Washington, D.C.—“Today’s employment report appears to understate the contribution of nonresidential construction as a job creator,” Ken Simonson, chief economist for The Associated General Contractors of America (AGC), said today. Simonson was commenting on the August 3 payroll employment report from the Bureau of Labor Statistics (BLS).
“Seasonally adjusted total construction employment dipped in July and was down by 53,000 or 0.7 percent compared to July 2006,” Simonson remarked. “But that total hides the vigorous growth in nonresidential construction that is occurring.
“On Tuesday, the Census Bureau reported that nonresidential construction spending leaped 14 percent from June 2006 to June 2007,” Simonson pointed out. “Last Friday, the Bureau of Economic Analysis estimated that private nonresidential investment in structures soared 15 percent from the second quarter of 2006 to the same quarter of 2007. And on July 25, informal surveys included in the Federal Reserve’s ‘Beige Book’ suggested that nonresidential construction remained vibrant in July.
“Yet today’s employment report shows job gains of only 1.5 percent in the past 12 months in BLS’s three nonresidential categories—nonresidential building, specialty trades, plus heavy and civil engineering—barely edging out the 1.4 percent gain in overall nonfarm payroll employment,” Simonson commented. “Meanwhile, residential building and specialty trades employment showed a combined decrease of only 3.4 percent, even though Census estimated the drop in residential spending at 16 percent.
“At least part of the explanation for these discrepancies probably lies in the mislabeling of workers as ‘residential’ specialty contractors,” Simonson speculated. “Industry contacts tell me there are many subcontractors doing commercial work who formerly concentrated on residential work. If their companies still use their former industry code, the workers will be miscounted as staying in the residential specialty trade industry.
“A switch of about 400,000 workers from residential to nonresidential—one out of six ‘residential’ specialty employees—would bring the drop in residential employment into line with the fall in spending and would roughly account for how so much nonresidential work could be built,” Simonson estimated.
“I expect nonresidential jobs to keep growing,” Simonson concluded. “There are many long-term projects under way and on the drawing board. In addition, architectural and engineering services employment—a harbinger of future construction—rose 3.2 percent in the past 12 months, twice as fast as overall jobs.”
The Associated General Contractors of America (AGC) is the largest and oldest national construction trade association in the United States. AGC represents more than 31,000 firms, including 7,000 of America’s leading general contractors, and over 12,000 specialty-contracting firms. More than 12,000 service providers and suppliers are associated with AGC through a nationwide network of chapters. Visit the AGC Web site at www.agc.org. AGC members are "Building Your Quality of Life.”###