What happened to construction workers

Today builders say they are facing a profound shortage of qualified, trained workers.  Yet construction employment dropped by 2.3m jobs between 2006 and 2011 and is still 1.3m below the 2006 peak.  So what happened to over one million workers?  Why aren't they coming back in the market?

WSJ's Real Time Economics blog has the answer: some have switched to other industries but many have dropped out of the labor force.  At the same time hiring of young workers has been slow, so now there are not enough trained workers to meet demand.

This evidence further supports the view that despite the lowest employment to population ratio we have seen in 40 years, the labor market is close to having a balance between supply and demand.  Those who have dropped out of the labor market after they lost their jobs in the Great Recession do not appear to be coming back.

The depression in construction

Harvard's Ed Glaeser has a great Economix blog entry today on the NYT site (enjoy it while you can before they start charging in 2011) about the very stark situation in the construction industry. Although times are grim in financial services, the unemployment rate there is a "mere" 6.6 percent, whereas it is 24.7 percent in construction. For comparison's sake, the overall unemployment rate maxed out at 25% in the Great Depression. In addition to overbuilding in previous years, construction is being held back by a decline in the rate of household formation. Until young men and women start moving out of their parent's houses, it will be difficult to sell off the inventory of vacant units.

I have had a long-standing interest in construction for two reasons: (1) I actually worked in construction one summer to pay for graduate school because the wages were significantly higher than for indoor jobs and (2) I wrote a number of papers in top academic journals in the 1980s about construction labor markets. The sector provides an opportunity for (mostly) men with limited education and experience to gradually become skilled and well-paid. In retrospect more of the stimulus package probably should have been allocated in this direction. On the other hand Glaeser argues for payroll tax reductions -- a great idea overall but one that is unlikely to provide any special relief for the construction industry.