Construction hiring starting to gain momentum

A construction worker sets up scaffolding platforms outside unfinished townhomes in Cleveland Heights, Ohio, this month.
A construction worker sets up scaffolding platforms outside unfinished townhomes in Cleveland Heights, Ohio, this month.
Published Feb. 23, 2012

NEW YORK — Construction hiring is picking up as Americans invest in renovating their homes amid signs that the worst of the housing market declines may be over.

The number of people working in residential remodeling grew 5.8 percent in December to 250,700 from a year earlier, according to preliminary data released this month by the Bureau of Labor Statistics. This was the highest growth for these jobs, which account for about 5 percent of construction employment, since December 2006, before the housing bubble burst.

"More remodeling projects are going to create more jobs in the construction industry," said Kermit Baker, a senior fellow at Harvard University's Joint Center for Housing Studies, who is also chief economist for the American Institute of Architects.

On Tuesday, Home Depot, the world's largest home-improvement retailer reported fourth-quarter net income that exceeded analysts' estimates. Increasing traffic and transactions among its professional customers is encouraging because "they're getting more jobs, more work," said Craig Menear, executive vice president of merchandising for Home Depot.

Home improvement probably will bounce back the most this year since 2006, after spending fell as much as 20 percent during the three-year home-remodeling slump that ended in mid 2010, Baker said. Growth in the "low- to mid-single digits" may follow an estimated 0.8 percent last year, with total spending projected to be $112.4 billion in 2012, he said, citing the Cambridge, Mass., center's leading indicator of remodeling activity.

Growth also is showing up in another index based on the number of construction permits filed, which rose 23 percent in December to 127.4 from a year earlier, said Joe Emison, co-founder and vice president of research and development at BuildFax, an Austin, Texas, real estate data company.

Another driver for the rebound in contractor hiring comes from "pent-up demand" by Americans who can't afford to move, said Ellen Zentner, a senior economist at Nomura Securities International. "If you can't sell your home, may as well make the box you live in better."

The rebound "makes sense," Emison said. BuildFax's data captures all work that requires a hired contractor, which accounts for about two-thirds of such projects, and amid a "glut of bad homes" on the market, "people may be stuck in their existing homes for a while."

Contractor-hired work has a long way to go to reach pre-recession levels, as the number of residential remodelers lags behind the September 2006 peak by more than 76,000, Labor Department data show. Government figures may underestimate the size of this industry because they track workers on payrolls, and about two-thirds of home-improvement businesses consist of self-employed people, Baker said.

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Even so, the revival in residential remodeling seen last year probably will continue, Zentner said.

"An increase in these jobs should precede a broader recovery in housing," she said. "We have a bit of strengthening that does appear to be legitimately returning."