NYC construction growing? Not really

by Greg David 

 Last week the New York Building Congress issued a bullish report on the city’s construction industry. It said that spending would reach $30.7 billion this year, the highest total since 2008, and remain at that level for the next several years.

However, the headline and the reality are somewhat different, it turns out. First, the increase in dollar value is driven in large part by inflation.

While the consumer price index is rising at an annual rate of about 2% a year, cost increases in construction over the past three years have been on the order of 20%, estimates Building Congress President Richard Anderson. In real terms, the report notes, there has been no increase in construction spending in the past three years. Part of this is the rebound in material prices from the lowest of the Great Recession, exacerbated by the increase in the price of oil. Don’t forget that recent contracts provide wage increases, even as they implement work rule changes.

The second—and most alarming—note is that employment in the industry is expected to decline slightly this year, to 110,800, the lowest number since 1998. The lack of any real boost in activity partly explains the decline.

Productivity gains accounts for the rest, but productivity in building works somewhat different than in other industries, Mr. Andersen says. It isn’t primarily the introduction of technology, which has had only some impact in back-office operations. It is the fact that only the best workers have jobs, and they get things done faster and more efficiently.

The Building Congress sees no uptick in jobs until 2014.

The bottom line: Construction is a source of good, middle-class jobs—whether unionized or non-union. It looks like this sector will not be a source of those middle-class jobs.