By Bernard M. Markstein
The national construction unemployment rate has generally reflected the fortunes of the construction industry. The national construction unemployment rate fell from 2004 through 2006 then began to rise in 2007 and jumped sharply in 2008 and 2009. Since 2010, there has been a slow, gradual improvement. December’s 8.3% unemployment rate is the lowest December rate since 2005’s 8.2% rate.
Not surprisingly, the estimates of the state construction unemployment rates
show most states improving since 2010 as well. As of December 2014, the five states with the lowest rates are generally small states. In order from the lowest rate
, they are Maryland, North Dakota, Utah, Nebraska, and Hawaii. Note that three of these states—Maryland, Nebraska, and Hawaii—have such a small construction industry that the BLS combines construction and mining employment data for their estimates of those state industry unemployment rates to avoid revealing construction (or mining) firm-specific detail. All except Maryland had high December construction unemployment rates as recently as 2011. Utah had a double digit rate that year. North Dakota had a double digit rate in December 2009.
The five states with the highest December 2014
construction unemployment rates are, from highest to lowest: Michigan, Rhode Island, Illinois, Connecticut, and Georgia. All these states and their construction industry were hard hit by the Great Recession. All are now doing better and have seen their overall unemployment rates decline in the past few years, though they remain above the national unemployment rate. Similarly, their construction unemployment rates have fallen, even as they remain relatively high (in the teens).
To see the construction unemployment rates for each state click here
To see total unemployment rates for each state click here
The Top Five States
The top state for the lowest unemployment rate, Maryland, benefits both from being a small state with only a small number of workers engaged in the construction and mining industries and from being in an area (bordering Delaware, Pennsylvania, Virginia, and Washington, D.C.) where it is easy to move to find work in construction or in other industries.
The second lowest unemployment rate is in North Dakota, which has benefited from the boom in fracking over the past several years. Although many of those jobs are not classified as construction jobs, many of the individuals who were hired by energy companies had previously worked in construction, particularly operators of heavy equipment. Those workers who had been previously unemployed construction workers, were now employed—just not in construction. With the recent drop in energy prices, unemployment in the North Dakota energy sector should rise beyond normal seasonal patterns. But that will not affect construction unemployment since the laid off workers would add to unemployment for oil and gas extraction (some laid off contract workers might be classified as construction workers, which would add to construction unemployment).
Even that effect is likely to be muted for North Dakota unemployment rates. Many of the workers engaged in fracking came from other states, attracted by the promise of a job and the high wages. Most, if not all of these workers, are likely to return to their home states if they lose their job in North Dakota. Anecdotal evidence indicates that many who have already lost their job, have returned to their home state.
Utah, which has had previously experienced a high construction unemployment rate, has seen its rate drop over the past few years to what is now an enviable rate. Much of this is due to the upswing in the state’s economy, partially driven by a revival in tourism traffic and the construction of some major infrastructure projects, such as the Salt Lake City streetcar project.
Nebraska has benefited from the energy boom and improvement in the agriculture sector. Hawaii has benefited from the rebound in tourism, which has spurred significant renovation and alterations of vacation properties as well as construction of new hotels and other vacation rental properties over the past few years.
To see the top five states for construction unemployment click here.
The Bottom Five States
The economies of Michigan and Illinois (and to a lesser degree Georgia) are strongly affected by developments in manufacturing. Thus, manufacturing’s relatively robust performance has helped these states’ economies. The rebound in the auto industry has helped Michigan, in particular, as well as Illinois and Georgia to a significant, but lesser, extent. Connecticut benefits from spending on military transportation hardware (aircraft parts, helicopters, submarines).
In addition to the lift from the auto industry, Georgia has benefited from increased demand for agricultural products. The state also has seen growth in its tourism industry. Illinois, although improving, is still struggling to recover from the great recession. As already noted, the state has benefited from an improved auto industry, though not as much as surrounding states such as Ohio and Indiana. Slower growth outside of the U.S. is hurting exports of its manufacturing products.
Although Rhode Island is a small state, it still suffers from relatively high unemployment. Its neighbors also have relatively high unemployment even as they, along with Rhode Island, have experienced improvement over the last few years. In terms of the December 2014 estimated construction unemployment rate, the rate for Rhode Island ranks 49th (tied with Michigan for last place) while the rate for its neighbor, Connecticut, ranks only a little higher at 47th.
To see the bottom five states for construction unemployment click here.
Measuring Employment and Unemployment Rates
Measuring employment and unemployment would seem to be straight forward; however, it turns out to be a little more complicated than it would first appear to be. The Bureau of Labor Statistics (BLS) produces the employment statistics for the United States based on a monthly survey conducted by the Census Bureau known as the Current Population Survey (CPS).
Each month, the Census Bureau surveys roughly 60,000 households (about 110,000 individuals). To be included in the survey panel, a person must be 15 years of age or older and not in the Armed Forces or in an institution, such as a prison, long-term care hospitals, or nursing home. (However, employment statistics are only reported for individuals 16 or older.) The survey is conducted during the week that contains the 19th of the month. This is the survey week. Survey questions refer to activities that occurred during the prior week (i.e., the week that included the 12th of the month). This is the reference week. The BLS then uses the CPS survey results to produce its estimate of U.S. employment and unemployment.
A person is considered employed if they worked during the reference week. No distinction is made between full-time and part-time work—although this observation is tracked and used elsewhere in the employment data. A person is considered unemployed if they did not have a job during the reference week but actively looked for work during the four weeks prior to the survey week. The labor force is equal to the number of employed people plus the number of unemployed people. People who were not employed or actively looking for a job are considered not in the labor force. The unemployment rate is defined as the number of people unemployed divided by number of people in the labor force.
In addition to this official unemployment rate, the BLS produces five other unemployment rates, such as a rate that includes discouraged workers. Discouraged workers are people who did not actively search for a job during the four weeks prior to the survey but did look for a job sometime during the prior 12 months and would re-enter the labor market if job market conditions improved.
Determining employment by industry is relatively easy. Starting with the definition of whether a person is employed, it is simply the industry in which a person is employed. There is a complication if the person works two or more jobs in different industries—e.g., a person who works at a restaurant and has a second job as a taxi driver. The BLS solves this problem by placing them in the industry in which they worked the most hours.
People who are unemployed are considered unemployed in the industry in which they were last employed. New entrants (i.e., people who have not been previously employed) are not assigned an industry. The unemployment rate for an industry is the number unemployed in that industry divided by the labor force for that industry. New entrants seeking employment are not included in the industry unemployment figures regardless of where they are focusing their job search activity. However, they are included in the general unemployment statistics.
Based on the CPS, the BLS produces a monthly unemployment rate for major industries, including the construction industry. These industry unemployment rates are available at the national level on a monthly basis, but not at the state level. Based on national employment statistics and state employment data, we have produced monthly estimates of state construction unemployment rates.
National and Construction Industry Unemployment Rates
Both the national unemployment rate and the national construction unemployment rate are an estimate based on the results of the Current Population Survey. Thus each estimate of the unemployment rate is subject to sampling error. Given the smaller sample for the construction industry (a subset of the national CPS data), the construction unemployment rate is subject to greater variation and error.
The variations in the unemployment rates from month to month may not indicate changes in the true rates (i.e., the rates that would result from accurately surveying the entire U.S. population) but be due to sampling error. However, over time, sustained movement either up or down would reflect labor market conditions for the entire United States population. Economists use unemployment rates, together with other labor force and economic data, to draw conclusions about the health of the labor market, the economy, and the construction industry.
The national construction unemployment rate is reported on a not seasonally adjusted (NSA) basis. Therefore, the construction unemployment rate generally increases in the fall and winter, and decreases in late spring and summer. Consequently, month-to-month comparisons should be approached with great care. Year-over-year comparisons (comparing the same month a year apart or several years apart) are a much better approach. To better compare the construction unemployment rate with the overall unemployment rate, the tables in this article report only NSA data for both.
To see regional construction unemployment rates click here