| NEW YORK
NEW YORK 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
Strength in nonresidential construction may continue to
offset a downturn in housing for now, but recent turmoil in
credit markets suggests job losses may accelerate in the sector
in the next few months.
"With what's happening with the mortgage market, the
financial markets in general, I think we'll continue to shed
workers at least for six months, maybe as much as a year," said
Bernard Markstein, director of forecasting at the National
Association of Home Builders.
"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," he
said, adding that cuts may be deeper than in the 1990s.
Construction employment fell about 15 percent in both the
1990s and 1980s recessions, and it dropped about 18 percent in
the recession of the mid-1970s, according to the Bureau of
Labor Statistics (BLS).
In each case, the sector's declines were far steeper than
overall job losses, and recovery took longer. But in the 2001
recession, declines were relatively modest as consumer-led
demand offset weak business spending.
About 7.7 million Americans are employed by construction
companies, according to the BLS, down about 75,000 from a peak
in September 2006. The sector's unemployment rate of 5.9
percent compares with 4.6 percent for the overall labor force.
A 15 percent decline now would mean more than 1 million
"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."
Employment in the sector has fallen in each of the past
four months from a year ago. The next six months may show a
surge in job cuts, as projects are completed and new ones do
Construction companies have announced about 20,000 job cuts
this year, according to Challenger Gray, but that does not
count small companies.
Job cuts in the sector have closely correlated with data on
construction spending but with about a six-month lag, said BLS
economist Chris Goodman.
Construction spending in June fell for the first time since
January, while private residential construction posted its 16th
straight monthly drop.
"Commercial construction has not taken the hit that home
construction has, but there is concern that if the economy is
going into a downturn, (it) will follow," Challenger said.
STAFFING THE WORK
Pockets of strength remain in metropolitan areas like Las
Vegas, Chicago and especially New York, where construction
firms fret about a shortage of qualified workers.
"The No. 1 challenge to building all the work that's out
there is people," said Lou Coletti, chairman of the Building
Trades Employers' Association in New York.
Building health-care facilities, hotels and public projects
demands workers, some of whom are switching over from
residential projects, he said.
For much of 2005 and 2006, more people were employed in
home construction, but nonresidential construction now accounts
for most jobs in the sector, according to the BLS.
Andy Frankl, president of IBEX construction, based in New
York's Times Square, hires several people a week and has been
placing ads nationwide to get workers to New York.
A weak national housing market and a credit crunch,
however, could domino into other types of construction.
"If people have a negative outlook, it's contagious and it
happens really fast," Frankl said, recalling the downturn in
the late 1980s and early 1990s. "People start laying off, they
pull out of contracts, banks are not making loans, companies
stop their investments and it can happen very quickly."
"I'm an optimist, but back of my mind it's a scary
prospect," Frankl said.