Construction sector adds 27,000 jobs in November, but project cancellations and looming taxes will undercut future job gains: AGC

Construction employment increased by 27,000 jobs in November, as continuing robust gains in residential categories masked more sluggish increases in nonresidential jobs, according to an analysis by the Associated General Contractors (AGC) of America of government data released Dec. 4. Association officials cautioned, however, that pandemic-induced project cancellations and looming tax bills for firms that used Paycheck Protection Program loans to save jobs threaten to undermine future job growth in the sector.

“The construction industry recovered a bit in November, but the future is far from certain for the industry,” said Ken Simonson, the association’s chief economist. “The nonresidential building and infrastructure segments are likely to shed jobs again amid an increase in coronavirus case counts unless Congress acts quickly to provide needed relief.”

Construction employment climbed to 7,360,000 in November, an increase of 0.4 percent compared to October. However, employment in the sector remains down by 279,000 or 3.7 percent since the most recent peak in February. The pandemic initially triggered widespread project cancellations and interruptions that resulted in the loss of 1.1 million construction jobs in March and April.

The disparity between residential and nonresidential construction widened in November, Simonson noted. Residential building and specialty trade contractors added 15,4000 jobs in November and have now recouped 96 percent of the employment losses they incurred in March and April. In contrast, nonresidential construction employment—comprising nonresidential building, specialty trades, and heavy and civil engineering construction—increased by only 11,900 jobs in November and has recovered only 56 percent of the jobs lost in March and April.

The industry’s unemployment rate in November was 7.3 percent, compared to 4.4 percent in November 2019. A total of 732,000 former construction workers were unemployed, up from 428,000 a year earlier and the highest November total since 2012.

Association officials warned that more projects are likely to be canceled amid a new surge in the pandemic. In addition, firms that used Paycheck Protection Program loans to save jobs face an unexpected tax hit because the Trump administration is defying Congressional intent and opting to tax forgiven loans as income. Without tax relief and other needed recovery measures, the officials warned that November’s modest job gains are likely to be fleeting.

“The Trump administration is seeking to undermine the benefits of the Paycheck Protection Program by rewarding firms that saved jobs with a massive tax increase,” said Stephen E. Sandherr, the association’s chief executive officer. “These new taxes, coming on top of greater market uncertainty as coronavirus cases surge, will make it hard for many construction firms to retain current workers, not to mention add new ones.”