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October 2006, Vol. 129, No. 10

Recent employment trends in residential and nonresidential construction

John P. Mullins

The construction industry encompasses a collection of diverse, specialized smaller industries, each serving different groups and providing different services. Although differing in timing, business and employment cycles across these subindustries have tended to follow similar patterns, rising sharply in response to economic expansions and declining in response to contractions. However, during and following the recession of 2001, two divergent and historically atypical employment trends emerged among construction industries, with those serving residential customers thriving, and those serving nonresidential customers stagnating or declining.¹ This article analyzes trends in construction employment from 2001 to 2005,² with special attention being given to the measurement of residential and nonresidential components.³

Construction is an extremely cyclical industry that typically has suffered recessionary employment declines exceeding, in both depth and duration, those in other industries. During and following the four recessions that took place from 1973 to 1991, employment declines in the construction industry averaged 16.2 percent, as opposed to 2.0 percent in total nonfarm industries, excluding construction.⁴ In addition, employment declines in construction over this period lasted about two and one-half times as long as those in other industries.⁵ (See chart 1.) However, in 2001, construction experienced an employment decline that was mild by historical standards (3.0 percent), while other nonfarm industries combined experienced a more typical decline (2.1 percent). Furthermore, construction’s 2001 employment contraction was substantially shorter in duration than that in total nonfarm, excluding construction—another departure from historical patterns. This pattern carries through to job recovery, with construction recovering jobs lost in the downturn much more quickly than usual, and other industries recovering much more slowly than usual. (See table 1.)

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Footnotes
1 The National Bureau of Economic Research (NBER) Business Cycle Dating Committee is the generally recognized arbiter of business cycle turning points. NBER defines recessions as economy-wide declines in economic activity lasting more than a few months that can be observed in major economic indicators, such as employment and output (GDP). Recession starting points are business cycle peaks and ending points are business cycle troughs. For the time frame covered in this article, the dates of the NBER-designated recessions are as follows: November 1973 to March 1975; January 1980 to July 1980; July 1981 to November 1982; July 1990 to March 1991; March 2001 to November 2001. Note that the length and timing of the NBER-designated peaks and troughs in the business cycle often differ from those of individual employment series.

2 Data on employment used in this article are from the Current Employment Statistics (CES) program, which surveys 160,000 nonfarm businesses representing about 400,000 establishments monthly. For more information on the program’s concepts and methodology, see BLS Handbook of Methods, Chapter 2, available on the BLS Web site at http://bls.gov/opub/hom/homch2_a.htm. CES data are available at http://www.bls.gov/ces/. Data used in this article are seasonally adjusted unless otherwise noted.

3 For more information on residential and nonresidential construction employment, see Christopher Manning and John P. Mullins, "Two new construction employment series for specialty trade contractors," this issue, pp. 14–22.

4 In this article, comparisons are made between employment in the construction industry and employment in all total nonfarm industries, excluding construction. BLS does not tabulate or publish employment estimates for total nonfarm, excluding construction; these data were tabulated by the author using published BLS estimates.

5 For both construction employment and total nonfarm employment, excluding construction, a single peak-to-trough cycle spanned the two recessions that took place from January 1980 to July 1980 and from July 1981 to November 1982. Therefore, these two recessions have been analyzed as a single employment cycle. Contractions in construction employment lasted between 17 and 38 months, compared with durations of 5 to 17 months in total nonfarm employment, excluding construction.

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