Construction losses not showing up in the data

I have a hard time believing that construction employment is picking up.  The California Employment Development Department (EDD) reported 3,800 construction workers were added in March.  That included the following

March monthly employment changes in construction:

• LA County, 0
• Orange County + 900 
• Riverside and San Bernardino County +2200 
• San Diego + 700 
• Ventura County -100 

I don't know how to explain this rise in hiring.  We know that the housing industry is slowing,  independent contractors have been laid off in big numbers so remittances to Mexico are down and border crossing are fewer.  Perhaps builders are rushing to finish projects, or highway and commercial and school construction is up.  I simply don't have the answer.  In the previous months, we had seen a decline in San Diego, which was not seasonal.

In CA, 20% of all employment in construction and financial services is made of informal workers (see below), and they are not counted in the employment report I quoted above.  f we count the informal work force, would construction show a job loss?

I'd like to look beyond the numbers reported above by the labor department, because they do not show that large numbers of construction workers have lost their jobs, mainly illegals.   Over the past few years, illegal Mexicans have come across the border, while others moved from farm fields, to work at construction sites.  They did not show up in the numbers when they were hired, and they are not showing up now as they are let go.

I heard on NPR last year that farmers did not know what to do, since their workers were leaving strawberry fields for construction sites, where they pay was higher.  It was a real problem for the farmers, who had to let food just rot in the fields.   RS told me the construction crew taking a lunch break near his office is all Mexican.  Many of the workers on my house were illegals.  But these people, who made up a big chunk of our construction crews, are not counted in the employment numbers. 

Boring paragraph about employment...feel free to skip.  The main employment report counts only people whose employer pays their unemployment insurance.  The employees are grouped them by industry, so an attorney working for Sears is counted in retail, not legal.    If that attorney works for Sears through a temp agency, he's counted in professional and business services. The household survey counts people discouraged from looking for work or underemployed. I haven't studied the labor reports enough to know the difference, if any, between the household survey and the informal employment.   I'm not sure if they are the same or different reports, and I'm not sure it really matters for our purpose.   The informal survey asks people about their employment, but the sample size is small, and people fill out the survey wrong, making it less useful.  With 15% of LA's work force in the informal sector, we cannot just ignore this sector.  It's too big.

The informal workforce is what matters to our story.  The construction workers who are laid off so far are not showing up in the data, because they are in the informal workforce.  The informal workforce is anyone whose employer doesn't pay unemployment insurance, because the workers are self-employed or illegal, or the employer is too cheap to pay it.  So when they are let go, they don't get unemployment pay and thus are not counted as being unemployed.

California has 1.6 million informal workers, which is 10% of our workforce and the highest number of any state.  Last year, the UCLA Anderson Forecast report estimates informal job growth from 2003-2005 was 130K for financial activities (includes realtors and mortgage brokers), 40K for construction, -80K for manufacturing, -65K for information, 95K for leisure, and -41K for business services.  Thus, financial activities and construction made of 22% and 19% of total employment for those sectors, respectively, at the end of 2005.  Thus, 20% of workers in construction and financial services are not showing up in the government's employment reports.  . It would be interesting to know if these informal workers are the first, or the last, to be let go.  We'd have to look back to their employment in the last recession.

Construction job losses are bigger than the data shows, as the New York Times reports.

The growing presence of illegal immigrants in home building, mostly working for small labor contractors, might help explain why government statistics have recorded only a small decline in construction employment, despite the collapse in residential investment.

“Technically they don’t fire them,” said Myrna Martínez, coordinator for the Fresno office of the American Friends Service Committee, a nonprofit organization working on social assistance projects for immigrant workers. “They just tell them that there is no more work.”...

As building jobs have grown scarce, many of the workers who left farm labor a few years ago are returning to where they came from. They can be seen once again hunched in clusters under the unremitting sun, cutting heads of lettuce or slicing off spears of asparagus for minimum wage, clinging to the hope that home building will resume again....

Illegal immigrants played a big if quiet part on the supply side of America’s housing boom. According to the Pew Hispanic Center, a research organization in Washington, immigrants from Mexico and other Latin American countries account for about one in five construction workers. Those who arrived since 2000 — who are likely to be unlawfully in the United States because they had virtually no way of immigrating legally — account for an estimated 7 percent of the construction work force.

They were mostly pulled in by the building frenzy of the first half of the decade. According to the analysis by the Pew Hispanic Center, based on census data, Hispanic immigrants took 60 percent of the million new construction jobs created from 2004 to 2006. Those recently arrived took nearly half.

While there are no equivalent statistics at the state or local level, a glance at a construction crew anywhere in the valley confirms the overwhelming immigrant share. “There are only Mexicans,” said Adrián L., an illegal immigrant from Oaxaca who does interior work on homes here. “Now not even the supervisors are American.”

The Wall Street Journal writes about the loss of construction jobs among those not counted in the survey.  It turns out that about 600,000 illegal workers have been laid off from their construction jobs since the peak of the housing boom. 

Monthly remittances from the U.S. to Mexico have dropped every month since their peak of $2.6 billion in May 2006 -- shortly before new-home construction in the U.S. plunged. In February 2007, the latest month for which data are available, remittances to Mexico had slowed to $1.7 billion.

Mexico, Latin America's remittance leader, may be a leading indicator of a trend unfolding across the continent. In a recent study of 15 Latin American economies tracked by BCP Securities of Greenwich, Conn., all but three showed better than a 90% correlation between the ebb and flow of U.S. housing starts and the swelling and shrinkage of remittances as recorded by the nations' central banks....

As housing starts slow, recent hires on construction sites are the first to lose their jobs -- and the first to warn relatives back home not to bother with a risky border crossing until the job picture improves. How many Mexican workers have lost their jobs? Most immigrants send an average of $1,000 a month back home, and Mexico's remittances are down by about $600 million, representing earnings from about 600,000 workers.

Many of these workers rely on day-to-day employment through small, family-owned subcontractors, whose hirings and firings don't surface in overall job-loss statistics.

I've tried to get a handle on the realtor and mortgage broker job losses.  People don't seem to know where their old colleagues ended up with new jobs, if any.   I ask all the realtors I know, "how many realtors have gone back to doing other work", and the answer is always, "I don't know."  That's because realtors work independently, usually from their home office, and rarely go into the company office.  I've been told that one realtor with 20 years in the same office didn't even know another guy who had been there over 5 years.  So I don't know how to get at that number.

On the subject of construction, thanks to the Wall Street Journal (I have a subscription) and the New York Times (registration is free) for digging up the story.