U.S. Home Building Is Surging, but Job Growth Isn't

The resurgent U.S. housing market has sent builders calling again for Richard Vap, who owns a drywall installation company. Vap would love to help -- if he could hire enough qualified people.

"There is a shortage of manpower," says Vap, owner of South Valley Drywall in Littleton, Colo. "We're probably only hiring about 75 or 80 percent of what we actually need."

U.S. builders and the subcontractors they depend on are struggling to hire fast enough to meet rising demand for new homes. Builders would be starting work on more homes -- and contributing more to the economy -- if they could fill more job openings.

In the meantime, workers in the right locations with the right skills are commanding higher pay.

The shortage of labor ranges across occupations -- from construction superintendents and purchasing agents to painters, cabinet makers, and drywall installers. The National Association of Home Builders says its members have complained of too few framers, roofers, plumbers, and carpenters. The shortage is most acute in areas where demand for new homes has recovered fastest, notably in Arizona, California, Texas, Colorado, and Florida.

The problem results largely from an exodus of workers from the industry after the housing bubble burst. Experienced construction workers lost jobs. And many found new work -- in commercial building or in booming and sometimes higher-paying industries like mining and natural gas drilling -- and aren't eager to come back.

Hispanic immigrants, largely from Mexico, who had filled jobs during the boom were among those who left the industry and, in some cases, the United States.

Dave Erickson, president of Greyhawk Homes in Columbus, Ga., lost an employee who took a job this year in Texas. The former employee is now installing fiber-optic cable and earning 30 percent more than he did as a construction supervisor.

"I think he's frustrated with the cycle we went through in recent years," Erickson says.

A shortage of labor in a well-paying industry might seem incongruous in an economy stuck with a still-high 7.5 percent unemployment rate. But it reflects just how many former skilled construction workers have moved on to other fields.

In 2006, when the boom peaked, 3.4 million people worked in homebuilding. By 2011, the figure had bottomed at about 2 million. As of last month, about 2.1 million people were employed in residential construction.

Jobs in the industry did rise 4.1 percent in April from a year earlier, faster than overall U.S. job growth. But they'd have to surge 24 percent more to reach 2.6 million, their 2002 level -- "the last time the market was normal," says David Crowe, chief economist for the National Association of Home Builders.

For now, the industry is building faster than it's hiring. In February, builders began work on single-family homes at the fastest pace in five years. And in March, new home construction broke the 1 million mark for the first time since June 2008. Permits for future construction are also near a five-year high.

In the 12 months that ended in March, housing starts surged 47 percent. Yet over the same period, the industry's employment grew just 3.7 percent.

Normally, a rebound in home construction helps propel an economy after a recession. But even with the steady gains in housing starts, sales and prices since last year, the industry remains below levels considered healthy.

The National Association of Home Builders says nearly half its members who responded to a survey in March said a scarcity of labor has led to delays in completing work. Fifteen percent have had to turn down some projects.

"I can't find qualified people to fill the positions that I have open," says Vishaal Gupta, president of Park Square Homes in Orlando, Fla. If not for the labor shortage, "I would be able to build more homes this year and meet more demand than I can handle today."

Gupta's company is facing a side effect of the labor shortage: Demand for higher pay from qualified workers. On some occasions, he says he's been outbid by rivals that need contractors for their own projects. Gupta's preferred paint contractor left for a rival that paid more. His new cabinet contractor is about 10 percent more expensive than the one Gupta used before.

The higher pay they're handing out helps explain why builders have been gradually raising prices on new homes. The median price was $247,000 in March, up about 12 percent from the same month in 2011, the Commerce Department says.

The industry may have to look more aggressively for workers at vocational schools, federally funded programs like Job Corps and elsewhere, says Crowe of the homebuilders group.

"We'll have to recruit more," he says.

Vap, owner of South Valley Drywall, rode out the downturn after the housing crash in part by relying on commercial construction projects. He cut his residential construction staff from 244 in 2006 to 80 in 2009.

This year, Vap has hired 15 field employees for residential construction and says he needs to hire 35 more to do the work he foresees in 2013.

During the 2005-2006 housing boom years, Gupta had to bring in workers from Texas because there weren't enough employees in Florida to keep up with construction. He doubts many of those veterans will return.

"A lot of people who are from other states or from Mexico are not willing to come back here as fast as they did last time because of what they experienced," Gupta says.

Between 2005 and 2010, 1.4 million Mexicans moved from the United States to Mexico -- roughly twice as many as in the previous five-year period, according to the Pew Research Center. Though an estimated 11 million people remain in the United States illegally, the influx of illegal immigration from Mexico has essentially stopped, says Douglas Massey, a professor of sociology at Princeton University.

"The Mexican economy is doing quite well, with strong growth in manufacturing and both skilled and unskilled services," Massey notes. "If construction demand picks up, we may see an uptick in Mexican immigration, but I think the boom years are likely over."

Crowe and other economists predict that as demand for new homes strengthens further, higher wages will woo back many laborers who took up other jobs during the downturn.

The homebuilders association is pushing Congress to let more immigrants enter the country through a worker visa program. The association cites census data showing that foreign-born workers make up about 22 percent of the U.S. home construction work force. It estimates there are 116,000 unfilled jobs.

Still, even if builders find more workers to hire, two other factors could hold back the industry for a while: A tight supply of building materials and ready-to-build land. Surveys by the National Association of Home Builders show that builders have grown concerned about those obstacles.

In part, that's why Crowe thinks employment in single-family home building won't return to its 2002 total until 2016. And he isn't unhappy about that.

"In a perverse sort of way, the mild housing recovery is probably a good thing," Crowe says. "We need to rebuild the infrastructure of the industry."


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2420910, ~/Articles/ArticleHandler.aspx, 4/17/2014 2:55:37 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement