Construction employment has boomed in the course of the pandemic
Economic activity – growth and job creation – has been remarkably strong for several years. This resilience to significant headwinds equivalent to higher rates of interest and rising oil prices is probably going on account of a gradual shift in what drives the economy. Much of the economic growth because the start of the pandemic has been driven by higher consumer demand, fueled by pandemic relief laws enacted in 2020 and 2021. As this extra stimulus to consumer demand disappeared, economic activity steadily shifted to increased capital spending by businesses and state and native governments. The composition of construction employment is a key area where this alteration is visible.
Employment in the development industry will be roughly divided into three categories. This includes residential construction, non-residential construction and heavy engineering construction. Residential construction includes work on single- and multi-family homes. Nonresidential construction includes work on office buildings, manufacturing facilities, latest mines, and other industrial and government buildings. Heavy construction refers to infrastructure-related activities on roads, bridges, utilities, canals and others.
Construction is a cyclical industry. On average, their share of overall economic growth and employment is comparatively small. But it plays out oversized Role during recessions and early stages an economic recovery. An economy will generally develop in the identical way as the development sector. Declining construction activity and employment will significantly increase the likelihood of a recession, while increasing construction activity will increase the probabilities of a strong recovery.
Importantly, construction employment has grown barely faster than overall employment growth because the pandemic began in March 2020. Construction employment rose from 5.0% of total employment in February 2020 to five.2% in March 2024. In a remarkably strong labor market, construction jobs were a very vivid spot. The robust recovery of the last 4 years has been driven partly by the continued strength of this sector.
But construction is just not a monolith. In an economy driven largely by consumer spending, employment in residential construction should grow faster than nonresidential construction and heavy engineering. People buy latest houses and apartments. They also hire contractors to modernize and expand existing homes. By comparison, an economy by which businesses and governments increase investment is prone to see faster growth in nonresidential construction and heavy engineering. For example, corporations are hiring more people to construct factories, and governments are hiring more people to repair roads and bridges and upgrade utility lines, amongst other things. This sort of investment lays the inspiration for stronger long-term growth while supporting current economic expansion.
The employment development in the development industry lately shows two different economies. First, employment within the housing sector grew faster than in non-residential and heavy engineering sectors. During 2022, employment in industrial and heavy engineering construction increased, while growth in residential construction slowed. Through January 2023, annual growth in employment in industrial and heavy engineering construction exceeded growth in employment in residential construction (see chart below). As a results of these changes in growth patterns, the share of employment in industrial construction and heavy engineering of all construction jobs increased from a low of 58.3% in May 2022 to 59.2% in March 2024.
Since the start of 2023, non-residential construction and civil engineering have overtaken residential construction … [+]
The changing composition of construction employment reflects gradual changes in overall economic activity. Consumer spending, particularly on durable goods equivalent to recreational equipment, contributed to an initial rebound from the depths of the pandemic-induced recession. At the top of 2021, people’s income increases from pandemic relief measures ended. Households then steadily used up their additional savings. With rates of interest rising from 2022, in addition they spent less on housing. By that point, nonetheless, spending from the Inflation Reduction Act of 2022 and bipartisan infrastructure had declined Investment and Employment Act of 2021 and compensate for the declining momentum in residential construction. Manufacturing construction skyrocketed, as did state and native government investments. The momentum in construction employment is only one clear sign of the gradual changes the U.S. economy has undergone from consumption to investment. The result is strong economic growth, laying the inspiration for faster growth in the long run.
