Housing starts are way up, but construction hiring isn’t. Ezra Klein at Wong Blog explains why:
Here are two numbers that anybody who wants to understand the job market should look at: Builders started work on 27.7 percent more homes in February than they did a year earlier. Yet the number of construction jobs in the United States was only 2.9 percent higher, year-over-year. Housing is finally coming back. But the construction jobs isn’t. Why is that happening, and when might it change? A deeper dig into the data by economists at Goldman Sachs gives some answers. And it boils down to two words: Labor hoarding.
What is labor hoarding?
Key to understanding the sluggish growth in construction jobs is a concept called “labor hoarding.” That’s what happens during a recession when companies don’t fire as many workers as the decline in business would seem to have justified. Firms don’t want to lose all their quality workers and then be unable to keep up with demand when business finally turns around, so they keep people on staff even when there is not enough work to keep them fully busy. This seems to have happened on a large scale in construction in the last few years. Kris Dawsey and Hui Shan at Goldman’s economics research group calculated that the economic value added per construction worker fell from $80,000 in 2006 to under $60,000 at the end of 2012. That is labor hoarding in a nutshell.