Nonfarm payrolls were unchanged in August and the unemployment rate was 9.1%, according to the Bureau of Labor Statistics. The private sector added 17,000 jobs and the government shed 17,000 jobs. There were some extraordinary items in the report, including over 40,000 workers being dropped from payrolls due to the worker strike at Verizon.
Next week Thursday, President Obama will unveil his latest job-creation plan. Early reports suggest the plan will consist of at least an extension of the payroll tax cut for employees and some type of an infrastructure bank. The infrastructure bank may function as a cheap source of financing to fund numerous federal, state, and municipal projects designed to repair roads, bridges, rails, and schools. Though this program could benefit specific businesses in the construction industry, I don’t think it will materially increase employment.
The construction industry was hit hard in the economic downturn. From peak to trough, the construction industry lost over 1.95 million jobs. Though that is a lot, more jobs were lost in the services-sector and the goods-producing sector, with over 2.9 million and 3.89 million jobs lost, respectively.
Within the construction sector, it is a mistake to think that one construction job can be filled by just anyone. Many of the jobs are quite specialized. In fact, it is in the specialty trade contractors subsector that most of the construction jobs were lost, having lost 1.288 million jobs. The specialty trade contractors subsector comprises things like pouring concrete, carpentry, plumbing, painting, electrical work, pipefitting, etc. A lot of these jobs are licensed and require years of specialized training. The idea that these specialists can just go and “do construction work” is wrong. That’s why I’m not too optimistic that an infrastructure bank will create many jobs in the short-term. What would be better, in my view, would be to encourage job creation in the much-harder hit services and good-producing sectors by lowering payroll taxes paid by employers, or by completely transforming the corporate tax code to encourage job creation.