Macroeconomics

Is Construction Investment Holding Back Job Creation?

Employment level statistics for the month of June 2015 looked a bit worrisome for some economists. At a glance, Construction was one of the missing sector in the list of industries significantly contributing to job creation. Indeed, Construction was the last sector in joining job creation after the Great Recession. Though ADP, the payroll company, reported that the sector added an estimated figure of 19,000 jobs during the month of June 2015 -which reflects a slight decline from the month of April-, establishment survey data from the U.S. Bureau of Labor Statistics (BLS) showed no addition for the Construction payroll data. More in detail, BLS employment data on Construction sector showed that it contracted at several specific specialties. The table below shows awful figures for a season which is said to be appropriate for outdoor works.
Employees on Construction Nonfarm Pay Roll
Specifically, activities that cut back in employment were nonresidential specialty trade contractors (-5.6K estimated employees), specialty trade contractor (-1.9K estimated employees), Residential Building (-6.1K estimated employees). Although there is much of a mix in the employment data for the sector, the aggregate figures suggest that a brief revision is worth doing in order to see whether there is an industry slow down, or just a deferred process due to weather conditions.

Well, the latest data on Construction put in place –May 2015- in the United States show no change in construction investment on month-to-month basis. Estimated change in construction spending for May 2015 was about 0.8% ($1,035.8 billion), with a margin error of +/- 1.5%. Furthermore, most of the estimated values do not support alternative hypothesis in order to reject the null hypothesis. In other words, there is no statistical evidence to claim that construction spending was different than zero (0) in the United States from April to May 2015. At the least, we could say that weather has not played a deferring factor for Construction activities, thereby affecting employment levels for June 2015.

Construction put in place Adjusted

Although data released by the U.S. Census Bureau is subject to constant revision, it seems unlikely that those figures change given the data on employment level. That is, employment levels data are sort of “confirming” that current investment in Construction is not enough for the sector to keep up with economic growth, at least for the summer season.

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