Construction Procyclitality

By Dave Anderson:

Time Magazine reports on construction employment:

Nationally, unemployment fell to 9.7% in January, but in construction it jumped to 24.7% ... "In the previous 14 years, I had not been out of work for more than one week," says Pat O'Connor, 57, a Connecticut carpenter. 

As I have mentioned before, my dad was a union electrician for thirty years.  Construction is a tough industry for two reasons.  The first is that it beats the shit out of a person's body between the bending, the twisting, the unstable footing, the lifting, the extreme heat and the extreme cold; 30 years is a tough career. 

The second is that construction is a massively pro-cyclical field.  In the mid-80s when Massachusetts was booming, my dad worked 6-12 or 7-10s.  Unemployment was frictional; a job would be done, my dad would be laid-off on a Tuesday, he would report to the unemployment office and union hall by Thursday and heading to a new assignment by Monday.   

However when times are slow in general, they are very slow in construction.  When the Massachusetts Miracle collapsed in the late 80s, the state's economy went into a funk ahead of the national recession but construction cratered.  From the tearing down of the Berlin Wall to the signing of Bill Parcells, my dad worked as an electrician in New England for less than six months.  There was no work within two hundred miles of Boston.  

Construction is an industry that is extraordinarily prone to cyclical boom and bust cycles.  This leads to massive entry and exit of workers from the workforce, and it impacts unemployment insurance policy (UI) as I wrote last month:

 broken down into a cyclical or structral recession dichtomy.  This is important because it tells us where the future jobs will come from.   If the unemployment cycle is mainly due to cyclical fluctuations most workers will be rehired to do the same thing that they were doing when they were laid off.  In a structural change people will be losing significant human capital as they transfer into significantly different jobs.

Exiting the construction industry or waiting for for the cycle to come back is extraordinarily painful. Waiting out the early 90's recession is the most probable reason why I became a liberal as the Republicans said that there was no problem at all, Perot was saying it was time to stop coddling the unemployed by making sure they had enough money to survive because unemployment extensions increased the deficit and the Democrats were offering retraining programs and UI extensions as a bridge.

As a society, we'll have to make the decision as to what we want to do for the people, who through no fault of their own, are in industries which are undergoing both massive structural and cyclical downturns at the same time.