Recent construction job gains still leave Minnesota in a hole

Ryan Hedlund, who operates his own small construction company in the south metro area, Hedlund Building and Remodeling, said his business has “definitely picked up,” but not for the custom renovation projects and house additions that kept him busy a few years ago.

Instead, he’s replacing lots of windows and doors as his customers get ready for another Minnesota winter.

Last week’s release of monthly Minnesota unemployment figures included news of an increase of 3,100 construction jobs, the largest since April 2005. Most of those gains were in the specialty trades — subcontractors involved in remodeling and renovations as well as new construction. 

Minnesota Department of Employment and Economic Development (DEED) Commissioner Dan McElroy and Director of Research Steve Hine were both quick to point out that the uptick in construction jobs, while a hopeful sign for the beleaguered sector, does not signal a revival of residential construction.

“It is way premature to say there’s the start of turnaround,” McElroy said.

To be sure he and Hine went out of their way to remind reporters in a teleconference that the construction industry in Minnesota still has a long way to go to get back to pre-recession employment levels.  In fact, it may not get back to recent peak levels anytime soon. The peak was driven in large part by an overheated residential housing boom, which, however unlikely, would not be desirable, the state officials said.

The construction numbers were one of the bright spots in the September unemployment figures.  While Minnesota has consistently reported a lower unemployment rate than the nation as a whole, 7 percent vs. 9.6 percent in September, 9,900 jobs were lost last month and about 207,000 unemployed are actively looking for work across the state.

Following up on all the states’ unemployment numbers, Associated General Contractors of America (AGC), the trade association for the heavy-construction industry, last week lamented   continued declines in construction employment in 31 states during September. Highlighting Hawaii and Minnesota as leading the nation in construction job gains, ACG predicted that industry employment will continue to stagnate as federal stimulus spending “remains in limbo” and private-sector investment stalls.

Asked about the recent statistics, Hedlund said he hasn’t seen any signs of an uptick in hiring among his subcontractors or suppliers. Although he may think about hiring some help next year, his sole proprietorship likely would not get picked up by DEED statisticians anyway.

Another metro area renovation company, SawHorse Designers and Builders, actually reduced employment recently, letting “five or so” people go over the past month, and now employs about 18 people, according to Rob Hammer, bookkeeper at the firm. 

Taking a deeper dive into the numbers reveals just how deeply the recession has hit construction in particular and the impact that drop continues to have on the economy as a whole.

Total construction employment peaked in Minnesota and in the United States in 2006, although in different months. Minnesota’s construction trades have been hit harder than the nation as a whole.

From the peak employment of 132,100 in February 2006, Minnesota’s construction industry has lost 47,000 jobs, a nearly 35 percent decline. Nationwide over that same period, more than 2 million construction jobs disappeared, a 27 percent decline.

Since January 2007, the U.S. Bureau of Labor Statistics (BLS) reports that average weekly earnings for construction workers rose nationwide from $856 to $943, a 10.2 percent increase. In Minnesota, average weekly pay among all construction workers rose from $919 to $1,027, an 11.8 percent increase. (BLS monthly wage data are only available beginning in 2007.)

But given the loss of jobs since early 2007, the U.S. economy has seen more than $1.3 billion in wages disappear from the construction sector every week. In Minnesota, $27 million in weekly wages has left the economy.

Granted, some portion of that income has been replaced, either by people changing jobs or receiving unemployment benefits. But by multiplying those numbers by 52 weeks a year ($68.6 billion and $1.4 billion respectively) in just one sector of the workforce, one starts to appreciate the depth of the hole the economy remains in.

Comments (1)

  1. Submitted by Richard Schulze on 10/25/2010 - 10:57 am.

    It’s not that difficult to understand. Not only did builders build too many houses, but they built the type of houses and in the locations that people with money don’t want. So builders are switching to building the types of houses that are in demand.

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