Contractors Lay Off 76,000 Workers in July

Construction employment fell 76,000 jobs in July. This is marginally better than the 86,000 job loss in June and much better than the six month string of 100,000 plus monthly job losses from November to April. 32,000 jobs were lost at residential job sites, including remodeling, in spite of rising housing starts in the previous three months. 44,000 jobs were lost at nonresidential job sites. Construction wages increased 0.4% in July after no change in June. Aggregate hours worked dropped 1.1%, a smaller decline than in previous months. 

The July jobs report was brighter for the balance of the economy. The unemployment fell 0.1% to 9.4%. The monthly job loss declined to 171,000 from 357,000 in June. Average hourly wages, average weekly hours and aggregate hours worked all increased slightly. Job losses narrowed sharply in professional and technical industries and net hiring resumed in leisure and hospitality industries and at the Post Office in spite of its inability to cover its pension costs. 

Caution: The jobs report overstates the ebbing of the recession in the national labor market. Seasonal adjustment issues raised the June job loss as much as 50,000 and similarly cut the July job loss a similar amount. Nonetheless, excluding construction, the labor market is "less bad" in July than it was in June. This is consistent with the expectation that GDP will resume growing this quarter. Construction activity, however, will sink slowly lower for the rest of the year. The pickup in residential construction will be more than offset the progressively faster decline in nonresidential construction. 

Net residential layoffs will continue for several more months because the houses now being started are smaller and have fewer features than the houses being finished. The number of houses under construction will also shrink for a few more months because it remains high relative to current sales. 

Contractors will continue to enjoy a buyers' market for labor through next year although their bargaining power will gradually diminish beginning next spring when net hiring is well underway. The unemployment rate for people who usually work construction jobs is now 18.4% ands will remain over 10% into 2011.

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