Economy Watch: What the Status of the Construction Industry Means for Real Estate

How is the construction industry doing across the country?

In keeping with the generally positive direction of the economy, the tenor of the construction industry is generally positive as well. That’s only fitting, since economic activity drives demand for built structures, which in turn drives demand for construction materials and labor. According to an analysis released on Friday by the Associated Builders and Contractors, construction activity and employment continues to improve from a year ago. On a year-over-year basis (not seasonally adjusted), construction unemployment rates for the country and 45 states were down in June. Also, the industry added 262,000 jobs from June last year to this June.

Of course, the industry isn’t completely robust everywhere. ABC noted that construction is still the strongest in west-central and western states. The states with the lowest construction unemployment in June are (in order from the lowest): South Dakota—at a slender 1.8 percent—Nebraska, North Dakota, Montana and Idaho (and nearby Wyoming is sixth). North Dakota fell to third place in June, with the decline in its position largely due to the slump in oil prices and the resulting slowdown in exploration and drilling new wells (which count as construction). Still, both the construction unemployment rate and the overall state unemployment rate are at a low level that other states would envy, so the drop in energy prices hasn’t been a crushing blow to the region yet.

By contrast, the states with the highest construction unemployment rate are (from lowest to highest): New Mexico, Rhode Island, Georgia, West Virginia and finally Mississippi, coming in worst at 9.9 percent. There’s no single factor in these states’ sluggishness, with various forces at work keeping construction activity at a low ebb relative to the healthy states. The highest construction unemployment rate among the largest states is that of California, which is seventh in the nation with a rate of 8.1 percent. Texas, for the sake of comparison, has a 4.6 percent construction unemployment rate as of June, and New York’s rate is 6.2 percent.

Compared with the recessionary years, however, construction employment is doing very well these days, even in the states that have the highest current unemployment in the industry. Mississippi’s current 9.9 percent is no picnic, but then again in June 2010, the rate was 21.7 percent. Even South Dakota had a construction unemployment rate of 6.3 percent five years ago (and a year ago, it was 1.6 percent, meaning that it’s edged up with the energy slowdown, but not by much). The largest of the state were also vexed by high unemployment in construction back in 2010: California at 26.4 percent, New York at 14.4 percent and Texas at 13.9 percent.