24  Monthly Labor Review • April 2011

The 2007–09 Recession: Construction 

Adam Hadi Construction employment fell by 

1.5 million1 during the December 

2007–June 2009 recession,2 bringing employment in the industry to the lowest level since March 1998. The losses during 

the recession represented a 19.8-percent decline in construction employment, the largest percent decline of any nonfarm industry 

supersector. The majority of the losses came 

during the last 9 months of the recession, 

when employment declined by 1 million. 

(See chart 1.) Job losses averaged 49,000 

per month between December 2007 and 

September 2008 and then accelerated to an 

average of 115,000 per month through June 

2009. Those construction firms which engaged primarily in residential construction 

activities started losing jobs more than a year 

before the recession started, and those firms 

which conducted primarily nonresidential 

and heavy construction projects did not start 

losing jobs until the onset of recession.

Losses in residential construction 

In 2005, demand for residential construction peaked and the U.S. housing market 

started experiencing the beginnings of an 

unprecedented downturn. Deep employment losses in residential building construction and among residential specialty trade 

Construction employment peaks 

before the recession and falls sharply 

throughout it

Job losses in residential construction began well before 

the 2007–09 recession, and employment in both residential 

and nonresidential construction declined rapidly during the recession

Adam Hadi is an economist in the

Division of Current

Employment Statistics

in the Office of

Employment and

Unemployment

Statistics at the Bureau

of Labor Statistics. Email:

hadi.adam@bls.gov

contractors started in 2006, worsened during the recession, and continued at a slower 

pace after the recession ended in June 2009. 

(Residential building construction and residential specialty trade contractors are analyzed together as “residential construction” 

in this article.)

Residential construction employment 

peaked in April 2006 at 3.5 million jobs, 

following approximately 5 years of rapid 

growth. This expansionary period roughly coincided with a housing bubble in the 

United States during which home prices rose 

greatly, peaking in April 2006 as employment in residential construction did.3

 New 

home sales,4 housing starts,5 and the Housing Market Index6

 all peaked between mid2005 and early 2006. (See chart 2.) Employment in residential construction dropped 

rapidly during the second half of 2006 as 

the housing market worsened. Delinquencies in mortgage payments began to rise, 

particularly for nontraditional loans, and by 

the beginning of the recession in December 

2007, residential construction employment 

had fallen by 390,000, or 11 percent. Other 

housing indicators also plummeted from 

their prerecession peaks. 

After the recession began, job losses in 

residential construction accelerated, and 

employment fell by 830,000, or 27 percent, 
Monthly Labor Review • April 2011  

Chart 1. Construction employment, 1990–2010, monthly data, seasonally adjusted

Thousands Thousands

NOTE: Shaded areas represent recessions as determined by the National Bureau of Economic Research.

SOURCE: U.S. Bureau of Labor Statistics.

1990 1992 1994 

8,000

7,500

7,000

6,500

6,000

5,500

5,000

4,500

4,000

8,000

7,500

7,000

6,500

6,000

5,500

5,000

4,500

4,000

Housing Market Index

2,500

2,000

1,500

1,000

500

0

100

90

80

70

60

50

40

30

20

10

0

Housing Market Index Thousands of new ho

sales and housing starts

Chart 2. New home sales, housing starts, and the Housing Market Index, 2000–10, monthly data, 

 seasonally adjusted

NOTE: Shaded areas represent recessions as determined by the National Bureau of Economic Research.

SOURCES:  New home sales and housing starts data are from the U.S. Census Bureau, and Housing Market Index data are from

the National Association of Home Builders.

2000 2001 2002 

New home sales

Housing starts
The 2007–09 Recession: Construction

26  Monthly Labor Review • April 20

from the start of the recession through June 2009. New 

home sales, housing starts, and the Housing Market Index also fell further, to record lows. Job losses eventually 

spread beyond new home construction to other areas of 

housing as spending on remodeling and home improvement projects fell. As home values declined, homeowners 

were less willing to invest in home renovation projects because the perceived return on investment and the ability 

to tap home equity both declined while the value of new 

loans and leases in bank credit from commercial banks 

decreased substantially. During the recession, residential 

construction accounted for over half of the losses in construction as a whole. Residential specialty trade contractors, with losses of 567,000, was the primary driver of job 

losses within residential construction. 

Sensitive to housing’s role in the economy, Federal policymakers enacted a series of policy initiatives to stabilize 

the housing market, including tax credits and expanded 

support for the housing mortgage market. The Housing 

and Economic Recovery Act of 2008 provided for a tax 

credit of up to $7,500 for first-time homebuyers. In 2009, 

the credit was expanded and the deadline was extended 

for new home purchases.7 It appears that these acts helped 

slow residential construction job losses substantially.

As of December 2010, residential construction had 

yet to recover the jobs lost during the downturn. Losses 

slowed significantly in the second half of 2009 (by an average of 19,000 jobs per month), and employment edged 

down in 2010 (by an average of 9,000 jobs per month). A 

number of other construction indicators also remained at 

historically low levels in 2010.

Losses in nonresidential construction

Soon after the recession started, employment losses began 

in the nonresidential components of construction as well. 

(See chart 3.) Since an employment trough in November 2003, nonresidential construction—which consists of 

nonresidential building construction, heavy and civil engineering construction, and nonresidential specialty trade 

contractors—had added jobs at a rapid pace until the employment level flattened just prior to the recession. 

Significant job losses began in the second quarter of 2008 

and accelerated rapidly; overall, there was a 14.8-percent 

decrease in employment during the recession. Nonresi3,600

3,400

3,200

3,000

2,800

2,600

2,400

2,200

2,000

1,800

NOTE: Shaded areas represent recessions as determined by the National Bureau of Economic Research.

SOURCE: U.S. Bureau of Labor Statistics.

2001 2002 2003 

Thousands

Chart 3. Residential and nonresidential construction employment, monthly data, seasonally adjusted, 

 2001–10 

4,800

4,600

4,400

4,200

4,000

3,800

3,600

3,400

Thousands

Nonresidential

Residential
Monthly Labor Review • April 2011  

dential specialty trade contractors was the primary driver 

of losses within nonresidential construction during the 

recession, accounting for 377,000 of the 654,000 jobs lost. 

Nonresidential construction is highly dependent on the 

broader economy and government spending. As the economy contracted, there was less demand for offices, factories, and retail facilities; troubles in financial markets also 

resulted in less funding for new projects. Furthermore, the 

Federal Government, State governments, and local governments experienced declining tax revenues, which led 

to reductions in government spending on civil works projects and affected employment in heavy and civil engineering construction.

In early 2009, the America Recovery and Reinvestment 

Act of 2009 provided increased spending for infrastructure projects, such as highways and bridges, but even after 

the recession ended in June 2009, heavy job losses continued in nonresidential construction. The industry lost 

an additional 330,000 jobs in the 8 months following the 

end of the recession. Employment has since stabilized and 

grew by 50,000 between February 2010 and December 

2010.

Construction employment during recessions

Construction is a cyclical industry that tends to go through 

periodic robust expansions and pronounced contractions. 

However, even in the volatile history of the construction 

industry, the 2007–09 recession stands out. Employment 

losses easily exceeded the declines observed during past recessions. Before 2007–09, the worst employment losses in 

construction during a recession occurred during the November 1973–March 1975 recession, when employment 

fell by 604,000. This represented a 14.3-percent drop in 

construction employment, compared with a 19.8-percent 

decrease during the 2007–09 recession. The job losses in 

construction during the latest recession represented 19.8 

percent of total nonfarm employment losses. 

Notes

1 The data on employment used in this article are from the Current Employment Statistics (CES) survey, which is a monthly survey of 

approximately 140,000 nonfarm businesses and government agencies 

representing approximately 440,000 individual worksites. For more 

information on the CES program’s methods, see “Technical Notes to 

Establishment Survey Data Published in Employment and Earnings,” 

http://www.bls.gov/web/cestn2.htm (visited Apr. 5, 2011). CES data 

are available at http://www.bls.gov/ces (visited Apr. 5, 2011). The CES

data used in this article are seasonally adjusted unless otherwise noted.

2 Recessions are identified by the National Bureau of Economic 

Research (NBER). According to the NBER, the most recent recession 

began in December 2007 and ended in June 2009. The previous two 

recessions were from March 2001 to November 2001 and from July 

1990 to March 1991. For a complete list of business cycle dates, consult 

the NBER webpage at http://www.nber.org/cycles/cyclesmain.html

(visited Nov. 2, 2010).

3 S&P/Case-Shiller Home Price index data are courtesy of Standard 

& Poor’s and can be found at http://www.standardandpoors.com/

indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusacashpidff--p-us---- (visited Apr. 6, 2011).

4 Data on new home sales are published by the U.S. Census 

Bureau and are available at http://www.census.gov/const/www/

newressalesindex.html (visited Apr. 6, 2011).

5 Data on new residential construction (housing starts) are published 

by the U.S. Census Bureau and are available at http://www.census.

gov/const/www/newresconstindex.html (visited Apr. 6, 2011).

6 Data on the Housing Market Index are published by the National 

Association of Home Builders and are available at http://www.nahb.

org/reference_list.aspx?sectionID=134 (visited Apr. 6, 2011).

7 Taxpayers had to have a binding contract to purchase a home 

before May 1, 2010, and must have closed on the home before July 

1, 2010. For more information, see http://www.irs.gov/newsroom/

article/0,,id=204671,00.html (visited Dec. 22, 2010).