Construction Slowdown Not All Bad For Jobs

Thursday, February 26th, 2015
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The amount of construction work being done hit a three-year low at the end of 2014, but that might not be such a big deal for the jobs market.

The volume of work being done in the sector has been falling in fits and starts for the past two years.  The latest drop, a slim 0.2 per cent, took the decline in the two years between the final quarters of 2012 and 2014 to a total of seven per cent.

But over the same two years, the number of people employed in construction rose strongly – by 55,000 or six per cent.

At the same time, the monthly survey of skilled job vacancies done by the Department of Employment showed the number of openings in construction trades in January was no less than 56 per cent higher than it was two years before.

That might not seem to make sense, but it is an illustration of why it’s so important to look behind the figures.  In this case, the likely explanation for the apparent contradiction is the mining investment boom.

Until the boom really kicked off around 2007, construction work done and employment in the sector had a fairly predictable, parallel relationship.  But from that point, employment growth effectively ground to a halt, while construction work accelerated.

The normally close link between work done and jobs in the sector broke done completely.  And that was likely because of one of the key features of the resource sector investment boom.

It was very capital-intensive – more machines and fewer actual people were needed for a given quantity of construction work to be done.  And some of it, notably the massive offshore gas-drilling rigs, were actually constructed in other countries and towed into Australian waters.

That’s one of the reasons the resources boom has been such a disappointment for Australia.

But, as the jobs and vacancies figures show, it also means a relatively soft blow for the jobs market when the boom goes bust.  The figures showed work done in the engineering construction sector, dominated by mining and public sector infrastructure (where activity has also slid sharply) fell by 17 per cent over the past two years.

But in non-dwelling construction like shops, offices and hospitals, where employment is higher for the amount of work done, there was a two-year rise of one per cent.  And in housing, the most people-intensive part of the construction industry, activity posted a solid two-year rise of 13 per cent.

In other words, activity is rising in the parts of the construction sector likely to produce the most jobs, and falling in the sector where it will hurt the jobs market the least.


By Garry Shilson-Josling
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