positive, Still Weak

The Bureau of Labor Statistics (BLS) released the Employment Situation report for November noting that Hurricane Sandy did not affect the national employment and unemployment figures in today’s release. The establishment survey indicated payroll employment increased by 146,000 with private sector payrolls increasing by 147,000 and a loss of 1,000 in the government sector. Estimates for both September and October were revised downward by a total of 49,000. The household survey indicated the unemployment rate moved down to 7.7% from 7.9% in October.

The payroll numbers are indicative of a labor market treading water. They’ve been weaker in plenty of months over the last two years, but they are well below levels necessary to bring the unemployment rate down.

In a reversal of last month’s report, the decline in the unemployment rate is not as good as it looks. Last month the unemployment rate moved up based on an increase in the labor force that outpaced the increase in the number of employed persons. Adding jobs and an expanding labor force were positive gains, the increase in the unemployment rate was less important.

This month the decline in the unemployment rate is based on a decline in the labor force. The labor force shrank by the combined effect of 122,000 fewer persons employed and a decline of 229,000 in the number of persons previously classified as unemployed. Persons who want work, have looked for work in the prior 12 months, but not in the 4 weeks preceding the household survey are classified as marginally attached to the labor force and not included in counts of the unemployed or labor force. The decline in the unemployment rate wasn’t based on any real improvement in conditions.

Overall, the economy continues to add to payrolls but at a slower than robust pace. The unemployment rate is trending down since peaking in 2009, but the labor force has only recently regained the losses since the recession. We’re seeing signs of improvement but there is still plenty of ground to make up.

 

The Employment Situation for October – Continued Positive But Subpar Gains

The Employment Situation report for October released by the Bureau of Labor Statistics (BLS) Friday continued the recent pattern of positive but subpar gains in the labor market. The establishment survey reported payroll employment expanded by 171,000 based on an increase of 184,000 in private sector payrolls and a decline of 13,000 in the government sector. August and September estimates were revised up by a total of 134,000 for the two months. The household survey reported the unemployment rate ticked up to 7.9% from 7.8% in September.

The uptick in the unemployment rate is less threatening than it might appear. The BLS characterized the unemployment rate as “essentially unchanged” based on the statistical properties of the household survey, but a more encouraging perspective comes from the details of the calculation. The number of employed persons increased in October by 410,000, not as large as the 873,000 increase in September, but still a strong gain by this survey’s standards. The increase in the unemployment rate was the result of the larger 578,000 increase in the labor force. This increase follows the 418,000 increase in September. This combination of strong job growth and an expanding labor force outweigh the slight increase in the unemployment rate and indicate a recovering labor market. The BLS also reported that the number of discouraged workers declined by 154,000 from one year ago. Discouraged workers are those who are available and ready to work, but believe there are no jobs available for them.

Overall it appears that job growth has recovered from its spring lull and the unemployment rate has trended downward. The labor market is showing signs of recovery but at a painfully slow rate.

 

The Employment Situation for September – Weak Payrolls and Noisy Unemployment Rate

The Employment Situation report for September released by the Bureau of Labor Statistics (BLS) today surprised analysts with a 0.3 percentage point decline in the unemployment rate, from 8.1% in August to 7.8% in September. Unlike last month when the decline in the unemployment rate from 8.3% to 8.1% was attributable to a shrinking labor force, the September decline was based on a surge in the number of persons employed, a gain of 873,000, according to the household survey. This is a large gain, even for this survey, which tends to have bigger swings than the establishment survey.

In contrast, the establishment survey reported a much more subdued net gain of 114,000 in nonfarm payroll employment in September. The private sector added 104,000 jobs while the government sector added 10,000 jobs. Large upward revisions, mainly in local education, account for the bulk of the upward revision of 86,000 for July and August. This brings the average monthly pace of payroll gains to 146,000 for the year so far. Ordinarily monthly job growth of 200,000 is required to keep up with growth in the labor force and keep the unemployment rate from rising.

The divergence between the establishment and household surveys, in this case weak payroll growth and a declining unemployment rate, is not new. The establishment survey has a larger sample and movements in the household survey tend to be more volatile. This combined with the swings in the size of the labor force since the end of the recession point to the subpar growth in payrolls as a better indicator of current labor market conditions than the recent declines in the unemployment rate.

 

The Employment Situation for August – Wrong Again

The Bureau of Labor Statistics (BLS) released the Employment Situation report for August today. Nonfarm payroll employment extended its troublingly lackluster streak adding a meager 96 thousand jobs, down from a revised 141 thousand last month. The private sector added 103 thousand while the government sector shed another 7 thousand. Figures for the prior two months were revised downward by a total of 41 thousand.

Despite this weak performance in payroll employment the unemployment rate moved down to 8.1 percent from 8.3 in July. This would be positive news except that it happened for the wrong reason: a shrinking labor force. According to the household survey, the number of persons employed actually declined by 119 thousand. But the unemployment rate declined because an equal number plus an additional 250 thousand workers, previously counted as unemployed, left the labor force. This is the third time this year that the unemployment rate declined while the number of employed persons declined, but the labor force shrank faster. A shrinking labor force is the wrong way to bring the unemployment rate down.

 

The Employment Situation for July – Mixed

The Bureau of Labor Statistics (BLS) released the Employment Situation report for July. The top line numbers show total nonfarm payrolls increased by 163 thousand, with private payrolls adding 172 thousand and government subtracting 9 thousand. Revisions to the prior two months lowered employment by 6 thousand for those months. The unemployment rate ticked up a tenth to 8.3 percent, which the BLS characterized as essentially unchanged.

The report is mixed because while job growth in July was better, it’s still not good. Growth in payrolls more than doubled from June but the pace remains too low and has been inconsistent. And while the unemployment rate increased, it’s more technical than substantive. It comes from a household survey which tracks people employed, unemployed and in the labor force. The uptick this month is based on a swing of 0.04 percentage points. Last month it rounded down, this month is rounded up. So the move is less than it appears. What’s more important is that the unemployment rate is stuck above 8 percent with no appreciable change in recent months.

Whether job growth continues to improve or falls back again will be related to the pace of broader economic recovery, but some insight can be gained by examining how the different sectors of the economy were affected by and are recovering from the recession. Constructing indexes of the level of employment in different sectors of the economy since the recession began at the end of 2007 illuminates where labor market recovery is strongest and weakest.

Disaggregating total nonfarm employment into the private and government sectors shows the private sector took a big hit early in the recession and has been recovering since early 2010. In contrast, employment in the government sector was relatively stable until mid-2010 but has declined steadily since then.

Separating the government sector into component parts reveals that federal hiring for the decennial census is what kept total government employment steady until mid-2010. After the census, the unabated decline in state and local government employment dominates that sector.

Separating the private sector into goods producing and services components shows employment in goods producing industries plunged by nearly 20 percent while employment in service industries declined by 5 percent.

Disaggregating the goods producing sector into natural resource and mining industries, construction, and manufacturing shows large differences in conditions. Employment in natural resource and mining industries is currently 13 percent higher than the pre-recession peak. The construction sector remains depressed at 74 percent of previous employment levels. Employment in manufacturing has regained 4 percentage points of its initial 17 point decline.

The services sector can be divided into above average and below average employment recoveries. The leading industries include education and health services which avoided any decline in employment and is currently 9 percent above its pre-recession peak, professional and business services which have recovered most of the initial 9 percent decline in employment, and leisure and hospitality services which have recovered from a 5 percent decline in employment.

Employment growth in the remaining service industries has been below the sector average. Among these, employment in information services has only recently stopped declining.

Payroll employment declined by 8.8 million in 2008 and 2009. Almost half of that, 4.2 million, was in the goods producing sector. Employment in the goods producing sector has increased by only 624 thousand since then. Construction employment is stagnant. Manufacturing employment is recovering but has a long way to go, and the boom in natural resources and mining industries has peaked. These industries previously accounted for 16 percent of payroll employment (natural resources and mining industries accounted for 1 percent).

In the services sector, of the 4.6 million jobs lost, the three leading industries have added 3.1 million back. Employment in the education and health services continues to grow. But employment in the business and professional services industries and the leisure and hospitality industries has returned to roughly pre-recession levels and growth has slowed.

The service sector industries that are lagging in employment growth previously accounted for roughly one third of payrolls. Employment in the government sector continues to decline and this sector represents another 16 percent of payroll employment.

With a little more than half of the sectors of the economy experiencing such sluggish employment growth the outlook for the top line numbers is uncertain, and the July employment situation is mixed at best.

Mixed Readings on Consumer Confidence in July

The Conference Board’s Consumer Confidence Index (CCI) and the University of Michigan Consumer Sentiment Survey reported consumer confidence moving in opposite directions this month. The CCI indicated a modest gain while the University of Michigan survey showed a slight decrease in consumer confidence versus last month. While the month-to-month changes for each index have not been entirely consistent with one another, the 3-month moving average of both indexes do reveal that consumer confidence has trended lower from multi-year highs over the course of the last few months. Nonetheless, the recent downward trend in consumer confidence is (at least thus far) smaller than the one observed a year ago when fears of a double-dip recession were quite high.

 

Sluggish labor market conditions are a possible factor in explaining the downtrend in consumer confidence. According to the CCI, more than 92 percent of respondents have characterized jobs as either “not so plentiful” or “hard to get” and 82 percent anticipate either fewer jobs or the same level at best 6 months from now. On a positive note, consumers remain optimistic with regard to the buying environment for homes. As of July, more than three-fourths of consumers indicated that buying conditions are currently “good”. Low prices and low interest rates represent the most reported choices as to why it is a good time to buy a home.

 

The Employment Situation for May – More Bad News

The Bureau of Labor Statistics (BLS) released the Employment Situation report for May. Total nonfarm payrolls increased by 69 thousand in May with private payrolls adding 82 thousand and government taking away 13 thousand. The March and April estimates were revised downward by 49 thousand for those months, and the unemployment rate ticked up a tenth to 8.2 percent, based on a surge of 642 thousand in the labor force.

The recent weakness has drawn comparisons to the last two years when early strength gave way to mid-year deterioration. In 2010 the initial threat of a Greek default rattled global markets and began the now long simmering Euro zone crisis. In 2011 the Arab spring oil price spike and Japanese tsunami and nuclear accident disrupted economic activity and trade. Now, with another slowdown in US economic growth, limited room for additional monetary stimulus and even lower prospects for fiscal stimulus, recessions and deepening turmoil in the Euro zone, and slowing global economic growth, maybe there is no smoking gun explanation for the weakening labor market, just a hail of bullets.

Blaming the weather is just getting harder to do.