New York Is Losing Construction Labor As Its Recovery Lags Behind The Nation
Much like the rest of its economy, the construction labor force in New York City has been hit harder than the rest of the country over the past year. The city faces a slower recovery and some of the jobs it has lost may never return, presenting challenges for an industry that was already facing labor concerns before the coronavirus pandemic.
New York City's construction industry's recovery has stagnated, however. It lost roughly 19,000 construction jobs year-over-year in December, a rate that was unchanged from September. Statewide numbers improved over that same time period, from 38,000 jobs lost in September to 22,400 in December, according to the New York State Department of Labor.
“The fact that there was a severe outbreak in New York City early on led to particularly strong tightening of activity,” Association of General Contractors of America Chief Economist Ken Simonson said. “[This] affected construction sites directly but was also devastating to many businesses, some of which would otherwise have gone ahead with new construction and found that they didn’t have the revenue flow that they had expected and that the demand was no longer there.”
In 2020, construction activity in the city hit its lowest point since 2012, according to the Real Estate Board of New York. Nonresidential construction starts fell 24% in the New York metro area between 2019 and 2020, according to Dodge Data & Analytics, which equates to $5.4B less being spent on new projects.
"Moving forward, New York’s recovery could lag the rest of the nation,” Dodge Data & Analytics Chief Economist Richard Branch told Bisnow in a statement.
There are a number of factors working against a quick recovery of these jobs, Simonson said, including a decline in population in recent years coupled with New York City’s reliance on tourism and the exodus of “knowledge workers” out of the city amid the work-from-home revolution.
A meaningful job recovery may not occur for another year and a half, Building and Trades Council of Greater New York President Gary LaBarbera said.
“Some trades are faring better than others," he said. “No one has a crystal ball … 2021 could shape up to be a lean year until we catch up.”
The decline in new starts not only propelled a wave of recent layoffs starting in December but also pushed down the cost of labor, United Service Workers Union Construction Division Director Kevin Barry told Bisnow this week.
“Prices are in the toilet,” he said.
Many construction companies are barely turning a profit on any of their projects, but bid at the low price to buy themselves some time and keep their workers employed, Barry said. He predicted around 70% of the decline in jobs were prompted by the pandemic directly, the other 30% stem from contractors not finding new projects to bid on.
Tony Bond, the CEO and president of Boston-based Bond Brothers Inc., a construction company that works on projects throughout the Northeast, said for a typical commercial project before the pandemic, the going average was four to five contractors bidding.
“Anything more than that, you’re like ‘why am I looking at this thing,’” he said. “We’re seeing a lot more jobs out there with 10 to 12 contractors, and on one public infrastructure bid we just saw, there were 33 contractors bidding on the project.”
While the economy has begun to recover this year, construction jobs may continue to drop throughout the winter as fewer projects than normal get started.
“Unfortunately, we haven’t hit complete bottom,” Bond said. “I don’t think we’re going to go much lower, but I think we’re going to be in this situation where things are going to erode for a little bit, I don’t think it’s going to be as drastic as it has been."
Infrastructure projects may be New York City’s saving grace. With the $306B state building plan laid out in Gov. Andrew Cuomo’s State of the State address last month, experts and industry leaders say that an influx of work could come from the public sector, helping to prop the industry up.
There have been indicators that the industry is turning a positive corner, Eastbound Construction CEO Alex Elkin said. Lender and buyer interest has significantly increased in recent months, he said. Much of this activity is around “supportive infrastructure,” he said, including affordable housing, homeless shelters and expansions of health care facilities.
“[The pandemic] literally froze construction activity in New York City for a certain period of time … it’s unavoidable that the consequences are catastrophic,” Elkin said. “[But,] from what we are seeing from indicators right now, it is all looking very, very positive.”
A sluggish recovery could push unemployed workers out of the industry toward other sectors or cities. The last time the construction industry faced this much job loss was between 2006 and 2011, when 2.2 million jobs, or 30% of the nation's overall construction labor force, was lost, Simonson said. The nation lost half that many between February and April last year, and while the bounce back was quicker, the lingering losses could last, he said.
“Some people will leave to work in other construction markets, others will leave the industry and perhaps get jobs elsewhere, and some will just drop out of the workforce,” Simonson said. “I am afraid it’s likely as we go through 2021, we’ll see a drop-off in nonresidential construction employment … These could be permanent job losses.”
As workers leave the workforce, it makes it harder for the companies in New York City to operate at the same level as they once did.
“For better or worse, construction is a people game,” Bond said. “If you don’t have the right people, and if you can’t keep them gainfully employed, they will move on. And if you lose your people, you basically lose the essence of your business.”