When the housing bubble burst in the Autumn of 2007, the effects were widespread, and continue to be felt, across a broad swath of industry. For obvious reason, the most affected were finance and construction.
Layoffs in construction began immediately. After years of unhinged growth, with suburban housing developments popping up, and huge new shopping centers following right behind, the construction the need for construction workers seemed insatiable. When housing crashed, new home building dried up quickly, leaving a huge number of construction workers with little job security, or completely out of work.
Blame for the foreclosures that brought about the crash in construction employment and housing prices can be laid at the feet of two groups: buyers and lenders. Buyers jumped at loans that were simply too far out of their price range, intoxicated on the idea that housing prices would rise, ad infinitum, and their debts would become windfalls.
This brazen attitude was stoked by an out-of-control lending industry, which saw the exponential growth in housing as an opportunity to turn a quick dollar. And turn them they did, securing outlandish loans for customers, who at times were not even required to prove their income. Lenders seemed immune to any negative outcomes and the immunity seemed to quickly spread to buyers. With visible end to the rise in house prices loans were quickly bundled and sold off to third party investors, the massive failure of bad loans has resulted in bank failures and economic belt tightening not seen since the 1980’s Savings and Loan debacle.
As the United States economy moves forward, attempting to recover from this unbridled lending spree, it is going to take the financial industry a good deal of time to recover. Job Security in these sectors therefore continues to drop. Despite a slight jump in JSI between May and June 2008, the general outlook for the financial sector remains grim.
In a sea of negative financial forecasts and reports, one positive measurement is the JSI for Construction. As shown in the first chart, above, the drop in Construction JSI was swift and striking, dropping over 100 points in just six months.
But job security in the construction industry may be improving. Construction JSI over the past four months is cause for some optimism. The JSI for construction, a measure of likely improvement in the construction industry over the next 8 to 12 months, has regained ground and may be picking up momentum. The biggest limit to this projected improvement is likely mirrored in the JSI for the Financial and Insurance industries. While dropping much less precipitously than JSI for construction, Finance and Insurance job security is predicted to continue in a significant decline. Layoffs and closings are likely to continue, according to JSI projections as banks struggle to maintain solvency
Still, when comparing the two charts, as shown below, construction job security took a much larger hit than job security in Finance and Insurance. But as the construction workforce begins to grow again it will have to contend with a tighter and, in terms of number of jobs, smaller financial and insurance workforce.
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