In recent months, comparisons between the number of homes completed and those started suggested that construction employment was set to cease to become the major drag that it has been on employment, with roughly 80,000 jobs per month lost in the sector over the past two years.
In March, construction employment increased 15k workers, the first monthly increase since June 2007. Continued stability is in the offing that will contribute to payroll statistics that continue the romance with an old-normal styled recovery and likely lead risk assets to out-perform for a while.
The premise behind the stabilization concept is simple: in the construction sector’s downtrodden period of the past 2 ½ years, housing completions substantially exceeded starts, leading to over 2.2 million job losses from the peak in construction at 7.725 million in August 2006.
These losses will substantially shrink or end because completions have finally moved closer to starts, meaning that as home projects end, a smaller and smaller number of construction workers will have difficulty rolling into new projects compared to the past 2 ½ years when the number of projects that were ending substantially exceeded the number of projects that were beginning.
Put another way, the number of construction workers currently employed is now roughly aligned with the number of housing starts.
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Tony Crescenzi is Senior VP, Strategist, Portfolio Manager Pimco. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the author of "Investing from the Top Down," "The Strategic Bond Investor," and co-author of the 1200-page book "The Money Market."