Academic journal article Monthly Labor Review

The Construction Boom and Bust in New York City

Academic journal article Monthly Labor Review

The Construction Boom and Bust in New York City

Article excerpt

During the construction boom that began in 2000, construction employment rose later and with more intensity in New York City than in the Nation as a whole, while the eventual construction bust was later but less severe in the City than nationally; the City's gains and losses were concentrated in Manhattan, Brooklyn, and Queens

The real estate boom and bust of the 2000-2010 decade reshaped New York City's building landscape and, with it, the City's construction industry. During this decade, the City's construction industry first gained 12,980 jobs and then lost 20,803. While similar booms and busts occurred nationally, the rise and fall in New York City's construction employment differed from the Nation's in both length and timing.

Using employment data from the Bureau of Labor Statistics (BLS) Quarterly Census of Employment and Wages (QCEW), (1) this report provides a borough-wide analysis of the labor market effects of the real estate boom and bust on New York City from 2000 to 2010. In particular, the analysis focuses on how changes in the City's real estate market affected the local construction sector, and looks specifically at three subsectors: construction of buildings, heavy and civil engineering construction, and specialty trade contractors. (2)

Quarterly data from the QCEW program were chosen because they provided the most detailed picture of the construction industry and allowed for analysis of countywide contributions to changes in New York City's labor market. (3) The midyear of 2000 was selected as a starting point because a number of observers believe that the boom got underway about that time. (4) By using data that goes through mid-2010, this report analyzes New York City construction employment throughout a decade of change. (5)

The boom in New York City

From June 2000 through June 2006, the price of residential housing in the New York City area doubled. (6) (See chart 1.) Throughout the period, prices rose, with one of the larger increases occurring in 2005. Driving this price increase in 2004 and later years were gains in employment and income in both the financial and legal services industries. (7) Furthermore, low interest rates and wider availability of loans and mortgages also contributed to increased demand and concomitant higher prices for residential housing.

These higher prices triggered an expansion of the construction industry in New York City. While expenditures for new residential housing units rose during the early years of the decade, it is noteworthy that between June 2004 and June 2008, spending on new projects increased from $211 million to $1.5 billion. (8) As a result, residential housing increased by 14,358 units in the City over the 4-year period. (9)

At the county level, the majority of the City's residential building activity was concentrated in New York (known as the borough of Manhattan), Kings (Brooklyn), and Queens counties. From 2004 to 2008, these three counties showed large increases in spending ($525 million, $458 million, and $300 million, respectively) and in newly-constructed units (5,448, 6,338, and 3,036). Richmond County (known as Staten Island) followed the trend but with smaller increases in spending and housing permits, while Bronx County exhibited declines in both measures of building activity over the 4-year period.

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Although new residential building activity increased early in the decade, employment in New York City's construction industry fell for 3 years following the 2001 recession, dropping by 11,598, or 9.5 percent. However, beginning in 2004, employment in the City's construction industry rebounded. From June 2004 to June 2008, total employment in construction for all five counties rose by 20,071, or 18.3 percent. (See table 1.)

Within the sector, the specialty trade contractors subsector saw the largest increase over the 4-year period, adding 10,281 positions. …

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