The Housing Bubble and the Resulting Impact on Employment Kathryn Byun byun_k@bls.gov

Commonly Cited Data from Current Employment Statistics (CES) 1) Construction Industry Employment: Includes work by the construction industry to satisfy demand other than for structures Does not include employment necessary to satisfy intermediate demand (secondary employment) Ie Retail Trade industry (Home Depots) Manufacturing industry (building eq. for construction companies)

Commonly Cited Data from the Office of Occupational Statistics (OOS) 2) Employment in Construction Related Occupations: Includes employment in the occupation that satisfies demand other than for building structures Overlook occupations outside of construction

OOSEP Methodology Industry Use Table Direct Requirements Total Requirements ä ä Y ä Market Shares ä Make Table Total Requirements ä ä X Commodity DRT: the amount of each commodity required by a particular industry to produce a dollar of that industry’s output MS: the percentage of each commodity produced in a given industry TRT: shows total requirements needed to produce a dollars worth of final demand Total Requirements Table * Final Demand = Industry Output

OOSEP Methodology cont. Ind. Ouput / Ind. Empl. Empl. Multiplier TRT * Emp. Multiplier = Employment Requirements Table ERT * FD vector = Industry Employment Industry Employment Vector * Staffing Pattern Matrix = Occupational Employment Ind. Empl.: Derived from the Labor model Staffing Pattern: Based on data collected by State employment agencies. distributes wage and salary employment in each industry to all occupations used by that industry in order to create its output.

Final Demand

Final Demand for Construction (chained 2000 dollars, millions) Linear trend is just y=ax where x is time from 1950-1995 2007 included

Annual Growth Rate

Divergence from 1950-95 Trend (chained 2000 dollars, millions)

Residential Detail

Nonresidential Detail

Nonresidential Breakout of Commercial and Health Care

Forecasted data for 2016

Average Annual Growth Rates (Final Demand)   Historical 1995-2005 Projected 2006-2016 *Implied 2007-2016 Total 3.2% 3.5% Non-Residential 0.2% 1.3% 0.3% Residential 5.6% 1.5% 4.1%

Employment ERT = The employment generated by $1 million dollars of final demand Gives the relative employment impacts of an expenditure throughout economy

OOSEP Methodology Final Demand + Intermediates = Industry Output Ind. Ouput & Ind. Empl. Employment Requirements Table ERT * FD vector = Industry Employment 2006: $1M final demand for construction : 9.5 jobs in the construction industry, 0.43 in water, sewage, and other systems, 0.06 in metalworking machinery manufacturing, 0.06 in retail trade, 0.19 in pipeline transportation, and so on.

Disclaimer The estimates presented from this point on reflect my research alone and are not the official view of OOSEP or the BLS I will be assuming that the ERT and staffing pattern matrix that OOSEP developed for the aggregate economy also apply to Nonresidential and Residential construction.

Employment due to Construction Spending

Employment in the Residential Construction Industry (CES data) vs Employment in the Residential Construction Industry (CES data) vs. Employment due to Demand for Residential Construction (My data) (Wage and Salary Employment, Thousands) 95-05: CES +330,000 (52.4%) OOSEP +2,190,000 (49.7%)

Annual Growth Rates 05-06: CES +355,000 (4.8%%) OOSEP -329,000 (-5.0%)

Employment during the Housing Bubble versus Trend This assumes that the ERT stays the same with or without the bubble

Could res. trend be shifting up? More people owning multiple homes More home owners / Less renters Replacing a higher percentage of existing structures Faster population growth (illegal immigration) More single persons buying homes (higher divorce rate)

Nonresidential Construction Related Employment versus Trend

Could Nonres. trend be shifting down? Less need for structures with e-business Telecommuting Move from manufacturing to services? Other reasons? Census Construction Put-in-place survey may provide some answers

2007 Employment (Assuming 2006 ERT holds)

Industry Employment

Industries with Construction Related Employment in 2006 (by major sector) Employment is in all industries but these are the major categories with the highest. This is for NRES and RES summed because the distr. is very similar. Distr. very similar throughout 93-16 so chose just to look at last year of historical data.

Residential: industries with biggest gains in employment   Residential Res. as % of Total 95-05 06-16 1995 2005 2006 2016 Construction 1,943,233 154,570 38.8% 50.8% 48.9% 48.7% Real estate 127,258 50,538 7.6% 12.9% 11.1% 11.5% Architectural, engineering, and related services 103,943 34,450 11.9% 16.3% 14.6% 13.6% Employment services 82,070 1,159 4.4% 5.3% 4.5% 3.9% Services to buildings and dwellings 59,090 16,507 4.1% 5.7% 4.9%

Residential: industries with biggest gains in employment cont.   Residential Res. as % of Total 95-05 06-16 1995 2005 2006 2016 Wholesale trade 35,587 -21,019 2.1% 2.6% 1.6% Cement and concrete product manufacturing 30,911 -441 23.4% 31.8% 29.6% 27.6% Monetary authorities, credit intermediation, and related activities 30,330 -3,472 2.4% 3.0% 2.5% 2.2% Architectural and structural metals manufacturing 29,755 -8,756 18.9% 24.7% 22.5% 19.4% Truck transportation 29,429 9,706 4.1% 5.4% 4.5% 4.0%

Residential: industries with biggest losses in employment   Residential Res. as % of Total 95-05 06-16 1995 2005 2006 2016 Retail trade -173,691 12,547 3.1% 1.8% 1.5% Other wood product manufacturing -35,557 -6,961 33.6% 24.0% 21.1% 19.9% Household and institutional furniture and kitchen cabinet manufacturing -5,122 -5,865 5.5% 4.7% 3.9% 2.7% Commercial and service industry machinery manufacturing -4,539 -573 1.0% 0.5% Crop production -4,384 -1,889 1.2% 1.1% 0.9% 0.8%

Residential: industries with biggest losses in employment cont.   Residential Res. as % of Total 95-05 06-16 1995 2005 2006 2016 Logging -3,998 -3,366 13.2% 14.9% 12.1% 10.7% Other electrical equipment and component manufacturing -3,560 -5,209 7.0% 6.6% 6.1% 2.6% Clay product and refractory manufacturing -2,756 -1,895 11.3% 10.4% 8.9% Semiconductor and other electronic component manufacturing -2,543 -1,431 1.3% 1.0% 0.7% 0.5% Communications equipment manufacturing -2,540 -401 1.6% 0.9% 0.4%

Nonresidential: industries with biggest gains in employment   NonResidential Nonres. as % of Total 95-05 06-16 1995 2005 2006 2016 Support activities for mining 63,800 -15,910 88.2% 88.6% 88.8% 88.4% Amusement, gambling, and recreation industries 3,002 294 0.1% 0.3% Management, scientific, and technical consulting services 2,406 10,313 2.4% 1.7% 1.5% Architectural, engineering, and related services 1,696 16,050 8.9% 6.9% 7.0% 6.5%

Nonresidential: industries with biggest losses in employment   NonResidential Nonres. as % of Total 95-05 06-16 1995 2005 2006 2016 Retail trade -189,316 7,107 2.0% 0.7% 0.6% Construction -93,959 79,242 29.4% 21.4% 23.0% Wholesale trade -20,274 -11,471 1.6% 1.2% 1.1% 0.8% Plastics product manufacturing -11,611 -1,893 4.1% 2.7% 2.6% 2.3% Architectural and structural metals manufacturing -9,487 -4,462 14.6% 11.0% 11.3% 9.8% Construction loses 10% here and gained ~10% due to Res.

Nonresidential: industries with biggest losses in employment cont.   NonResidential Nonres. as % of Total 95-05 06-16 1995 2005 2006 2016 Household and institutional furniture and kitchen cabinet manufacturing -9,335 -2,703 3.9% 1.9% 1.8% 1.2% Management of companies and enterprises -8,162 -8,413 2.7% 2.1% 2.3% 1.6% Other wood product manufacturing -7,161 -4,881 9.0% 7.2% 7.3% 6.1% Telecommunications -7,083 -183 2.0% 1.1% Other fabricated metal product manufacturing -6,610 -3,205 5.3% 3.5%

Occupational Employment (Indsutry Employment Vector * Staffing Pattern Matrix) Based on data collected by State employment agencies and analyzed by BLS. Used to distribute wage and salary employment in each industry to all occupations used by that industry to create its output.

Occupational Breakout in 2006 (by major sector) This again is for the sum of NRES and Res as their distr. are very similar at the major level

Top 5 occupations NRES RES Sum as % Total 2006 2016 Carpenters 217,832   NRES RES Sum as % Total 2006 2016 Carpenters 217,832 236,030 466,321 504,660 46.8% 45.9% Construction laborers 207,437 225,088 435,019 472,275 52.1% 51.0% First-line supervisors/managers of construction trades and extraction workers 128,869 137,675 251,917 271,776 49.3% 48.6% Electricians 117,508 126,535 246,118 264,958 51.6% 51.7% Plumbers, pipefitters, and steamfitters 87,733 97,510 184,772 205,273 54.3% 54.5%

Occupations 6-10 NRES RES Sum as % Total 2006 2016   NRES RES Sum as % Total 2006 2016 Office clerks, general 73,542 75,999 157,710 168,167 7.2% 6.8% Truck drivers, heavy and tractor trailer 83,452 83,169 153,255 154,591 12.7% 11.6% Operating engineers and other construction equipment operators 68,501 73,433 137,035 147,812 48.5% 48.1% Bookkeeping, accounting, and auditing clerks 66,193 67,726 136,736 142,832 9.6% 8.9% Painters, construction and maintenance 59,983 63,594 128,680 136,569 40.8% 38.7%

Occupations 11-15 NRES RES Sum as % Total 2006 2016   NRES RES Sum as % Total 2006 2016 Construction managers 55,082 60,252 116,899 128,245 35.3% 33.4% Farmers and ranchers 52,243 37,237 114,666 83,275 15.8% 12.4% Laborers and freight, stock, and material movers, hand 54,032 48,389 107,360 97,624 6.7% 5.9% Secretaries, except legal, medical, and executive 50,942 47,943 106,203 102,458 8.1% 7.7% General and operations managers 54,552 50,872 102,529 98,131 9.1% 8.5%

Occupations 16-20 NRES RES Sum as % Total 2006 2016   NRES RES Sum as % Total 2006 2016 Cement masons and concrete finishers 48,114 53,397 102,261 113,203 67.9% 67.5% Heating, air conditioning, and refrigeration mechanics and installers 42,372 46,837 90,508 99,882 45.5% 46.2% Retail salespersons 38,231 40,720 88,288 93,885 2.8% 2.7% Janitors and cleaners, except maids and housekeeping cleaners 31,944 32,199 86,456 90,750 5.0% 4.5% First-line supervisors/managers of retail sales workers 35,789 30,495 79,626 68,920 6.9% 5.7%