Washington – The housing boom that helped fuel U.S. economic growth and employment from 2000 to 2007 was an unsustainable bubble, and when it burst it not only sent the economy into a tailspin, but also left the U.S. economy struggling to create jobs.
A McClatchy analysis of employment data collected by the Labor Department’s Bureau of Labor Statistics has found that the jobs that are being created as the economy recovers often don’t replace the ones that were lost when the housing boom collapsed.
The analysis suggests, in fact, that the recovery is slow in part because many unemployed workers don’t have the skills to fill the jobs that are now available.
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“That’s an astute observation, and I think it’s accurate. How to retool to meet those new skills?” said Martin Regalia, the chief economist of the U.S. Chamber of Commerce. “I think it’s a longer-term issue. You are not going to retool someone who was a construction worker to handle motherboards. The skill matchup with the skill need is shifting as the economy recovers.”
A deep dive into the government’s monthly employment reports indicates that the sectors that benefited most from the housing boom, especially construction and housing-related manufacturing, are unlikely to return to bubble levels or even close to them. It also suggests that the road ahead will remain rocky for low-skilled laborers and skilled tradesmen.
“There has to be a reverse flow of those workers back into the other parts of the economy,” said Joel Prakken, the chairman of Macroeconomic Advisers, a consulting firm in St. Louis that co-issues the monthly ADP National Employment Report on private-sector Hiring.
The ADP reports show a continued bleed, month after month, in residential construction jobs that are unlikely to bounce back.
“In my judgment, some of that is gone forever. . . . We’re not going to need as many people as we had (in that sector) in 2006 and 2007. That adjustment and transition back is kind of painful,” Prakken said. “Sectors have been affected unequally.”
Housing and residential investment make up 2.5 percent of the nation’s gross domestic product, the total value of domestically produced goods and services. Their impact is larger, however, because many manufacturing jobs are tied to housing.
These include jobs in companies that produce, install or repair kitchen cabinets, hardwood floors, carpets, heating and cooling equipment, appliances and other products. There also are jobs in hardware stores and home improvement centers, the truckers who deliver stock to Home Depot and Lowe’s, and the longshoremen who handle containers of Asian-made tools in West Coast ports.
A strong housing sector, one in which home prices rise, creates personal wealth. That, in turn, feeds consumer spending, which drives 70 percent of U.S. economic activity.
During the housing boom, employment in construction and manufacturing tied to the sector soared. Residential building accounted for about 800,000 direct jobs in January 2000, and peaked at 1.037 million jobs in August 2006. It fell to a decade-long low this February at 549,000 jobs. Hiring in this segment of the construction sector has picked up only slightly since, adding about 55,000 jobs through June.
The plunge in construction employment is even starker in the specialty trades. Employment for drywall and insulation contractors has fallen from 329,000 in December 2007 to 214,000 this past May, far off the June 2006 peak of 380,600.
Similarly, framing contractors have seen their numbers more than cut in half, to 54,000 positions this past May from 115,000 in December 2007 and less than a third of the September 2006 peak of 185,500 jobs.
There’s a clear spillover to manufacturing.
When the recession began in December 2007, almost 13.8 million Americans were employed in manufacturing. Through this June, that number stood at 11.7 million.
Employment in manufacturers who make plywood and engineered wood products, tied closely to residential construction, has fallen to just below 70,000 through June from 99,000 in December 2007, having peaked in August 2005 at 128,200.
Similarly, manufacturers who make wood window frames and doors employed 47,000 workers in June, 22,000 fewer than they had on their payrolls in December 2007 and well below the July 2006 peak of 82,000.
Companies that make kitchen cabinets and countertops from wood products employed about 103,000 workers in June 2010, down 57,000 from the workers they employed at the recession’s start, and well below peak employment in June 2006 of 180,900.
Companies that make air conditioners and forced-air heating equipment employed just 81,000 workers this past May compared with about 100,000 in December 2007, far off the February 2001 peak of 138,400.
Who’s hiring? Some of the strongest data this year come from the professional and business services sector, usually associated with white-collar employment. Employers in this broad category have added jobs for eight consecutive months, 572,000 from January through June. The sector accounted for more than 16.7 million U.S. jobs in June.
The information technology sector outperforms most others. IT employment in computer systems design grew to 1,441,000 positions this June from 1,426,900 in December 2007.
Similarly, hiring continues to rise for custom computer programmers, whose employment numbers in June stood at 626,000, up from 620,000 in December 2007.
Health care also continues to add jobs as the first wave of baby boomers, born from 1946 to 1964, hits the official retirement age at the end of this year. Health care employment, much like IT jobs, requires a degree of specialization. There were 13,760,000 health care jobs in June, up from 13,134,000 in December 2007.
Employment in medical and diagnostic labs held steady throughout the recession, growing to more than 217,000 jobs through May 2010 from about 213,000 in December 2007.
Employment in hospitals rose in the same period to 4,705,000 jobs from 4,564,000. It’s grown every month but one since the recession began. Hiring in home health care services grew to 1,066,000 positions in June from 934,000 in December 2007.
Despite the sector-by-sector differences, Larry Mishel, the president of the liberal Economic Policy Institute, warns against losing sight of the broader problem.
“It’s not about sectoral trends. We’re in a massive downturn. There’s never been, in the postwar era, a period where we lost as many jobs as this one,” said Mishel, who added that 4 percent of the nation’s job base had been wiped out by the time government stimulus efforts began in February 2009.
EMPLOYMENT JANUARY TO JUNE 2010:
(Thousands of jobs, not seasonally adjusted)
Construction, up 330,000
Manufacturing, up 276,000
Professional, business services, up 572,000
Education, health services, up 87,000
Retail trade, up 157,300
Private-sector (all), up 344,000
Government (all), up 291,000
SELECT EMPLOYMENT, DECEMBER 2007 THROUGH JUNE 2010:
(Thousands of jobs, not seasonally adjusted)
Construction (residential), down 290,000
Manufacturing (all), down 2,046,000.
Professional, business services, down 70,300
Engineering and drafting, down 75,500
Interior designers, down 14,500
Computer systems design, up 26,700
Custom computer programming, up 5,700
Management, technical consulting, down 14,300
Scientific R&D, up 5,200
Veterinary services, unchanged
Administrative and support, down 778,100
Call centers, down 27,800
Collection agencies, down 6,200
Security guards, down 19,200
Janitorial services, down 51,700