Wieffering: For some, recovery may never come

  • Article by: ERIC WIEFFERING , Star Tribune
  • Updated: January 4, 2012 - 10:11 PM

Most conversations about the beleaguered housing sector focus quickly on one topic, prices. As in, "Will they ever stop falling?"

We almost never talk about the 48,000 construction jobs Minnesota lost during the last five years.

Maybe 2012 is the year that home values finally stabilize. But those construction jobs? Most of them -- probably much more than half -- may never come back. They were casualties of a burst bubble, much like all those dot-com marketing jobs that evaporated in the wake of the tech stock crash in 2000.

This may sound unnecessarily gloomy, until you consider that the forces that turbocharged and temporarily distorted home prices worked a similarly destructive magic on labor markets as well.

Between 1997 and 2007, the United States added an unprecedented 2.1 million construction jobs. Some were in commercial construction as developers scrambled to erect grocery stores, drugstores and bank branches close to all those new subdivisions. But the 50 percent surge in new home construction indicates that the vast majority of those new construction jobs were related to housing, and many economists credited the growth in construction jobs for helping blunt concurrent losses in the manufacturing sector.

To put those numbers in context, in most years only one in every 20 Americans works in construction; but between 1997 and 2007, one in every seven new jobs was a construction job.

So it was in Minnesota, where construction employment peaked in February 2006 at 132,000, a gain of more than 40,000 jobs from the beginning of 1997.

When the money spigot closed and new home construction plunged to all-time lows, America suddenly found itself with too many builders, remodelers, carpenters, plumbers and tile installers. In Minnesota, construction accounts for 30 percent of the jobs lost since the recession began, and many economists now say it partly explains the historically high unemployment rate for young men without a college degree.

Imperial Homes, a Shoreview-based builder that put up 12 homes at the peak of the market, scrambled to build just two the following year. It laid off some employees, reduced its office space, and "did what we had to do to survive," said Rich Riemersma, president of the Builders Association of the Twin Cities and co-owner of Imperial Homes.

Last year Imperial built five homes, a typical number in the years before the boom. Despite that uptick, Riemersma said he and other builders are cautious about taking on new workers.

"We're all still adjusting to the new economy," he said.

A lot of false bottoms have been called in the housing industry over the last couple of years, but the reality remains grim. Construction job losses did not bottom out until April of 2011, and in November the large Roseville-based builder Rottlund Homes announced that it was going out of business.

The good news? Minnesota may have finished 2011 with more construction jobs than it had at the end of 2010, and some analysts expect residential construction to pick up in 2012 -- welcome news for builders who've managed to hang on.

But it's unrealistic to expect a significant surge in hiring. When National Public Radio recently tried to identify the "normal" number of construction jobs in a healthy U.S. economy, it arrived at a total of 6.5 million: 1 million more than the current level, but 1 million fewer than in 2007.

I used the same methodology to arrive at a figure for Minnesota. Historically, construction typically represented about 3.6 percent of all jobs in the state. During the bubble years, construction's market share of Minnesota's labor force surged as high as 4.8 percent.

If it had remained a constant 3.6 percent, Minnesota wouldn't have had 132,000 people working in construction in February 2006, the peak. It would have had 99,342.

The good news is that's almost 16,000 more construction jobs than Minnesota currently has. What about those other 33,000 jobs, you ask? Consider them a byproduct of the bubble.

Jobs of the moment, gone forever.

ericw@startribune.com • 612-673-1736

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