The ‘Great Recession’ theoretically lasted about 18 months, from 2007 to 2009. The recovery has been excruciatingly slow in many industries, but it is now 2015 and the construction industry is more quickly ignoring the residual effects of the recession.
How bad was it?
Although the construction industry is cyclical and the recession generally follows a boom period, nothing could have prepared it for the harsh and widespread scope of the recession:
- Residential: Homeowners defaulted on their payments and others delayed buying homes, leading to a glut of residential real estate languishing in real estate agents’ inventory.
- Commercial: Commercial construction was also hit hard, severely affected by the federal budget hijacking and eventual but temporary shutdown, followed by reduced government spending and greatly reduced lending practices.
- Institutional: Institutional construction remained stagnant, affected by the same financing constraints and problems faced by the commercial construction sector.
How were construction workers affected?
Nevada, California, Florida, and Arizona are often areas with a lot of construction work. But the recession changed that:
- Nevada employed about 146,000 construction workers at the peak of its construction boom. That number dropped by 59 percent.
- Arizona construction employment fell 50 percent from the industry’s peak before the recession.
- Florida came very close to industry-related unemployment for Nevada and Arizona, losing 40 percent of its workforce from construction.
- California fared better, but still posted a 28 percent drop.
- According to the US Bureau of Labor Statistics (BLS), approximately 2.3 million construction workers lost their jobs during the recession (nearly 30 percent of the total number of jobs lost).
- The construction industry in general has a Estimate 1.4 million fewer construction workers in 2015 than in 2007.
Construction prospects in 2015 and beyond
Happily, the United States and its construction industry continue to pull away from the harshest effects of the Great Recession. Industry watchers expect to see these improvements:
- Non-residential construction: rebounding and looking stronger, especially with expected real GDP growth of 2.6 percent in 2015. This sector may grow 8 percent with growth in office buildings, hotels, and industrial facilities.
- Single Family Home: The number of residential units is expected to increase by 11 percent, thanks to easier access to home mortgages.
- Manufacturing plant construction – Will likely drop around 16 percent after the huge increases in 2013 and 2014.
- Institutional building: it is expected to continue its moderate upward trend and increase by 9% compared to the results of 2014.
- Residential Construction – Called the potential “wild card” of 2015 due to rising interest rates. Existing home sales can go up to 10 percent.
- Public Construction: Growth will remain low due to current federal spending restrictions. However, transportation spending is expected to grow by around 2.2 percent.
Ironically, construction workers may not rush back to new jobs. Many left the industry entirely and retrained for other jobs.
Both Texas and North Dakota show significant increases in construction employment. North Dakota now needs to hire construction workers. Texas construction employment is up 10 percent, approaching its pre-recession peak.
Economists do not expect the construction industry to return to its peak (2006) until 2022 or later. However, the BLS anticipates that the fastest growing jobs now and in 2022 will be in the healthcare sector. and construction.
So while the Great Recession did considerable damage to the overall economy, individual incomes, and morale, 2015 and beyond look considerably more favorable in the commercial construction industry.
