Construction jobs revisited

Fed economists disagree over  construction jobs lesson on the economy blares the Washington Post.

“Construction workers are not experiencing relatively worse labor market outcomes,” concluded an online article by economists at the Federal Reserve Bank of New York, Richard Crump and Aysegul Sahin.

Within days, their colleagues at the Atlanta Fed issued on their Web site what they called “an alternative view of the fate of unemployed construction workers.”

“Unemployed construction workers are generally experiencing relatively large wage declines relative to what they earned before becoming unemployed,” wrote Pedro Silos and Lei Fang, economists at the Federal Reserve Bank of Atlanta.

The ‘truth’?

Crump and Sahin, who opined that they are not faring worse in unemployment, bring to bear several numbers. They note that the unemployment rate in the construction industry, though it rose to a very high level, has come down faster than the overall unemployment rate. Where it once stood at 27 percent in February 2010, it had fallen in two years to about 17 percent, according to Bureau of Labor Statistics data.

Similarly, they point out that since mid 2010 the rate at which unemployed construction workers have found work has improved faster than the rate for other unemployed workers.

Silos and Fang however, examine different federal data, which show that construction workers leaving the industry for jobs in other industries are suffering wage losses of about 19 percent compared who found jobs in construction.

“Unemployed construction workers who took jobs in other sectors seem to have done so at a considerable loss of income,” they write. “The reason may well be a mismatch between the skills they possess and those required by their new job.”

The article casts this apparent disagreement as part of the debate between structural versus cyclical unemployment. I'd go with Silos and Fang, but I would not go as far as to say that this demonstrates that unemployment from this recession is all structural.

As Larry Mishel says:

“Construction has lost a lot of jobs and construction workers are struggling – I don’t deny that,” he said. “But they are not the whole story of unemployment in the U.S.”

Agreed, but he also suggests “that more stimulus spending on infrastructure projects – roads, bridges, railways – would help employ construction workers, who, newly employed, would spend and stimulate the economy further.”

My previous thoughts on the relationship between fiscal stimulus and constructions jobs are here - and I haven’t really changed my mind when I said then that the guys who are swinging hammers and framing houses don’t really have the same skills as those who are building roads and repairing bridges.

But I also think that construction jobs on the whole are what some would consider good jobs. My feeling is that the construction workers who are unable to find work as a result of the financial crisis are perhaps those who are least skilled. Sure, there are some skilled construction workers who are probably still unemployed or who had to take on lower paying jobs as a result of the bubble. It is also probably true that these highly skilled construction workers were adversely affected because of the bubble and the point here is that because of these real effects, the Fed really needs to take a proactive stance against bubbles. It causes real misallocation of resources. These skilled workers might have seen the housing boom as a signal to further invest in their construction skills as opposed to going into another occupation.