3 charts that show how construction has collapsed in RI

April 22nd, 2014 at 4:06 pm by 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:

RI GDP vs construction GDP 2013 Tebaldi

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:Construction jobs RI vs NE vs US 2013 Tebaldi

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:

Construction GDP growth rates RI vs NE vs US 2013 TebaldiThe 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.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

Tags: , , , , ,

8 Responses to “3 charts that show how construction has collapsed in RI”

  1. Jim Donahue says:

    Eventually the construction rate here will be around zero because there isn’t much space here.

  2. Tim Duffy says:

    There has also been a moratorium on school construction for the last two years.

  3. John says:

    The state has plenty of “space” and it could and should go up. Smaller, taller, denser is a way to produce units that are affordable and sustainable. The state has a very poor quality, old housing stock and infrastructure that is equally antiquated. We could spend a century rebuilding, updating and expanding all of it or we can choose to think that what we have currently works – it doesn’t, and it puts us in a massive uncompetitive hole. As for a 2001baseline, it’s a realistic target that doesn’t have any unusual factors influencing it. In RI, we have become fearful of building and our policies have been designed to keep kids and growth from staying here. Time to rethink what we’ve done.

    1. Jim Donahue says:

      @John You may notice I said ‘eventually’. I love it when people redefine what I say to make their non point.

      Those ‘old’ homes are historic so they aren’t being replaced.

  4. lost in ri says:

    if there were jobs in the state and people had income to pay a mortgage, there would be plenty of construction.

    if you are a tradesman, best to pack your bags and move elsewhere because I don’t see much new development in the future. the simple reason is, there is not enough personal income to support the rents and mortgages.

    if the fleet building was in downtown boston, nyc, eashington dc, san francuisco it would be full of apartments and offices.

  5. [...] 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. Read full article [...]

  6. Michael says:

    It is sad to know that construction work has collapsed in recent past. I believe now construction industry is moving upwards. As now there is an increase in demand for construction workers.

  7. [...] warned about the huge financial uncertainty surrounding pensions … three charts that show how construction has collapsed in Rhode Island … Gordon Fox put his East Side home up for sale … the Providence mayoral candidates [...]