The level of construction activity is one of many indicators that signal the health of an economy. Currently, Idaho’s scenery is dotted with construction projects ranging from heavy construction infrastructure ventures to commercial buildings to single- and multi-family homes and residential housing projects.
This was not the case after the Great Recession (December 2007 to June 2009) squelched Idaho’s strong housing industry, resulting in a loss of almost 23,000 jobs based on quarterly employer reports to the Idaho Department of Labor. Construction was one of the hardest hit industries during that time and continues to rebuild in all six Idaho regions.
The recovery from the recession has been slower than the purge of 23,000 jobs between 2008 and 2011. Considering the millions of dollars invested in construction projects across the state currently, employment increased by a respectable, but not record breaking, 9.6 percent between 2017 and 2018. Pre-recession employment grew 15 percent between 2005 and 2006 — when construction was white hot across the nation and state. Even greater growth in construction employment occurred between 1993 and 1994, when jobs advanced 16.4 percent. The industry was considerably smaller in the early ‘90s — it took about 4,200 new workers to report 16 percent growth versus almost 7,000 new workers in the 2005-2006 period for 15 percent growth.
Construction activity in the single-family home arena has not returned to pre-recession levels, nor has the high employment of the real estate bubble returned as expected. Chart 2 shows the progress back to pre-recession levels of all construction employment by region, and all report a gap.
- Southwestern Idaho is home to Boise, a city attracting national press and receiving high rankings on national lists for best quality of life. It has recovered to within seven percent of previously high employment levels for the industry pre-recession.
- North Central Idaho has returned to within 10 percent of previously high levels. Chart 3 shows this region’s activity and employment maintained regular and sustainable levels with slow to moderate growth. Without the big upside, it did not experience the hard fall of job loss either.
- The other regions hover around a 20 percent gap to full recovery of pre-recession levels.
There are several reasons construction levels remain lower than before the Great Recession. Changes in mortgage underwriting have been a barrier for people who cannot meet the new standards. Credit reports reveal the poor financial condition of people whose homes went into foreclosure proceedings, creating a serious “rent and wait” scenario. This group of former homeowners had to rehab their credit and is sidelined until foreclosures are removed from their report.
A Federal Reserve Bank of Chicago article estimated 3.8 million foreclosures across the nation between 2007 and 2010 (Dharmasankar, 2016, p. 1). Research indicated a marked slower pace of recovery to previous credit score status for those involved in these foreclosures, compared with previous years.
“The slower financial recuperation of those who lost their homes to foreclosures during the Great Recession has been one important factor behind the slow recovery in housing markets during the current economic expansion,” Dharmasankar wrote.
The loss of such a potentially big part of a balance sheet has wreaked havoc on these individuals’ abilities to recover financially. Multi-family housing projects have been proliferating across the urban areas in Idaho, but single-family housing has not returned to pre-recession levels, aligning with the author’s conclusions on a national level. Twin Falls is one local example of slower single-family construction, reporting 266 permits pulled for 2018 compared with 664 in 2005 and 547 in 2006.
On a regional basis, Idaho has seen mixed results. Chart 3 shows construction employment from 2006 to 2018 by region.
- Southeastern Idaho lost jobs, but to a lesser degree than other regions. It is not rebounding as quickly, but does have several big projects in the works such as the FBI data center in Pocatello that will attract in-migration. Premier Technology in Blackfoot is expanding, hiring another 100 workers.
- Northern Idaho experienced strong service sector growth and continues to attract retirees. It has 21 percent or 1,700 jobs to create before it is back to its peak.
- Southwestern Idaho had more than 26,000 in average construction employment at its peak. With 40 percent of the state’s population within its 10 counties — Ada, Adams, Boise, Canyon, Elmore, Gem, Payette, Owyhee, Valley and Washington — the high level of workforce is needed and more gains in 2019 and 2020 are plausible considering the number of projects in the pipeline.
Many items contribute to a strong construction industry including jobs, available lending flow with low interest rates, population growth and community support. Idaho tied with Nevada for the fastest population growth in the nation in 2018 and the other components are falling in line. From 2013-2017, the state averaged 2,300 new construction jobs annually and, simply applying this numerical average as a forecast, the state’s construction employment may very well be back in record territory in 2021.
Jan.Roeser@labor.idaho.gov, regional economist
Idaho Department of Labor
(208) 735-2500 ext 3639