Economists spot upside to industry’s downfall
Published: November 23, 2009
Tags: American Recovery and Reinvestment Act, American Subcontractors Association of Wisconsin, Beiriger, Bender, Drewianka, economy, employment, Jorgensen, Painters and Allied Trades District Council No. 7, stimulus, University of Wisconsin-Milwaukee, Wisconsin
The construction industry is falling from a sustained boom that peaked in 2007 and 2008, resulting in a plummeting number of jobs this year.
There are two ways to interpret the dramatic shift in the industry, said Keith Bender, assistant professor of economics at the University of Wisconsin-Milwaukee. One, the decline is as bad as it looks and must be curbed with public stimulus money.
Two, the fall from the heights of the past decade is inevitable and, although painful for unemployed workers and companies forced to close, good for the industry.
“You just let the market adjust,” Bender said of the second approach, “and if it causes you to go back, well, maybe that’s where you should have been before.”
Wisconsin in October had 113,700 construction jobs, which is on par with the number of jobs in the mid-1990s. But John Jorgensen, business manager of the Painters and Allied Trades District Council No. 7 in New Berlin, said the market does not remind him of the 1990s.
The council has shed about 100 members in the past year, and the number of hours worked is down about 25 percent, he said.
“To me, this period of time seems to be more reminiscent of the early 1980s than the ’90s,” Jorgensen said, “when we lost a lot of people in the industry through lack of work.”
Job numbers that were healthy for the industry 14 years ago — 109,200 jobs in 1995 — are considered terrible by today’s standards because the industry grew so much during the good years, said Scott Drewianka, UW-Milwaukee associate professor of economics. In October 2007, there were 132,800 construction jobs in Wisconsin.
“There does have to be some adjustment,” he said. “However fast it happens, however it works, someone is going to have to move.”
Bender agreed the laws of economics say the industry must suffer before the work force stabilizes to match the amount of work. But stimulus money also is important, he said.
Projects from the American Recovery and Reinvestment Act can soften the fall, Bender said.
“I am a bit in the middle,” he said. “I think, in general, the markets should be left alone to figure out where the best place to land is when there are no huge adjustments being made. And, right now, huge adjustments are being made.”
Even after the credit market loosens up and there are more project opportunities, the industry likely will not return to its past highs, said Jeff Beiriger, executive director of the American Subcontractors Association of Wisconsin.
“It’s kind of a slow-and-steady-wins-the-day economy,” he said. “We’ve never been able to support some of the sustained growth with the kind of numbers that were running around back then.”
If the boom years truly are gone, some people will have to leave the construction industry or remain unemployed, Drewianka said.
“It’s, in a sense, a loss that we can’t take advantage of the skills that were developed,” he said.