Puzzling Weakness in Construction Work

Erik S. Lesser/European Pressphoto Agency Townhouses under construction in Atlanta last month.

With the economy having added 162,000 jobs in July, it's clear the pace of job creation has slowed. Before the report, the average monthly gain for 2013 was 202,000 jobs.

One explanation for this slowdown is the failure of the construction sector to show a net gain in jobs since March, notes Kevin Logan, chief United States economist at HSBC. Indeed, the number of construction jobs fell by 6,000 in July.

By contrast, as recently as February, the sector added 48,000 jobs. And between October and March, a period that was unusually warm, Mr. Logan notes, construction ranks grew by an average of 23,000 a month.

For his part, Mr. Logan predicts that construction jobs will again grow in the second half of 2013, lifted by more residential construction.

That's debatable. While the housing sector is healthier in terms of price gains, rising mortgage rates make the pace of new-home sales less certain in the months ahead.

At the same time, the relative recovery in the housing sector recently hasn't come close to restoring anything near the employment level in construction that prevailed before the housing boom turned to bust, helping to bring on the recession.

At 5.79 million now, there are nearly two million fewer construction jobs than in late 2006.

Just why construction employment has been so weak, despite a pickup in construction, has puzzled economists. After all, it's not as if construction work can be outsourced to Asia or replaced by robots.

Instead, as is true in much of the private sector, it seems that builders are doing more but adding fewer workers.