OLMIS

by Carolyn B Eagan
Published Jul-21-2010

Oregon's Construction Workers Impact of the Recession: 2007 to 2009 What's Occurred Across the West? Where Are the Construction Workers Now?

Between 2001 and 2007, Oregon saw a dramatic increase in employment in all sectors of the construction industry. In just seven years, construction employment grew 29 percent. Over the same time period, total nonfarm payroll employment in the state grew about 8 percent. The only other industry in Oregon that even closely resembled the dramatic rise in employment in construction was education and health services which grew nearly 19 percent over those seven years.

The growth in construction employment varied by sector (Table 1). From today's vantage point, it is no surprise that employment in construction of buildings had the largest gains, 34 percent. Construction of residential buildings made up nearly 90 percent of that employment growth. Heavy and civil engineering construction employment grew 18 percent and specialty trade contractor employment grew about 30 percent between 2001 and 2007.

The number of Oregon contractor licenses does not reflect this trend of dramatic employment growth. Between July 2001 and July 2007, the total number of contractor licenses in Oregon grew less than 1 percent.

The slow growth in licenses, however, is reflected in the increasing number of employees per firm. In 2001, there were 13,300 business units in Oregon's construction industry. By 2007, there were 15,700. The number of workers per firm increased from 6 to 6.6 over that seven-year time period.

The incredible growth in employment in the residential building sector is supported by dramatic growth in the total number of building permits allowed by cities and counties across Oregon. Between 2001 and 2006, the total number of annual housing units permitted grew 25 percent, from 21,300 to 26,600. The number dropped in 2007 to 21,100 and appears to have been an early indicator of the pending plummet.

Oregon's construction industry reached peak employment in August 2007, with 110,000 workers or 6.4 percent of Oregon's total employment. What was the source of all of those workers? Were they here in Oregon but working in other industries? Did they move to Oregon from another state? Were they too young to be working in 2001?

Using Oregon wage data, we can calculate the number of workers who earned wages in the construction industry in 2001 and in 2007. Of more than 125,000 workers employed in Oregon's construction industry in the 3rd quarter of 2007, only 33 percent of them worked in construction in the 3rd quarter of 2001. Another 25 percent worked in other industries in Oregon, most commonly in manufacturing; state and local government; or professional and business services. This leaves more than 50,000 workers, about 42 percent, who were employed in Oregon's construction industry in the 3rd quarter of 2007 who were not recorded in Oregon's wage records at all in the 3rd quarter of 2001- about the same share as for all private-sector industries (43%).

Some of these "missing" construction workers were too young to be in the labor force in 2001. Assuming that workers enter the labor force at age 16, nearly 10 percent of those working in construction in 2007 were not yet in the labor force in 2001.

In-migration may also explain the absence of some construction workers in the 2001 wage file. Between 2003 and 2007, Oregon's population grew by at least 1 percent and by as much as 1.6 percent each year. In each of those years, in-migration accounted for more than 60 percent of the population growth.

Between 2007 and 2009, total employment in Oregon fell dramatically (Table 2). Total employment loss over the two-year period was nearly 7 percent, moving employment back to early 2000 levels. Private-sector employment fell 9 percent. In the construction industry, more than 30,000 jobs were eliminated - a loss of 29 percent. No other Oregon industry had employment losses anywhere near the percentage of jobs lost in construction.

The state recorded 2,050 fewer construction firms in 2009 than in 2007 (-13.1%) and the average number of workers per firm dropped to 5.3.

The number of active contractor licenses fell 8.7 percent between July 2007 and July 2009. The number of housing permits issued dropped by more than 5,500 between 2006 and 2007 (-20.7%) and then dropped by more than 9,000 between 2007 and 2008 (-44.7%).

After Oregon's last deep recession, construction employment was depressed for more than a decade.

The dramatic growth in construction employment in Oregon was no outlier. Nationally, employment grew about 12 percent between 2001 and 2007 (Table 3). Across the western states construction employment grew dramatically. In Nevada, employment grew almost 47 percent and in Washington, employment in construction grew 31 percent. In all cases, employment in the construction industry grew much faster than total employment.

And like Oregon, in all cases, the majority of the employment growth that occurred in the first seven years of the decade was lost in two quick years.

We return to Oregon wage records for a glimpse of where Oregon's former construction workers were employed in 2009. By the 3rd quarter of 2009, only 47 percent of those who were working in construction in 3rd quarter 2007 were still employed in the industry. Another 18 percent were working in other industries and a whopping 35 percent were not recorded in Oregon wage records. The 18 percent who have found employment in other industries appear to be the lucky ones. That 35 percent who were not recorded in Oregon wage records were either no longer in Oregon or were unemployed and not receiving wages.

This is consistent with the information released by Oregon's unemployment insurance program. In 2009, more than 17 percent of Oregonians receiving unemployment insurance were from the construction industry. Only the manufacturing industry had more claimants - but manufacturing employment is typically more than twice the size of construction employment in Oregon.

While it appears for the moment that construction employment hit bottom in the first half of 2010 along with the economy in general, the industry is not expected to ramp up rapidly. Oregon's Office of Economic Analysis projects that by the end of 2017, construction employment will once again reach 80,000 - far below the 2007 peak of more than 100,000 jobs.