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closeStill reeling from the subprime mortgage mess and the economic downturn it spawned, the troubled construction industry got another jolt of bad news recently when the production of single-family homes hit its lowest annual rate since 1991.
Homebuilders, stung by a glut of unsold units, slowed production nearly 3 percent in July and, in doing so, helped send 22,000 more construction workers to the unemployment line.
At a time of the year when residential and commercial construction should be peaking, the homebuilding industry is in its worst slump since the Great Depression and many commercial projects have been canceled or postponed until the economy rebounds. The industry's July unemployment rate of 8 percent is the highest in 13 years. Across the nation, some 783,000 jobless laborers, carpenters, plumbers, pipefitters and other tradesmen are looking for work wherever they can find it.
The slowdown is also being seen in Whatcom County. Through August, 236 building permits were issued for new homes in unincorporated areas of Whatcom County, down 40 percent from the same period in 2007, according to Whatcom County Planning & Development Services. In Bellingham, 59 permits were issued for new homes through July, down 62 percent for the same period in 2007 and down 28 percent compared to the first seven months of 2006.
In July 7,900 people were employed in the construction industry in Whatcom County, down from 8,200 in July 2007, according to the Washington State Employment Security Department.
Bill Quehrn of the Building Industry Association of Whatcom County said local companies have been making adjustments, including some layoffs, but have been able to avoid more drastic measures such as closing. Membership in the local Building Industry Association has been rising this summer, he said.
"This is a correction we knew would be coming, but it's been made worse by the credit problems that have been happening in other parts of the country and we're feeling the ripple effect," Quehrn said. "The professional, well-established companies have been able to weather this OK by moving into other projects."
One area that is seeing some growth is home remodeling work, he said, particularly projects where people are adjusting to changing family situations, such as family members moving in or making changes to homes for elderly residents. In Bellingham, 185 permits were issued for residential alterations through July, up 18 percent compared to the same period last year.
"Remodeling homes has been a strong, growing market in recent years," Quehrn said.
Overall, though, construction has been slower and it will be felt at the local government level at budget time. Valuations for all building permits through August in unincorporated areas of Whatcom County are $106.5 million, down from $120.2 million for the same period in 2007. In Bellingham, total valuation of the permits through July is $91.8 million, down from $150.8 million through the same period last year.
"Construction generates revenue for the government through taxes, so this area will feel the impact of the slower summer," Quehrn said.
ADJUSTING TO THE CHANGES
Across the U.S. the double whammy of slower residential and commercial projects has made it a cruel summer for construction workers.
After being laid off in May, Gerry Cassani, an electrician from Harrison Township, Mich., took a job in Louisville, Ky., after work in the Detroit area dried up because of the struggling automobile industry.
Cassani hoped the out-of-town work would keep him from drawing down his unemployment benefits. But in early July - after only eight weeks on the job - he was laid off again.
Cassani, 52, is one of roughly 1,200 unemployed members of the International Brotherhood of Electrical Workers, Local 58, in Detroit. Each night he checks the union telephone information line about local job opportunities, but openings are scarce.
"If the auto industry is doing bad, everyone is doing bad. It's like everything's on hold,'" Cassani said.
Douglas Fleming of Anderson, Ind., lost his job as a quality assurance manager with Beazer Homes in October 2007 because of the subprime mortgage crisis. Since then, Fleming said he has mailed, faxed, e-mailed and delivered his resume to more than 700 prospective employers with no luck.
A journeyman plumber by trade, Fleming, 41, was optimistic about getting a maintenance pipefitter job after recently scoring well on an IQ test and a skills assessment test. Again, however, he wasn't hired.
"I was just floored," Fleming said. "The roller coaster of emotions is just unreal."
Since its September 2006 employment peak, the construction sector has lost 557,000 positions. Nearly three-quarters of those lost jobs occurred after October 2007, when the economy officially began to tank.
Specialty trade contractors like Cassani accounted for 20,000 of the 22,000 construction jobs that were lost in July, according to the Department of Labor.
Other construction workers unable to find steady full-time work are settling for part-time work. In fact, since July 2007, the number of part-time construction workers who want full-time work has jumped by 249,000, or 40 percent. That's the most among all industries, said Steve Hipple, a Labor Department economist.
The slowdown in new housing construction is likely to continue into early 2009 before picking up, said Robert Denk, an economist at the National Association of Homebuilders.
Single-family home production in the second quarter of 2008 was at just 39 percent of the record production level of the first quarter of 2006. That's the equivalent of 638,000 new homes being built in 2008, Denk said.
"The slowdown in housing starts has been very painful for the industry, but it is the necessary medicine to work down the inventory of unsold homes," Denk said. "We need for sales to outpace production so we can work down these inventories. That's what has to happen before we can get this thing back on track."
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