Armonk NY Needs Those Construction Jobs | Armonk NY Real Estate

The National Bureau of Economic Research announced in September that the recession officially ended in June of 2009. However, nearly 15 million people remain unemployed and countless more are working fewer hours than they would like. Unemployment threatens the housing industry as it erodes consumer confidence causing would-be buyers to shy away from big purchasers like homes, and pushing many homeowners into foreclosure. Employment growth is the key to a robust recovery; and while last spring provided a reason for optimism, job growth will not be even around the country.

Officially, the recession ended more than a year ago, but the unemployment rate remained at 9.6 percent in August and is forecasted to remain above 9 percent through 2012. Furthermore, the unemployment rate varies around the country. As of August, the highest rate of unemployment in the 159 markets monitored by NAR Research was 14.8 percent in Riverside-San Bernardino-Ontario, California, while the lowest was 3.1 percent in Bismarck, North Dakota. The spread between these two markets’ unemployment rates is close to its widest point in two decades at 11.7, but is below the recent peak of 14.9 in January of 2010. With the exception of the spike in 2006 caused by Hurricane Katrina, the spread between the highest and lowest unemployment rates had not been this wide since
February 1993.

The expansion of this spread reflects the widely different experiences of those markets which have performed relatively well compared to those that experienced a more severe decline in growth.

The Geography of Unemployment

Geographically speaking, many of the most resilient markets in the country are in the Northern Midwest, in particular Fargo, Sioux Falls, and Bismarck; as well as in the Middle Atlantic and a handful of markets in New England and in western and upstate New York. Washington, D.C. and Baltimore have also done well. Both of these markets have large education and health service sectors, which have weathered the recession. Additionally, Washington, D.C. garners a large share of its employment from the Federal government, a notably stable employer. Some of the hardest hit markets in the country are those where home construction was very strong during the boom and played an important part in the local economy. As the housing market slowed, layoffs in construction and the mortgage finance industries rose. The credit crunch spread economic decline to the rest of the economy and this second wave of unemployment added to already swelled pools of unemployed workers. Many of the high unemployment cities in Florida and central California as well as Las Vegas and Phoenix depicted below experienced this pattern.

Unemployment by Industry

More often than not, the geography of unemployment reflects the relative concentrations of certain industries. Nationally, the construction and manufacturing industries were hardest hit over the last four years. Employment in the construction industry fell 26 percent from August of 2006 through August of 2010, while it fell 17 percent in manufacturing, and 11 percent in information services. The trade and transportation sector slid only 6 percent over this period, but that sector accounted for 19 percent of total national employment in August of 2006. When the economy slows, fewer products are shipped, so this sector feels the pinch sooner than most. Memphis, home to Federal Express, and other cities that act as hubs for shipping and warehousing have experienced a sharp decline in employment, but will likely be at the forefront of any expansion. The manufacturing sector accounted for 10 percent of total employment in August of 2006, so the 17 percent decline in that sector over the subsequent four years was deeply felt. Likewise, the share of total employment in both the manufacturing and construction industries declined over this 4-year period. The manufacturing industry’s share of total employment slid from 10 percent to 9 percent by August of 2010, while the construction industry’s share slid from 6 percent to 4 percent.

Not all sectors have withered, though. Employment in mining and logging grew 7 percent over the last four years as prices of oil and some minerals surged. The Federal government expanded to supply services for the unemployed as well as to support U.S. foreign and domestic security policy. Finally, employment in the education and health services sector grew 10 percent as the baby boom generation continues to march into retirement and their parents require more care. Employment growth in this sector caused its share of total employment to rise from 13 percent in August of 2006 to 15 percent four years later. Likewise, the government’s share of total employment rose from 16 percent to 17 percent over this same time frame. These two industries have been boons for the floundering labor market.

The experience of industries at the national level is reflected in unemployment at the local level. Furthermore, the industrial makeup of local markets will likely determine whether their path of expansion is relatively rapid and robust or protracted and modest. Markets with high shares of unemployed construction workers will feel the drag of this industry for many quarters to come.

Unemployment in Construction and Housing Inventory

Nationally, the construction industry made up 6.0 percent of the employed work force in August of 2006. As depicted in the map below, construction employment made up a greater share of the total work force in many markets across the West, Southwest, Southeast, and Middle Atlantic. A few markets had significantly larger shares like Riverside-San Bernardino-Ontario (10.5 percent), Reno (11.3 percent), Las Vegas (12.2 percent), Sarasota-Bradenton-Venice (18.8 percent), and Phoenix (10.1 percent).

By 2010, the landscape of employment in construction had changed dramatically. That industry’s share of employment fell in most markets with the exception of a few locations in Texas, Louisiana, North Dakota and several other cities spread across the country. Coastal and Northern California along with Reno, Las Vegas, and a slew of markets in Florida experienced declines greater than 2 percentage points. Cape Coral-Fort Myers was one of the hardest hit cities with the construction share of employment falling 8.4 percentage points from 16.7 percent in August of 2006 to 8.3 percent by August of 2010. The Carolinas were all hit hard with Charlotte-Gastonia-Concord, Charleston-North Charleston, and Raleigh-Cary declining by 2.7 percentage points, 2.6 percentage points, and 2.5 percentage points, respectively.

Many markets that experienced a construction boom are now burdened by high concentrations of excess inventory, which will stymie demand for housing and retard future construction. The decline in construction also impacted workers in industries that supported construction like manufacturing and food services. This situation will limit job growth in the local financial and service sectors as well as local governments which depend on property tax revenue. Conversely, markets with higher than average concentrations of workers in manufacturing may expand sooner than mothers as businesses increase orders for the machinery and goods needed to expand production. Likewise as shipments and orders rise, so will those markets that supply shipping and warehousing services.

NAR Research Report

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