Rebound in construction hiring offers hope for economy

After five years of hemorrhaging jobs, the construction industry has become one of the bright spots of the labor market — a hopeful sign that one of the most damaged sectors of the economy may finally be starting to heal.

Overall, the government’s monthly jobs report, released Friday, showed continued modest growth in December. The economy added 155,000 jobs, on par with the monthly average for both 2012 and 2011. The unemployment rate remained at 7.8 percent.

But a closer look reveals that nearly one-fifth of the jobs created were in construction, marking only the third time since the recession ended in June 2009 that the industry has added 30,000 workers or more. The surge capped one of the largest three-month gains the sector has seen since the recession began in December 2007.

The return of construction jobs is an especially critical component of the economic recovery. That’s partly because of the sheer number of jobs lost — more than 2 million since 2007 — but also because of fears that many of those workers’ skills may not translate to other industries, rendering them permanently unemployable.

“These jobs have been the backbone of the middle class for many, many years,” said Arne L. Kalleberg, a professor at the University of North Carolina at Chapel Hill and author of “Good Jobs, Bad Jobs.” “Now they’re coming back.”

A detailed look at the unemployment and jobs situation.

The jobs report follows several other encouraging data sets that show year-end momentum in the economy. Automakers reported surprisingly robust sales last month and consumers piled into shopping malls, unfazed by the political wrangling over the “fiscal cliff.” But economists say they are particularly heartened that the uptick in construction coincides with new strength and stability in the housing market, suggesting the gains are more sustainable.

The number of new homes under construction topped 800,000 in September for the first time in four years and stayed there through the fall, according to government data. Permits are being sought on more than 900,000 homes. Private estimates show that housing prices in hard-hit Phoenix have risen for 13 straight months, while San Diego has increased for nine months.

“We underbuilt houses from 2006 until this year. At some point, there is a long-term catch-up where you have to go out and build a lot of new houses,” said John J. Canally Jr., economist and investment strategist for LPL Financial.

That is likely to help address the persistently high unemployment rate among young men, one of the most recalcitrant problems of the recovery. More than a quarter of 16-to-19-year-olds are out of work, while nearly 14 percent of those ages 20 to 24 do not have a job.

“By and large, those guys have been left on the sidelines the last few years,” said Ken Simonson, chief economist for the Associated General Contractors of America, “and construction will give them much more of an option in 2013.”

There have been false starts before, however: A similar jump last winter gave way by spring, when the sector shed 53,000 jobs.

Simonson said job growth in the industry had lagged behind increases in construction spending over the past two years. Some of that discrepancy represented productivity improvements, Simonson said, and some probably came from existing workers putting in overtime. Contractors may have been holding off to see if the housing recovery was durable. But eventually, as housing activity kept growing, the industry was bound to accelerate hiring again.

The December jobs report is the latest piece of data to offer a glimmer of hope for these workers. A working paper by economists Edward P. Lazear and James R. Spletzer issued last year found that though lost construction jobs accounted for nearly 20 percent of the rise in the unemployment rate during the recession, industry gains also helped bring down the jobless rate by roughly the same amount.

“There is no evidence that the recession resulted in a long-lasting skills gap that would require retraining experienced workers to work in different industries,” the authors concluded.

Still, no one is arguing that construction employment will return to its pre-recession peak of more than 7 million. The 45,000 jobs added during the fourth quarter last year represented just a fraction of those losses.

“Even if the housing recovery does maintain the legs we’ve seen recently, we’re not going to hit the boom levels,” said Sarah Watt, an economic analyst for Wells Fargo. “You are going to need some other industries where you don’t traditionally need a college education” to bounce back more rapidly.

The gains may not be large enough or come fast enough to offset what some labor market experts view as a detrimental shift toward low-paying jobs in the recovery. According to research by the nonpartisan National Employment Law Project last summer, low-wage occupations made up 21 percent of jobs lost in the recession but account for 58 percent of of jobs created since then. That trend is reversed for mid-wage occupations.

“We’re not making a lot of progress,” NELP executive director Christine Owens said. “It’s a seesaw effect that’s not going in the right direction.”

At AR Daniel Construction in the Dallas-Forth Worth area, president and chief operating officer Art Daniel said he expects to expand from 80 employees to 100 or 120 by the end of the year.

Daniel’s firm works on major infrastructure projects such as water and sewer systems, a specialty that is booming in North Texas but not growing as fast in other regions, because the weak economy has held down public works spending.

“I’m very optimistic” about growth and hiring this year, Daniel said, but added: “When I talk to my compadres around the country, I don’t hear that same optimism.”

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
Jim Tankersley is the editor of Storyline, where he explains complex public policies and illuminates their human impact.
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