Brickonomics

Figuring out trends in housing, construction and property


Grim outlook for jobs in UK construction

Brian Green

The official figures show construction lost 67,000 jobs in the third quarter of this year. This is more than 1,000 jobs each working day and half the jobs lost to the UK economy over that period.

So while there may be suggestions of more stability in the wider economy, construction is clearly still mired in a growing recession.

Jobs graph 17 12 09It’s pretty clear from the latest employment figures (see graph) that the general picture looks bleak for construction workers. And it doesn’t take much looking at other numbers to work out that things will get much worse from here.

How much worse and how quickly is, perhaps, rather harder to answer than it might be for a number of reasons.

And without wishing to sound too depressing there is plenty of reason to suggest that the construction labour market is far worse already that the top-line numbers suggest and possibly more fragile in the face of further drops in workload.

The pattern of job shedding painted by the official numbers, as we navigate this recession, is leaving many economists and number watchers more than a little curious, not just within construction.

The BBC’s Stephanie Flanders captures some of the puzzlement around the employment data for the wider economy in her recent blog. It provides a very useful run through of some of puzzles and some of the reasoning.

The construction figures are however still more puzzling, as I have mentioned many times before. They seem, until recently, to have underplayed the severity of the downturn and there is a possibility that they may still be underestimating the real job losses to the industry.

Does this matter? It is certainly true that any errors or peculiarities in the data do not alter the facts on the ground.

But from a policy perspective it is important that the data do reasonably reflect and illustrate what is actually happening. If they don’t there is a greater chance of the policy makers reaching for the wrong remedy.

There are plenty of conundrums within the construction employment data that policy makers should note, as the bald figures may not be telling the whole story.

Firstly though, what do the data say with regard to construction.

The latest official figures show that the construction industry has shed 187,000 jobs and the pace of job shedding does appear to be rapid. There were 136,000 jobs lost in the six months to September, which represents well over 1,000 jobs lost each working day.

From a peak of 2,281,000 jobs in construction the number has shrunk to 2,095,000. That’s about 8.2% and compares with a 2.5% drop in jobs within the overall economy.

For those now looking for work there was more bad news in the figure released yesterday, with vacancies down still further to just 7,000. This is less than a third of the normal level for the industry in recent years (see graph).Vacancies graph 17 12 09

There are other data available that help to shed more light on the pattern of employment in construction. Data from the official labour market statistics on the nomis website shows that the number of construction folk on the claimant count is climbing again after a slight drop in the summer and early autumn.

What this data series also shows is that the rise in construction folk on the dole started in the summer of 2008. This appears to be at odds with the workforce jobs figures, which suggest that the industry was still expanding its workforce.

If we trawl the nomis data further we find that the drop in those employed directly, rather than self employed, was 148,212. In other words the official data have it that the vast majority of jobs lost were from the directly employed.

In one sense this feels extremely odd, given the strenuous efforts firms, across all sectors, appear to have made to keep their teams together. Much easier one would have thought to cut the number of self-employed.

However, it may just be that the number of self-employed has been swollen by the formerly directly employed turning to self-employment.

If this is so, it would mean that real job losses are being obscured. And it does rather suggest that there has been a sharp fall in the average number of hours worked by self-employed workers, with increasing numbers of them under-employed.

While the available data for the total weekly hours worked within construction is pretty crude and covers just up to June this year it does show a fall of 7.6% compared with a 4% drop in the number of jobs.

This supports the view that less work is being done for each job, whether this be a self-employed job or directly employed.

Another issue of note is the effect of migrant labour. This is a particularly important issue in construction, as the accurate measuring of migrant labour is exceptionally fraught with difficulties. So, variations in the mix of migrant labour can cloud the construction numbers.

The figures show the number of non-UK nationals employed in the UK as a whole has dropped by more than 100,000 since the final quarter of 2008.

That represents more than a quarter of the jobs lost to the UK overall in that time. Given that non-UK nationals hold less than 10% of jobs. This suggests a significantly higher loss of jobs among migrant workers. This would lessen the impact on UK nationals.

Whether this is as true in construction as it is in the economy at large is tough to judge accurately, but there is a strong case to suggest it may be, as some non-UK nationals made redundant will choose to take themselves out of the labour market and return to their homeland.

Meanwhile, there is a widely held view that there is an under-recording of non-UK nationals working in construction. I will not go into the frailties of the Labour Force Survey and why this should be so, but an undercounting would suggest an underestimation of the total construction jobs at peak and, consequently, a possible underestimation of the jobs lost. That is if proportionately more jobs are being lost by non-UK nationals.

The claimant count figures for those usually employed in construction would also rise less slowly than would otherwise be the case, as many of the non-UK nationals lost to construction would return home or would be ineligible to claim.

So it is very possible that the increase in construction folk within the claimant count again understates the rate of job losses within the industry.

The upshot is that the more you poke and prod the employment numbers the worse they look for construction folk.

And if we do hit another sharp downturn in work, as is likely, the rate of job losses will probably accelerate, as the short-time-working card appears to have been played.

Tell us what you think

You must fill in all fields marked *

 
Awards
Events/Conferences
Sister sites