COVID-19’s Effects on Construction Employment in March

NATIONAL—The United States Department of Labor reported 6.6 million more workers filed for unemployment last week. Over the past few weeks, those jobless claims have continuously increased, reaching 16.8 million this week. Economists expect that number will be 25 million or more by the end of April. 

Economists at America’s biggest bank, JP Morgan, have predicted that the pandemic will lead to a 40% drop in the country’s gross domestic product and a nationwide unemployment rate of 20%. 

While the overall economy is worsening, construction is showing some stamina. The Bureau of Labor Statistics reported a 6.9% unemployment rate for the industry in March, only slightly up from February’s 5.5%. The unemployment rate for all industries was 4.4%. 

Analysis of the data by the Associated Builders and Contractors found construction industry employment declined by 29,000 in March, with nonresidential construction declining by 24,600. 

By segment: 

• Nonresidential building: -10,700
• Heavy and civil engineering: -10,200
• Nonresidential specialty trade: -3,700

“So ends the lengthiest expansion in American economic history,” said ABC Chief Economist Anirban Basu. “The expansion was associated with dramatic asset price increases, multi-decade lows in unemployment, persistently low costs of capital and a thriving U.S. nonresidential construction sector. While the March jobs report is horrific, ending a 113-month streak of employment gains, it is clear that employment reports in future months are likely to be even worse.

“What remains unclear is the extent to which estimated construction employment declines are due to mandated suspension of projects in Massachusetts, Pennsylvania, California and elsewhere, and how much of this is due to the emergence of recessionary forces,” said Basu. “Generally, nonresidential construction is one of the last segments of the economy to enter recession as contractors continue to work down their collective backlog, which stood at 8.9 months in ABC’s Construction Backlog Indicator. The need for social distancing renders that statistic less pertinent, meaning that nonresidential construction is susceptible to large-scale job losses immediately.

“While the recently passed stimulus package is massive and helps support the payments side of the economy, economic recovery will remain elusive until the COVID-19-engendered crisis is behind us,” said Basu. “While that is obvious, many people are still looking to compare the current crisis to other episodes in American history, including the Great Recession. As a practical matter, this period defies comparison, and must be understood on its own. Based on what is known, the downturn will be vicious. The good news is that this crisis may finally induce policymakers to fashion and implement a long-awaited infrastructure stimulus package.”