The lack of growth in the Construction sector and problems in the housing market are reasons for the lackluster recovery of the economy. In April, 2012 there were 117,900 Colorado Construction workers, virtually the same as in March 1997.
Over 57,000 construction jobs were lost as a result of the Great Recession and an oversupply of construction workers. The recovery has begun; however, only 9.8% of the lost jobs have been recovered.
By comparison, Healthcare and Higher Education did not experience a downturn. Tourism jobs dropped off slightly but have returned to pre-recession levels. The Extractive Industries; and Professional, Scientific, and Technical Services will reach 2008 peak levels later this year.
When all sectors are considered, about 55% of all lost jobs have been recovered.
It is great news that workers are being added to the payrolls, but does the state still have a surplus of construction workers?. This question is asked because the Construction sector should have a location quotient near 1.0 (the location quotient is a ratio comparing the local concentration of workers to the national concentration).
In January, 2012 the location quotient jumped to 1.23 and has remained near that level since. This means the state’s concentration of construction workers was about 23% greater than the U.S. average.
To put this in a historical perspective, the construction location quotient was less than 1.0 in 1990. It had dropped to this level because the state residential and commercial markets were overbuilt during the 1980s. The state experienced a housing bust and negative net migration for five years.
The strong expansion during the 1990s was supported by the increase in the number of construction workers. By January, 2000 the location quotient reached its peak at 1.46. Over the next 12 years, the number of construction workers declined relative to other sectors and the location quotient gradually dropped to 1.17 in August 2011.
The comparative lack of construction activity will probably prevent an oversupply of construction workers. For example office vacancies remain high enough that there is not demand for significant new construction. There is one major speculative office site being built-in Colorado; it is located in Broomfield.
Current activity appears to be in reaction to demand:
• There has been a greater need for multi-family units than single family housing, resulting in new apartments, condos, and townhouses in certain areas.
• There is demand for infrastructure improvements. Construction continues on FasTracks and improvements to the 36 Corridor are on tap for this summer. (It should be noted that different skills are needed for building houses and infrastructure).
• Finally, the expansion of the extractive industries drives construction activity, in areas such as the Niobrara shale field.
The good news is that jobs are being added. Hopefully they will increase at a rate that doesn’t result in an oversupply.
For a more complete update on the recovery of the Colorado economy, go to https://cber.co/.
©Copyright 2011 by CBER.