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Declines in Public Sector Investments Are Keeping Construction Employment Levels Stagnant after Years of Severe Job Losses, Conditions Unlikely to Change Soon

Construction employment was virtually unchanged in May as the industry added just 2,000 jobs for the month and the sector’s unemployment rate declined to 16.3 percent, according to an analysis of new federal employment data released today by the Associated General Contractors of America. Association officials said that declines in public sector construction demand are offsetting slight increases in private sector demand, resulting in stagnant construction employment levels that are unlikely to change soon.

“At the current rate of growth, the construction industry will continue to experience double-digit unemployment rates for a long time,” said Ken Simonson, the association’s chief economist. “Simply put, there just isn’t enough demand for construction to fuel the kind of hiring needed to get industry employment back to where it was in 2007.”

The construction economist noted that the nonresidential construction sectors lost 6,200 jobs in May, while the residential sector added 8,200 jobs. Within the nonresidential sector, employment in heavy and civil engineering construction increased by 3,100 for the month as work on highway and other public works projects accelerated with the warmer weather. Meanwhile, employment declined in the nonresidential specialty trade contractors sector while the nonresidential building category added only 600 jobs.

Association officials said that construction employment is unlikely to change much one way or the other for the rest of the year. They noted that construction spending figures released earlier in the week indicated that federal, state and local governments are cutting investments in infrastructure and other construction projects. Those declines are largely being offset by slight increases in private sector demand for construction, especially in power construction.

“As long as Washington starves infrastructure instead of fixing entitlement spending, construction employment is likely to remain weak,” said Stephen E. Sandherr, the association’s chief executive officer. “We are never going to balance the budget by deferring maintenance and keeping employment levels low.”