Residential construction workers took the hardest hit during the downturn, and a new study from Fannie Mae shows it will be years before a return to even normal levels.
The study was authored by Fannie economist Manhong Feng and Patrick Simmons, a director in the strategic research group at the government-sponsored enterprise. They showed from December 2007 through June 2012, Americans lost an aggregate of nearly $3 billion in weekly earnings.
“When industrial sectors are examined individually, construction stands out as having suffered the greatest loss in aggregate earnings from the beginning of the Great Recession to June 2012,” Feng and Simmons wrote.
Aggregate weekly earnings for construction workers dropped by nearly $1.1 billion from December 2007 through June 2009. And during the sluggish recovery since, this sector lost another $400 million in weekly wages.
“The large employment-driven earnings decline in the construction sector is one symptom of economic rebalancing in the aftermath of the housing bubble,” researchers said.
But instead of measuring the construction share of the work force against pre-recession highs, it might be more constructive to compare this sector to levels seen before the housing bubble began to grow.
Construction made up 4.8% of the private labor force in 1992, peaked at 6.4% during the height of the bubble in 2006. It has since fallen by less than two percentage points as of June 2012, according to the study.
Still, the researchers believe it will still take some time before construction shakes off the remnants of the housing boom, even after hitting a bottom in 2009. Private residential construction spending increased 70% from 2001 to 2006, more than double the 34% growth in GDP.
According to the Bureau of Labor Statistics, roughly 563,000 residential construction workers had a job as of August 2012, half the more than 1 million employed homebuilders at the height of the bubble in 2006. But it’s also down from roughly 807,000 in the pre-bubble period of August 2002.
“As the economy works off the imbalances of the housing bubble, we expect that it will likely take years before construction activity rebounds to a more ‘normal’ level consistent with sustained rates of household formation, housing demolition, and demand for second homes,” according to the study.