|
The construction sector in
Connecticut experienced an he construction sector in Connecticut experienced an
unprecedented boom in the eighties, adding over 31,000 jobs, or 64 percent growth, from
1982 to 1988. But it was also a period of rapid, unsustainable build-up in the real estate
market which inevitably led to the construction business failures and job declines during
the 1989-92 recession. All of the prior gains in the industry were lost and then some,
almost 34,000 jobs (-42%) by the end of 1992. Yet, since 1993, this small but dynamic
industry has been steadily adding workers, and by the end of 1999 had reclaimed over
one-third of the jobs lost in the last recession (Chart 1).
Although the construction industry accounts for a relatively small part of the
Connecticut economy in terms of value added, employment, or income, it is one of the most
closely watched sectors for its significant ripple effect on the entire State economy.
This article will highlight the sector's output, employment, wages, establishment
trends and outlook. Employment and wage data trends on the county level are also analyzed.
Output & Employment Trends
The construction sector made up roughly three percent of Connecticut's gross state
product (GSP) in 1997, or $4.4 billion out of the total $134.6 billion. Despite its
relatively small size, construction activity is closely watched as an indicator of
cyclical movements in the economy.
As Chart 2 on page 2 shows, business cycles in the construction industry are generally
more extreme than the cycles for the economy as a whole. Its troughs are deeper and its
peaks are higher than those for the State's total output. During the economic boom in
the mid-eighties, the construction sector saw rapid expansions in output, outpacing the
growth in the overall economy. In 1983 alone, the industry experienced a 24 percent
increase, while output rose only five percent in the economy as a whole.
After reaching a peak in 1988, the real estate "bubble" burst; the
sector's output began to decline precipitously beginning in 1989, and dropped almost
21 percent in 1990. Then, after four years of declining output (twice as long as the
overall economy's two year contraction in 1990 and 1991), the construction industry
finally turned around beginning 1993, albeit at a slower pace than the overall economy.
The cyclical nature of the construction industry is also mirrored in employment data.
As Chart 3 shows, there exists a very close relationship between employment and output in
the construction sector.
Compared to non-construction sectors, construction employment has exhibited more
dramatic changes and has reacted more sharply to changes in economic conditions. Changes
in mortgage interest rates, the availability of financing, consumer confidence, and
overall economic conditions have a greater impact on construction activities and jobs than
on most other industries (see Chart 4).
When compared to the nation, construction employment in Connecticut showed similar
trends for most of the past 16 years (Chart 5). During the heyday of the 1980's,
however, Connecticut construction jobs grew faster than the nation's. Since the
recession, our growth has slowed and remained below the national pace.
Employment
The Connecticut construction sector had over 61,000 jobs in 1999, making up 4.2 percent
of total private employment. From 1992, when the Connecticut economy began its employment
recovery, the construction industry experienced a 27.6 percent increase in jobs. This was
significantly higher than the overall private sector job growth of 10.3 percent between
1992 and 1999.
On a detailed level (four-digit Standard Industrial Classification), over two thirds of
the industry's subsector categories experienced increases in jobs from 1992 to 1999.
The biggest employment growth, in terms of both the number and rate, occurred in the electrical
work, single-family housing construction, and plumbing, heating,
air-conditioning sectors (see Table 2 on page 4). The biggest job-losing subsector
since 1992, on the other hand, was in heavy construction, not elsewhere classified.
Currently, the largest number of jobs is concentrated in the plumbing, heating,
air-conditioning industry with over 10,000 positions, making up nearly 20 percent of
all construction jobs.
Wages
In terms of wages, the construction sector in the State averaged $43,342 in 1999,
slightly above the total private sector average of $43,195. Between 1992 and 1999, this
sector's average wage grew 21.7 percent, a slower rate than the overall private
sector's 33.0 percent. Within construction, the highest wage was paid in nonresidential
construction, not elsewhere classified at $57,709 in 1999. The lowest average wage was
paid to the workers in the painting and paper hanging industry at $30,510.
Establishments
From 1992 to 1999, the number of construction business establishments actually fell by
11.1 percent, while the number of overall private sector establishments rose by 3.8
percent. The biggest percentage drops occurred in residential construction, not
elsewhere classified and operative builders categories. The subsectors with
actual net increases in the number of businesses since 1992 include nonresidential
construction, not elsewhere classified and floor laying and floor work.
Counties
All of the counties in Connecticut experienced net business losses in construction
between 1992 and 1999, with the biggest percentage drop in New London and Hartford (see
Table 1 on page 4). In terms of employment, all eight counties added construction jobs in
the last seven years, five of which showed faster growth rates than the State overall. As
of 1999, Hartford County had the largest number of jobs, home to nearly a third of the
total construction jobs in the State. All of the counties experienced wage growth as well
from 1992 to 1999. However, employees in only two (Fairfield and Hartford) counties were
paid above the statewide average wage last year, which compares to four counties in 1992.
New London's wage rate was the highest in 1992, whereas Fairfield County topped the
list in 1999. The lowest annual average wage was in Windham County for both 1992 and 1999
(see Chart 6 on page 2).
Outlook
The prospects for a steady, if not even stronger, job growth in this industry seem
bright. There are many new, renovation or expansion projects already on the drawing board
or in the pipeline, such as the University of Connecticut's "UCONN 2000"
project, Eastern Connecticut State University's expansion and renovation, and the
upgrading and enhancing taking place at other state universities and colleges and state
hospitals, as well as at Yale University. Other projects include: expansion of two
casinos, Foxwoods in Ledyard and Mohegan Sun in Montville; development of Pfizer in New
London; new Long Wharf Mall in New Haven; expansion of Pearl Harbor Memorial Bridge
("Q" Bridge) in New Haven; expansion of Bradley International Airport; new
Renaissance Place complex and Bushnell Theater in Hartford; and numerous infrastructure
repairs and road paving projects to the State's major and secondary highways. All of
these will undoubtedly generate thousands of new construction jobs (many of which are
expected to be filled by Connecticut residents) in the coming years. With the improved
economy, these projects will also help to spur many new home building jobs in each region.
As of July this year, the construction sector added 1,600 jobs, or a 2.7 percent
increase over a year ago. The construction sector is expected to see sustained growth this
year and for the next several years. Shortages of skilled and trained construction workers
to fill these positions notwithstanding, the Connecticut Department of Labor projects that
the industry will experience the largest growth rate of all the major industry groups, at
20.8 percent, by 2006. Nearly two-thirds (7,080) of the 11,070 additional jobs will be
concentrated in the special trade contractors category.
The now familiar slogan, "You Belong in
Connecticut," had its origin in the Marketing Advisory Board of the industry cluster
initiative. A key finding of the Board was the recognition that in an aggressive and
competitive global environment Connecticut needed a more cohesive, sustained, and
consistent promotional effort. The tag line was chosen for its ability to work as an
umbrella message for multiple targeted campaigns both in- and out-of-state.
The first You Belong in Connecticut campaign was
launched over the summer (July-September) in 1999 and was initially announced in a press
rally held by the Governor's Office. It consisted of radio advertising, outdoor
billboards, bus cards, and aerial banners, merchandise (t-shirts, hats, lanyards, frisbees
and beach totes), events (including a college fair and Big E booth, a Web site, a full
public relations complement to the campaign. The campaign focused on informing
Connecticut's young people (students and members of the workforce) about educational
and business/job opportunities, as well as entertainment/ recreation activities and
quality of life in Connecticut.
Media outreach resulted in 3,000,000 impressions
designed to raise the public's awareness of Connecticut as an attractive place for
young professionals. Now SNET and Webster Bank are making significant contributions by
carrying the logo in publications and monthly statements.
Commissioner James F.
Abromaitis of the Connecticut
Department of Economic and
Community Development announced
that Connecticut communities
authorized 898 new
housing units in July 2000, a 8.1
percent decrease compared to
July of 1999 when 977 units were
authorized.
The Department further indicated
that the 898 units permitted
in July 2000 represent an increase
of 6.4 percent from the 844 units
permitted in June 2000. The
year-to-date permits are down
14.6 percent, from 6,491 through
June 1999, to 5,546 through June
2000.
Fairfield County documented
the largest number of new, authorized
units in July with 287. New
Haven County followed with 157
units and Hartford County had
154 units. Stamford led all Connecticut
communities with 162
units, followed by Danbury with
30 and Shelton with 25.
The national economy
continues to baffle the
"old-economy" experts with the
larger than expected second
quarter growth in gross domestic
product. "New-economy" types
see the event as just confirming
their view that productivity
improvements will facilitate
further non-inflationary growth.
The proof of the pudding, as it is
said, is in the eating. So until
events trigger a change in paradigm,
the "new-economy" story
must remain at center stage.
While consumer spending
softened somewhat, business
investment, especially computers
and software, and (unintended)
inventory accumulation contributed
to the robust growth in the
second quarter. The once-in-adecade
Census further boosted
output. So, the extra growth in
the second quarter reflected in
some measure one-time events.
The big question remains the
future movements in consumer
spending.
Meanwhile, the Connecticut
coincident and leading employment
indexes continue to march
to slightly different drummers.
The coincident index, a gauge of
current employment activity,
reached a new all-time peak with
the release of (preliminary) June
data. That is, the current expansion
shows no sign of slackening.
The leading index, a barometer of
future employment activity,
continues marking time with no
perceptible trend up or down.
The leading index, however, has
declined for three consecutive
months, although the decrease
from March to April was small
(one-tenth of a point). We shall
continue to focus on the future
movements in the leading index,
because it provides a forecast of
the next downturn in the
Connecticut economy.
Jobs and employment continue
to experience healthy gains.
Jobs (nonfarm employment) rose
by 25,700 over the last twelve
months; total employment rose
by 31,800. The current extremely
low readings on the unemployment
and insured unemployment
rates suggest that employment
remains an important risk to the
current expansion. That is,
where will the new employment
come from?
In summary, the coincident
employment index rose from 96.6
in June 1999 to 103.5 in June
2000. All four components of the
index point in a positive direction
on a year-over-year basis with
higher nonfarm employment,
higher total employment, a lower
total unemployment rate, and a
lower insured unemployment
rate.
The leading employment index
fell from 89.9 in June 1999 to
88.8 in June 2000. Two index
components sent positive signals
on a year-over-year basis with a
lower short-duration (less than
15 weeks) unemployment rate
and lower initial claims for
unemployment insurance. Three
components sent negative signals
on a year-over-year basis with
lower total housing permits, and
a lower average workweek of
manufacturing production workers,
and lower Hartford help
wanted advertising.
SOURCE: Connecticut Center for Economic Analysis, University of Connecticut. Developed by Pami Dua [Economic Cycle
Research Institute; NY,NY] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Stan McMillen and Jingqui Zhu [(860) 486-
3022, Storrs Campus] pro provided vided research suppor support.
Return to Top
|