With US home prices rising and more new homes being built, people are fretting about the possibility of a new housing bubble. But as we’ve argued, average home prices suggest it’s still early to be talking about one. And here’s another indicator: if there’s a bubble, where are all the construction jobs?
As you can see in the chart above from today’s jobs report, there aren’t nearly as many people, either construction workers or residential specialty contractors, at work today as there were just five years ago. It’s no surprise that we’re not back at the levels of the housing bubble, when the number of new homes under construction and the people working on them exceeded demand. Fannie Mae, the US housing finance corporation, estimates that only 412,000 new home construction jobs will be added between 2012 and 2016, but even then, it expects one million fewer builders than the 2006 peak, when 3.5 million were hard at work.
Still, you might expect a larger increase in hiring now, but ironically, it looks like a case of market over-correction. While some companies are leery of more hiring, fearing the economy is still soft, many say they are having a hard time hiring because construction workers who couldn’t find jobs during the recession have switched to new industries or, in the case of unauthorized immigrants from Mexico, returned home. It’s going to take higher wages to find the workers they need.