by Calculated Risk on 8/26/2007 07:22:00 PM

Most of my focus on employment has been related to potential residential construction job losses. Unfortunately the BLS only started breaking out residential specialty trade contractors starting in 2001, so there is no data available to analyze residential construction employment during prior downturns in the housing market.

However we can look at trends in total private construction employment.

From Reuters: Construction job losses could top 1 million (hat tip Houston)

Job losses in the construction sector could top 1 million if a housing downturn tips the economy into recession and tighter access to credit dampens business investment.
...
"The ability of nonresidential to continue absorbing additional workers is going to be limited, and that's going to put downward pressure on construction employment overall," [Bernard Markstein, director of forecasting at the National Association of Home Builders] said, adding that cuts may be deeper than in the 1990s.

Click on graph for larger image.

This graph shows total construction employment since 1970 according to the BLS. As noted in the article, total private construction employment fell about 18% in the mid-'70s recession, and about 15% in both the early '80 and '90s recessions.

Construction employment only fell 3% in the '01 recession, as residential construction employment offset most of the declines in commercial construction employment. In the current construction slowdown, total employment has only fallen 1% (residential construction employment is off about 4%) according to the BLS.

Note: there are several reasons why the BLS is potentially understating the residential construction job losses (see here). One of the possible reasons - and relevant to this article - is that some workers have probably moved from residential construction to non-residential construction, but these employees are still being reported as residential construction employees.

A 15% decline in construction employment, from the peak last year, would be about 1.1 million total construction jobs lost.

"We may be in a period where there may be larger losses because growth was so steep," said John Challenger, chief executive of Chicago-based outplacement consulting firm Challenger Gray & Christmas. "(Compared with) that 15 percent that we saw then, this may be a steeper, more volatile cycle."

When the BLS releases their annual revision later this year, there will probably be a significant downward revision in construction jobs for the last 4 quarters. The Business Employment Dynamics (BED) report showed there were about 100K more construction jobs lost in the 2nd half of '06 than the BLS reported. The BLS has probably understated job losses in the 1st half of '07 too, as housing completions have fallen off a cliff, but BLS reported residential construction jobs has remained steady.

Still, if non-residential investment spending slows (especially CRE), than there will probably be many more construction jobs lost in the coming year.