Monthly Labor Review October 2006 23

A visual essay: post-recessionary employment

growth related to the housing market

Housing Employment

During and after the 2001 recession, low mortgage

 rates helped drive unusual strength in the housing

market. Consumption traditionally falters during recessions, thus hindering sales of homes, which are the largest

purchase most people ever make. Although many industries

saw employment fall during and after the recession, certain

industries expanded in large part because of increased housing activity. The following analysis looks at various indicators related to the housing market and employment trends in

industries that benefited.

Data on employment used in this article are from the Current Employment Statistics (CES) program, which surveys

160,000 nonfarm businesses representing about 400,000 establishments monthly. For more information on the program’s

concepts and methodology, see BLS Handbook of Methods

(Bureau of Labor Statistics, on the Internet at http://www.

bls.gov/opub/hom/home.htm). CES data are available on the

Internet at http://www.bls.gov/ces/. Data used in this article

are seasonally adjusted and analyzed through December 2005

unless otherwise noted.

This essay was prepared by Matthew Miller, a former

economist in the Office of Employment and Unemployment

Statistics, Bureau of Labor Statistics. For questions about this

essay, contact Julie Hatch Maxfield, a supervisory economist in the Office of Employment and Unemployment Statistics. E-mail: Hatch.Julie@bls.gov

The following is a list of the charts presented in this visual

essay:

Matthew Miller

1. The 30-year conventional fixed mortgage rate hit an historic low in June 2003, while

refinancing rose sharply in the second quarter of 2003

2. New home sales and employment in residential construction experienced strong growth after

the 2001 recession

3. Employment in residential specialty trades increased by nearly 530,000 since January 2001

4. Construction-related manufacturing employment and industrial production of construction

supplies both increased after 2003

5. Lumber and construction supply wholesalers employment accelerated in 2004 and 2005

6. Existing home sales accelerated in mid-2003, while real estate employment followed suit

about 6 months later

7. Low mortgage rates led to increased employment in mortgage and nonmortgage loan brokers

and real estate credit

8. Average expenditures for residential improvements have increased by more than $110 billion

since 1991

9. Construction spending outpaced retail sales after 2002 and sales in building material and

garden supply stores in 2003

10. Employment growth in furniture and home furnishings stores and building material and

garden supply stores outpaced total retail trade following the 2001 recession

11. Housing has aided employment and sales growth in a host of industries
Housing Employment

24 Monthly Labor Review October 2006

and to refinance existing mortgages. The low rates and

rising housing prices fed the perception that housing was

a good investment, and home sales boomed. According

to the U.S. Census Bureau, home-ownership rates

reached an all-time high of 69.2 percent in the second

quarter of 2004.

• After reaching a cyclical peak of 8.52 percent in May

2000, the 30-year conventional fixed mortgage rate began to decline until it hit an historic low of 5.23 percent in

June 2003. The rate remained low through 2005.

• Low mortgage rates spurred consumers to buy homes

1. The 30-year conventional fixed mortgage rate hit an historic low in June 2003, while refinancing rose

sharply in the second quarter of 2003

Percent

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

4

5

6

7

8

9

10

11

4

5

6

7

8

9

10

11

Percent

SOURCE: Freddie Mac.

Billions of dollars

SOURCE: Mortgage Bankers Association.

Home purchase

Refinancing

Billions of dollars

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

0

100

200

300

400

500

600

700

800

900

0

100

200

300

400

500

600

700

800

900

30-year conventional fixed

mortgage rate
 Monthly Labor Review October 2006 25

the 1990–91 recession; however, after this lag, both

employment and sales experienced strong coincidental growth.

• During the 1990–91 recession, the annual rate of new

homes sold declined by around 100,000, as compared

with an increase of around 10,000 new homes sold during the 2001 recession. New home sales continued to

reach record highs since then. Through 2005 about

1,280,000 new homes had been sold. Since the start of

the 2001 recession, the demand for new homes has created a need for residential construction workers.

• Employment in residential construction of buildings

grew at a strong rate soon after mortgage rates

dropped and as new home sales rose. Between March

and November 2001, residential builders added only

11,700 jobs but, between November 2001 and December 2005, added almost 180,000 jobs.

• In contrast, the industry cut 131,300 jobs during and

following the 1990–91 recession, reaching an employment trough in April 1992, about 7 months following a sales low point. Employment gains in residential builders lagged new home sales growth after

2. New home sales and employment in residential construction experienced strong growth after the

2001 recession

Employment,

in thousands

Sales, annual rate,

in millions

NOTE: Data are seasonally adjusted. New single-family home sales data are 12-month moving average.

SOURCE: BLS and Census Bureau.

Employment in

residential construction

of buildings

New single-family

home sales

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

500

550

600

650

700

750

800

850

900

950

1,000

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4
Housing Employment

26 Monthly Labor Review October 2006

• Housing demand has also driven employment growth of

residential specialty trade contractors. From January

2001 through December 2005, the residential trades

added 529,100 jobs, a 29.1 percent increase. This hiring

outpaced job growth for residential building contractors,

which had 23.5 percent growth over the same period.

3. Employment in residential specialty trades increased by nearly 530,000 since January 2001

• Specialty trade contractors are essentially subcontractors that specialize by performing certain tasks, such as

pouring concrete, site preparation, plumbing, painting,

or electrical work. The residential trades employ about

2.3 million workers, more than twice as many workers

as residential building contractors.

NOTE: January 2001 is the first month for which residential and nonresidential specialty trades data are available. Data

are seasonally adjusted.

Thousands Thousands

January July January July January July January July January July 1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2001 02 03 04 05
 Monthly Labor Review October 2006 27

have shown particular strength in recent years and are

worth noting. Wood products manufacturers have

added 28,900 jobs, representing a 5.5-percent gain

since hitting an employment trough in August 2003.

Cement and concrete products added 17,700 jobs, a

7.9-percent increase, since an employment trough in

February 2003. In addition to U.S. demand, some of

this growth may be attributable to growing foreign demand for U.S. exports of cement and concrete products as reported by the U.S. International Trade Commission. After an employment low in June 2003, architectural and structural metals has regained 23,900

jobs, a 6.4-percent increase, while construction machinery manufacturing has recovered 16,800 jobs, representing a 29.1-percent gain.

• Demand for building materials and equipment has grown

with home sales. Construction-related manufacturing

employment has grown also; 48,600 jobs were added

between an employment trough in June 2003 and December 2005. This is notable in the manufacturing industrial sector, which as a whole has had no sustained

employment growth since before the 2001 recession.

• Similar trends appeared in the index of industrial production of construction supplies, which measures real

output in manufacturing. The index of industrial production has grown from 96.9 in April 2003 to 113.5 in December 2005, an increase of 17.2 percent.

• Certain construction-related manufacturing industries

4. Construction-related manufacturing employment and industrial production of construction supplies

both increased after 2003

Employment,

in thousands

Industrial

production index

Construction-related

manufacturing employment

Industrial production of

construction supplies

NOTE: Data are seasonally adjusted.

SOURCE: BLS and Federal Reserve Board.

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 1,400

1,450

1,500

1,550

1,600

1,650

1,700

1,750

1,800

1,850

60

70

80

90

100

110

120
Housing Employment

28 Monthly Labor Review October 2006

• Following sharp declines during the year leading up to the

2001 recession, strong job growth came in lumber and

construction supply wholesalers. Employment reached a

low point in June 2001 and then began to expand during

the recession. Growth accelerated in 2004 and 2005.

• Since June 2001, the industry added 37,900 jobs, or 17.3

percent, easily outpacing wholesale trade’s overall

growth. Wholesale employment did not hit a trough until August 2003, and subsequent job gains totaled only

3.5 percent.

5. Lumber and construction supply wholesalers employment growth accelerated in 2004 and 2005

Seasonally adjusted,

in thousands

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

160

180

200

220

240

260

160

180

200

220

240

260

Seasonally adjusted,

in thousands
 Monthly Labor Review October 2006 29

• Existing home sales accelerated in mid-2003. Real estate employment followed suit about 6 months later; after that, existing home sales and real estate employment

grew coincidentally. Employment in activities related to

real estate and offices of real estate agents and brokers

notched up during the recession. Employment in offices

of real estate grew by 77,700 or 26.8 percent since

March 2001, the beginning of the recession. Activities

related to real estate include services such as managing

real estate for others and appraising real estate but not

real estate leasing. Employment in this industry grew by

77,900 jobs or 17.9 percent since March 2001.

• Growth in existing home sales accelerated after the 2001

recession as did new home sales. The number of existing homes that changed hands well exceeded the number of new homes sold, directly benefiting the real estate and related financial industries. According to the

National Association of Realtors, two factors may help

explain this fact. First, before the stock market decline

of 2001, some investors were placing capital gains from

stocks into residential real estate. Second, after the stock

market decline, some investors liquidated some stock

holdings and placed the proceeds into residential real

estate.

6. Existing home sales accelerated in mid-2003, while real estate employment followed suit about

6 months later

Index,

January 2001=100

Index,

January 2001=100

2001 02 03 04 05

NOTE: Data are seasonally adjusted. Existing home sales data are 12-month moving average.

SOURCE: BLS and National Association of Realtors.

Existing home sales

Employment in offices of real

estate agents and brokers

Employment in financial

activities related to real estate

January July January July January July January July January July

95

100

105

110

115

120

125

130

135

140

95

100

105

110

115

120

125

130

135

140
Housing Employment

30 Monthly Labor Review October 2006

interaction between home buyers and real estate credit

establishments. Employment in mortgage and nonmortgage brokers and real estate credit grew through the recession. Even when mortgage rates stopped declining in

mid-2003, employment still grew, especially for mortgage and nonmortgage loan brokers.

• Home sales remained strong even after the number of

those refinancing their mortgages fell back from unusually high levels in 2003. Consequently, employment continued its upward trend, just at a slower rate.

• Mortgage rates have not only been a driving force behind all of the employment trends analyzed thus far,

low rates have benefited mortgage brokers and lenders

also. The low rates increased demand for new and refinanced mortgages and, thus, for workers in mortgage and nonmortgage loan brokers and real estate

credit.

• Real estate credit companies lend funds and require borrowers to secure the loan by pledging real estate as collateral. Mortgage and other loan brokers facilitate the

7. Low mortgage rates led to increased employment in mortgage and nonmortgage loan brokers and

real estate credit

Seasonally adjusted employment,

January 2001=100

Mortgage rate

SOURCE: BLS and Federal Home Loan and Mortgage Corporation.

2001 02 03 04 05

Employment in mortgage and

nonmortgage loan brokers

Employment in

real estate credit

30-year mortgage

January July January July January July January July January July

80

100

120

140

160

180

200

220

240

260

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0
 Monthly Labor Review October 2006 31

money for home improvements.

• Since 1999, residential improvement expenditures have

increased by an average of $10.2 billion or 9.3 percent

per year. This jump provides an additional explanation of

the growth in construction, construction-related manufacturing, and wholesale employment. It also helps explain

sales and employment strength in some retail industries.

• Mortgage lending also boosted remodeling. Much refinancing was done to tap home equity in order to remodel

and renovate existing homes. The National Association

of Realtors found that gains in housing wealth are spent

at a quicker pace in the short run than gains in stocks

and provide a temporary lift to consumer expenditures.

Between 2001 and 2002, 40 percent of those borrowing

against their home equity reported using some of the

8. Average expenditures for residential improvements have increased by more than $110 billion

since 1991

Annual average, in

millions of dollars

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Annual average, in

millions of dollars

SOURCE: Census Bureau.
Housing Employment

32 Monthly Labor Review October 2006

• From 1993 though 2000, sales in building material and

garden supply stores and spending on private residential

construction trended together similar to overall retail

sales. After 2002, construction spending grew at a faster

pace than retail sales, while the same occurred with

building material and garden supply stores as of 2003.

9. Construction spending outpaced retail sales after 2002 and sales in building material and garden

supply stores in 2003

• Much of the spending occurred at home centers. Some

large chains have estimated that 20 percent to 30 percent of their business comes from private contractors.

Building and garden stores benefited doubly from the

building and remodeling boom as they supply contractors as well as individuals.

1993 94 95 96 97 98 99 2000 01 02 03 04 05

50

100

150

200

250

300

350

50

100

150

200

250

300

350

Seasonally adjusted annual rate,

January 1993=100

SOURCE: BLS and Census Bureau.

Construction spending

Retail trade sales

Building material and

garden supply stores sales

Seasonally adjusted annual rate,

January 1993=100
 Monthly Labor Review October 2006 33

same timespan.

• With consumers buying more new and existing homes,

furniture sales have risen as well. Furniture and home

furnishings stores have added 34,800 jobs since January

2001. Furniture stores have not seen the same growth as

building material and garden supply stores however,

because other venues also sell furnishings. For example,

according to the U.S. Census Bureau, general merchandise stores accounted for about one-third more kitchenware and home furnishings sales than furniture stores in

1997.

• Overall, retail trade shed jobs through the 2001 recession and until mid-2003. The industry has since recovered about 85 percent of the job losses. However, two

retail component industries—building material and garden supply stores and furniture and home furnishings

stores—experienced notable employment growth.

• Home centers have become the foundation for employment in building material and garden supply stores,

which added 141,200 jobs since January 2001 for a

12.3-percent employment gain. Home centers expanded

their payrolls by 153,900 jobs or 31.3 percent over the

10. Employment growth in furniture and home furnishings stores and building material and garden

supply stores outpaced total retail trade following the 2001 recession

NOTE: Data are seasonally adjusted.

Index,

January 2001=100

Index,

January 2001=100

Building material and

garden supply stores

employment

Furniture and home

furnishings stores employment

Total retail

employment

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

70

75

80

85

90

95

100

105

110

115

120

70

75

80

85

90

95

100

105

110

115

120
Housing Employment

34 Monthly Labor Review October 2006

• Record existing and new-home sales have propelled economic growth after the 2001 recession.

Housing has aided employment and sales growth

in a host of industries. These beneficiaries include

11. Housing has aided employment and sales growth in a host of industries

residential construction, construction-related

manufacturing, loan brokers and real estate credit

agents, real estate, and certain retail and wholesale industries.

March 2001- November 2001- March 2001-

November 2001 December 2005 December 2005

Level Percent Level Percent Level Percent

 

Total nonfarm ............................................................. –1,621 –1.2 3,493 2.7 1,872 1.4

Total private ................................................................ –2,002 –1.8 2,941 2.7 939 .8

Construction ........................................................... –78 –1.1 632 9.3 554 8.1

Construction of buildings .................................... –6 –.4 143 9.0 137 8.6

Residential ..................................................... 12 1.5 180 22.8 191 24.7

Nonresidential ................................................. –17 –2.1 –37 –4.6 –54 –6.7

Heavy and civil engineering ............................... –4 –.4 22 2.3 18 1.8

Specialty trade .................................................... –68 –1.6 467 11.0 400 9.3

Residential specialty trade contractors ..... 13 .7 490 26.4 504 27.3

Nonresidential specialty trade

contractors ................................................... –81 –3.3 –23 –1.0 –104 –4.2

Manufacturing ..................................................... –1,107 –6.5 –1,606 –10.1 –2,713 –16.0

Wood products .............................................. –19 –3.3 –3 –.6 –23 –3.9

Cement and concrete products ................... –5 –1.9 7 2.9 2 .9

Architectural and structural metals ............ –22 –5.2 –10 –2.5 –33 –7.6

Construction machinery .............................. –9 –11.9 8 12.2 –1 –1.2

Wholesale trade .................................................. –112 –1.9 74 1.3 –38 –.6

Lumber and construction supply ................ 1 .5 35 16.0 37 16.6

Retail trade ......................................................... –197 –1.3 150 1.0 –47 –.3

Furniture stores ............................................ –10 –1.8 47 8.7 37 6.7

Building material and garden supply

stores .......................................................... 13 1.1 129 11.1 141 12.3

Financial Activities .............................................. 50 .6 378 4.8 428 5.5

Real estate credit .......................................... 24 10.6 113 46.0 137 61.5

Mortgage and nonmortgage loan brokers . 11 17.8 73 100.8 84 136.6

Real estate ......................................................... 10 .7 137 10.2 147 11.0

Offices of real estate .................................... 3 1.1 75 25.4 78 26.8

Activities related to real estate.................... 6 1.3 72 16.3 78 17.9

Industry

(thousands) (thousands) (thousands)