Home building creates jobs and depends on job creation. NAHB estimates that building 100 single-family homes generates 300 yearlong jobs. More jobs mean more worker income, allowing for more household formation requiring more homes. The two-way street is one reason why housing usually leads the economy out of a recession. Newly created jobs help create new households, building homes produces more jobs, and the cycle continues.
The job impact on housing is broader than just construction. About half of the jobs created when a home is constructed are in non-construction fields. The construction worker impact shows up in the construction labor count; the other new jobs show up across the rest of the economy and are not identified with home building—but they exist because of more home building.
But this recovery has been unique. Housing did not lead the recovery; in fact, housing took three years before it consistently grew faster than the rest of the economy. Now housing is a major contributor to both economic and job growth. During the past four quarters, the housing component of total economic output (residential fixed investment as a share of gross domestic product for the data nerds) contributed nearly 25 percent of the economic growth even as the Great Recession dropped the sector’s share of the economy to 3 percent from the normal 6 percent.
Multifamily Led the Way The steady growth began in 2011, with strong apartment building in anticipation of growing rental demand from those who don’t qualify for a mortgage. Single-family construction started its more muted revival in 2012 with a 23 percent increase—and the NAHB expects a similar gain in 2013. An increase of 2 million private sector jobs per year for the past three years has been a major factor in buyers and renters coming back to the housing market.
Employment in the housing market, however, has not been revived in line with construction trends or with the rest of the job market. Total home building employment hit a low point at 2 million in early 2011 and has risen by only 100,000 in two years, while housing starts have risen 77 percent. From the beginning of the official economic recovery in mid-2009, total construction jobs dropped another 150,000, but the number of unemployed former construction workers fell by 750,000. Construction workers found employment in other fields and will have to be persuaded by higher wages, more hours, or other elements to restaff home building.
Builders/Subs Kept Best Workers There are at least two explanations behind the mismatch in growth of housing construction and housing jobs. During the downturn, builders and subcontractors kept their best crews. From January 2006 to January 2009, housing construction fell 78 percent but residential construction jobs fell only 28 percent. Home building construction jobs continued to fall for another two years, but the total change peak to trough was still less than half the rate of home construction. As construction rebounds, workers are working more hours.
Some workers who were laid off from home building and subcontractor firms started their own one-person companies. Companies with no employees are not counted in monthly government employment figures, so some added jobs have been generated but not counted from individuals acting as subcontractors or builders.
Wages and Home Prices Rise Regardless of explanations, the home building labor market is tight and causing some problems. A recent NAHB survey found 51 percent of respondents experienced a shortage in framing crews, and 42 percent saw a shortage of finished carpenters. The consequence has been higher home prices and greater subcontractor wages and costs.
As home building continues to rebound, more hiring will occur, jobs will expand, and more homes will be needed.