A hole in construction employment … really?

A big deal was made during the release of the Household Labour Force Survey (HLFS) of the decline in construction employment.  According to the HLFS, employees in the construction industry (including the self-employed) fell 4.0% from a year earlier in the September quarter – even as New Zealand’s second biggest city was supposed to be being rebuilt!

What was ignored was that this isn’t the only figure that discusses employment by industry.  A couple of days earlier the Quarterly Employment Survey (QES) was released.  This survey suggested that the number of staff hired by construction firms (excluding the self-employed) rose 5.7% while the hours being paid for in the industry climbed 9.2%!

Source:  Infoshare from Stats NZ

So what do we believe?  That is tough, lets go through some ideas.

  1. The HLFS includes self-employment, the QES doesn’t.
  2. We know that the HLFS isn’t picking up a number of self-employed workers shifting down to Christchurch, neither does the QES.
  3. The QES does capture employed, but not self-employed workers who have just shifted down the Christchurch, the HLFS may miss them (this may be one of the factors behind the lower response rate for example).
  4. The QES occurs in a specific week in the middle of the quarter – if the quarter itself was materially different (in a non-seasonal way) this could explain some variation.
  5. The QES only takes a sample of “economically significant” firms.
  6. Firms and households may classify industries in a different way – making the “construction” sectors incomparable.

See more comparisons here.

The key point is, the HLFS told us that the labour market is very weak.  But it is not clear that construction is weak – in fact the acceleration in economically significant firms hiring and utilising workers suggests the opposite.

7 replies
  1. Miguel Sanchez
    Miguel Sanchez says:

    And to muddy things further, neither employment measure bears much resemblance to actual building activity (the QES is slightly less worse to my eyes). Labour productivity must be doing some strange things if we’re to believe any of the jobs numbers.

    • Matt Nolan
      Matt Nolan says:

      Labour productivity has been doing strange things in aggregate over this period – but I buy your point, we really can’t make a definitive conclusion about what is going on at present.

      Pulling everything together all we know is that rebuilding work is picking up, and at least in the residential space higher house prices is starting to drive a planned supply response in Auckland. Putting magnitudes on any of this is a big call.

  2. Brennan McDonald
    Brennan McDonald says:

    Wait, so self-employed construction sector workers are not included?
    That makes the QES data useless for construction.

    As does the fact that the HLFS includes self-employed workers – because of the nature of being a survey it will significantly under-estimate self employment numbers.

    The construction sector both for private housing and commercial construction revolves around sub-contracting arrangements that are basically employment relationships but “technically” not, temporary and casual labour by way of recruitment firms and the reality that a lot of construction work at the margins will be “off the books”.

    • Matt Nolan
      Matt Nolan says:

      Yar don’t get me wrong – I tried to make the exclusion of self-employment pretty explicit to show just how little we really know!

      The hard thing for people trying to build a narrative around it is that we have different surveys saying different things, and both of them have significant issues at present.

      When LEED is out, we’ll have a nice idea. Until then, the WPIP figures will give us the best idea probably :/

      • Brennan McDonald
        Brennan McDonald says:

        It doesn’t help that journalists don’t realise the limitations of these statistics when they’re reporting and sub-editors certainly don’t when they make up their misleading headlines!

        • Matt Nolan
          Matt Nolan says:

          Its because people get rewarded for “knowing what’s going on” – when it’s never that easy 🙂

          This is why we can never read one piece of data in isolation – we need the other data, and a set of hypotheses. And this leads to fun issues of methodology, I love those ….

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