3 charts that show how construction has collapsed in RIApril 22nd, 2014 at 4:06 pm by Ted Nesi under Nesi's Notes, On the Main Site
The Rhode Island Construction Coalition, a newly formed industry group, released a short paper today put together by Bryant economics professor Ed Tebaldi examining the challenges facing Rhode Island’s construction sector four years after the official end of the Great Recession.
“The widespread difficulties in the housing market and weak construction outlook in the nation makes the short term a difficult time for the construction industry in Rhode Island,” Tebaldi concludes.
While Tebaldi’s findings won’t be a surprise to anyone who’s been tracking Rhode Island’s economy in recent years, the paper includes a few striking charts that demonstrate just how hard-hit the construction sector has been – and hints at why it was set up for such a hard fall.
This first chart shows just how deep the construction contraction has been in Rhode Island – even as the state’s economy (in red) has tread water and begun to recover in recent years, annual construction output in Rhode Island (in blue) is still almost $1 billion below its 2003 level:
And here’s a look at construction employment in Rhode Island versus in New England and nationwide, indexed to the 2001 level. Construction employment grew markedly faster in Rhode Island through 2006 before falling to about the same level as in the region and in the nation – but of course Rhode Island had much further to fall to get to that level, since its peak had been so much higher:
These charts are also a reminder of the important role construction played in helping Rhode Island avoid a recession as deep as the one Massachusetts experienced after the dot-com bubble burst in 2000. Construction output rose by 4% a year in Rhode Island from 2000 to 2003, even as it shrank regionally and nationally:
The industry’s headline-grabbing talking point off the Tebaldi report is the professor’s estimate that the Rhode Island unemployment rate in January would have been 7.3% instead of 9.2% if construction sector output was still at its 2001 level (adjusted for inflation). But is that a reasonable target?
As one economic policymaker reminded me recently, there was a lot of activity happening in the mid-2000s that drove up Rhode Island construction employment: the housing bubble, the I-195 relocation, the new CSO system, the launch of historic tax credits, and the closing phases of the Big Dig. Can the Rhode Island economy sustain construction employment at the 2005-2007 level (about 22,000 workers, versus 16,000 now)? Or was that a unique period of exceptionally high construction activity locally?
The funding for Tebaldi’s study came from the Rhode Island Construction Coalition’s five member organizations: Associated Builders & Contractors, Rhode Island Associated General Contractors, Construction Industries of Rhode Island, the Rhode Island Builders Association and Build RI.