Special Report: 3.19.2009

Posted by TED Magazine on Thursday, March 19, 2009

A Deep Dive Into the Data

By Joe Salimando

Imprecision runs rampant in our society. Sometimes it’s a result of laissez-faire behavior by politicians and business people; a good example here would be the rating of residential mortgage-backed securities as “AAA” by rating agencies that should have known better.

And then there’s the fact that many of us just really suck at math. This subset of the population includes, apparently, people who do general media AND business reporting!

Right now, we’re in a Depression (as Special Report has been saying since August 2004!).

Given that, it’s important to look more closely at numbers.

Housing

Here’s an eye-opening statistic you’ve not seen reported elsewhere:

• New single-family houses started in January 2005: 113,100.
• New single-family houses started in January 2009: 22,000.

That’s not a typo. It’s a doggone big drop in just four years, isn’t it? You might actually remember 2005! The numbers come from Census Bureau press releases (one recent, one historic).

Further, new houses that are being built are shrinking. Here’s a Washington Post snippet from Jan. 24, 2009:

Atlanta-based Beazer Homes recently started to shrink its designs. Its high-end houses, which used to be about 3,600 to 3,700 square feet, now average about 3,000 square feet.

Entry-level homes, at least in some locations, are getting a trim as well. Some of Beazer’s houses in the Greenfield development in Hagerstown, Md., are now about 1,900 square feet, compared with the old standard of 2,500 square feet.

Construction Start

 

Every month, Robert Murray, chief economist for McGraw-Hill Construction, posts to the Construction.com website (find it here) the up-to-date figures for the dollar value of construction starts.

It’s not a long web document, but it does have a lot of info. The table pasted above comes from the very bottom of the release. The headline on this one was that January starts were down 3%, and that’s what was parroted in the media.

And January construction starts were down 3%, from December 2008.

But just look at the numbers above, comparing unadjusted totals for January 2009 with one year earlier. If nonresidential has posted a 53% drop at any other time in the past few years, certainly most of us are not aware of it.

Might this info have created a headline somewhere (other than TEDMAG.com)?

Construction Spending

Every month, the Census Bureau releases a construction spending report. Here’s a typical general-media report (from Thomson Financial, posted to the Forbes.com site). It parrots the Census data, saying “total U.S. construction fell 3.3% in January.”

Sounds not-so-damn-bad, right? We can handle 3.3%, can’t we?

But wait. Here’s what was posted to The EleBlog.

 

Now, which seems more reflective of the actual situation in the construction industry? Down 3.3%? Or down 19% over a two-year period?

Yes, it does seem as if the owner of The EleBlog is patting himself on the back here. I apologize for this self-aggrandizement. But realistically: All I did was:

1. disregarded the seasonal adjustments, which seems realistic;
2. compared January to January, rather than January to December; and
3. went back and looked at the historical press release for January 2007.

This does not seem like a lot of work to do. In fact, it took less than three minutes.

Construction Employment: Down 18.8% In Two Years

Did you know that employment of field workers in the construction industry was down, as of January and February, to levels last seen in 2003? Early 2003 wasn’t such a great time in the business. So: Things got “bad” damn fast.

If you average out the January-February numbers from the Bureau of Labor Statistics, there were roughly 790,000 fewer workers employed in the construction industry than in 2007. A few facts to add:

1. There were 4,622,000 people employed in construction in February 2009 vs. 5,409,000 in February 2007.
2. That 2007 number was the best February for employment that the construction industry has ever had.
3. Employment in construction in February 2003, a time in which construction was recovering from a slight recession, was 4,621,000.

In February 2007, the nation had 145,919,000 people employed, of which 5,409,000 (3.7%) were in construction. In February 2009, we had 141,748,000 people working, of which 4,622,000 were in construction (3.26%).

Comparing just the February data over two years:

Employment: We’ve lost 4,171,000 jobs

Construction: Lost 787,000 jobs

Construction jobs as a percentage of total lost = 18.87%

As an electrical distributor, unless you are 100% into industrial automation, it’s likely you have a stake in construction. Perhaps 2007 is recent enough so that you probably remember it (and perhaps can look up numbers you posted in February 2007).

Is it noteworthy that employment in construction is down nearly 20% in 24 months?

EC Employment: Record One-Month Drop

Here are a few notes (obvious to industry veterans, but not everyone reading this has gray hair, you know!):

1. Electrical construction is the tail end of the construction industry. It recovers more slowly than the rest of it, because a lot of the electrical work comes in the final months of a given construction project.
2. Along those same lines, electrical construction slips into a recession (or Depression) later than the rest of the construction biz.
   
3. Slowing things down just a bit more, the Bureau of Labor Statistics posts data on subcontractor employment one month later than for construction as a whole. That means while you see February 2009 data above for all of construction, as of this moment we have only data for January on electrical.

December 2008 saw 701,500 “production workers” (think field workers) employed in electrical contracting, vs. 740,500 in December 2007.

January 2009 saw 669,600 workers in the EC field, vs. 715,600 in January 2008.

Quick math: December 2008’s decline was 5.3%; January 2009’s dip was 6.4%.

Now, that doesn’t sound so bad. But there’s more. You can look at the BLS database for employment in electrical contracting (a month by month run-down of employment in the business) going back to January 1990.

Let’s focus on comparing two numbers above:

• December 2008: 701,500 employed in electrical contracting
• January 2009: 669,600
• One-month drop: 31,900, or 4.55%

That’s a one-month drop of 31,900. When’s the last time the industry saw that big a drop in just one month? Answer: NEVER.

In other words, going back to 1990, the one-month drop in the most recently reported data for electrical construction was the BIGGEST ON RECORD.

Here are the monthly data, so you can see for yourself (if you like):

 

Note: Data in blue are the annual averages. The (p) next to January 2009 means that it is preliminary data, subject to revision. Each cell provides the number of workers in thousands; so there were 701,500 in December 2008.

Previous big drops:

• December 1994 to January 1995: A loss of 21,800 (= 3.96%)
• December 2001 to January 2002: A loss of 24,700
• December 2003 to January 2004: A loss of 22,100

It appears as if the drop from December to January was the biggest drop in raw-numbers terms AND in percentage terms.

National Unemployment: 15.36%

If you listened to media reports on the national unemployment rate when the data came out March 6, you heard that the national unemployment rate rose from 7.6% in January to 8.1% in February. That’s correct. But it doesn’t go far enough.

Get into national employment figures in any BLS press release, and you’ll find several levels of unemployment. Here’s the situation for February 2009:

• Total in the civilian labor force: 154,214,000.
• Total unemployed: 12,467,000. That’s 8.1%.

Dive a bit deeper and you’ll find this:

• People working part-time for economic reasons: 9,170,000. These are people who want full-time work, but can’t find it.
• People “not in the labor force” but counted as “marginally attached to the labor force.” These people don’t have a job, want a job, but are not counted as unemployed for technical reasons. Total: 2,051,000.

Now add the numbers. You get 23,688,000 workers.

Maybe you want to argue that this is not a “real” unemployment number; after all, some of those folks have part-time jobs. But there are actually many millions more employed part-time; the part-timers included here are those who WANT full-time work.

Add it all up, and the unemployment figure is 15.36%, not 8.1%. It’s a better indicator, you might come to think, of what’s really going on in our national economy.

	Joe Salimando of EFJ Enterprises is a consultant, web content provider, and wordsmith based in Oakton, Va. To contact him, call 703-255-1428. See also The EleBlog.
Personal Disclaimer: The appearance of the ambling pachyderm is indicative of the writer’s obsession with elephants, not his political leanings.
IMPORTANT NOTE: THIS COLUMN REFLECTS ONLY THE OPINIONS OF ITS AUTHOR AND DOES NOT REFLECT THE OPINIONS OR POLICIES OF NAED, TED MAGAZINE, OR THE ADVERTISERS ON THE TEDMAG WEB SITE.