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Construction Added 19,000 Jobs in August, But Unemployment Rate Hits 17%

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The construction industry added 19,000 jobs in August as a strike that had lowered employment in July ended, but the sector’s 17% unemployment rate was the highest August rate ever, according to a new analysis by the Associated General Contractors of America of federal employment data.

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Continuing gridlock in Washington over infrastructure legislation and expiring tax rates threatens to keep construction workers unemployed much longer, association officials warns.

“In construction, employment was up by 19,000 in August; however, about half of the increase was due to the return of 10,000 workers to their jobs following a strike in July,” says Keith Hall, commissioner of the Bureau of Labor Statistics. “On net, construction employment is about unchanged since March.”

(The International Union of Operating Engineers and the Chicago Laborers’ District Council, representing more than 15,000 heavy equipment operators and laborers, went on strike for three weeks in July, affecting more than 300 Chicago-area construction projects. The unions demanded a wage increase of 15.9% over the next three years. The contractors’ association, the Mid-American Regional Building Association, initially countered with a 3.25% increase next year, but the two sides compromised on a 9.75% increase in wages, spaced out over the next three years.)

“Construction layoffs in May through July offset modest job gains in March, April and August, leaving the industry with a tragically high unemployment rate last month,” says Ken Simonson, chief economist for the AGC.

He points out that the industry’s 17% rate was higher even than the 16.5% rate a year earlier and far above the unadjusted national rate of 9.5%. He notes that industry unemployment rates are not seasonally adjusted and, thus, can be meaningfully compared to the same month in earlier years but not across months.

“Construction began losing jobs four years ago, more than a year before the rest of the private sector, and the industry remains stuck in neutral at best, nine months after other industries started adding jobs consistently,” says Simonson.

He says that over the past year, 274,000 construction workers (4.7% of the August 2009 total) have lost jobs, spread among all five categories tabulated by the Bureau of Labor Statistics: nonresidential specialty trade contractors (123,700 or 5.8%), residential specialty trade contractors (63,200 or 4%), residential building (45,700 or 7.4%), nonresidential building (31,900 or 4.5%) and heavy and civil engineering construction (10,000 or 1.2%).

Architectural and engineering services employment, a harbinger of future demand for construction, was flat for the month and down 24,400 (1.9%) over 12 months. Average hourly earnings for all workers in construction rose 3 cents to $25.20 in August, seasonally adjusted, and 28 cents (1.1%) from August 2009.

“Construction job losses will resume soon unless Congress and the White House promptly finish work on long-term transportation and water infrastructure spending bills and keep income tax rates from soaring,” says Stephen E. Sandherr, the association’s CEO. “Stopgap funding for transportation doesn’t provide the certainty companies need for hiring. Meanwhile, the prospect of a leap in taxes is deterring private investment.”

In other federal data, the Census Bureau reports that construction spending fell 1.0% in July to a seasonally adjusted annual rate of $805 billion, a 10-year low and a drop of 11% from July 2009. Totals for June and May were revised down. Private nonresidential spending rose 0.8% for the month, due mainly to an 8% rise in power construction. But private nonresidential spending plunged 24% from a year earlier and all 11 of Census’ categories fell, most at double-digit rates.

Public construction fell 1.2% for the month and 7.9% year-over-year as declining state and local spending evidently outweighed the boost from federal stimulus funds. The three biggest public categories declined over both spans: highway and street construction was down 2.9% and 7.0%, respectively; educational construction sank 0.1% and 19%; and transportation facilities fell 3.8% and 1.4%.

Three categories that have recently received considerable stimulus funding rose: sewage and waste disposal, 2.5% and 11%; water supply, 2.2% and 0.7%; and public housing, 0.3% and 18%.

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