By James Robson, Senior Economist
Dealing with the Covid-19 pandemic over the past two and a half years has been a singularly difficult historical and societal event with significant death, sickness and uncertainty. This pandemic dealt Utah, our Nation, and the World, the sharpest and most sudden widespread employment declines and severe economic disruptions in recent memory. Yet Covid-19 notwithstanding, essential economic activities had to continue whether there is a pandemic or not. Basic needs of food, shelter, utilities, healthcare, transportation and security must be maintained. Some activities migrated into homes through a teleworking format, while other activities could continue as is with relatively minor adjustments. There were other pursuits that could not make these adjustments and suffered from lingering COVID-19 impacts. However, one industry in Utah, that operated throughout the pandemic at quite normal or even high levels of employment, was construction.
Monthly Nonfarm Job Counts
Figure 1 depicts the overall Nonfarm Payroll Job counts by month from January 2019 to March 2022. The graph illustrates pre-pandemic employment levels each month through December 2019 with job growth continuing in January and February 2020 and into the first weeks of March 2020. Then people retreated to their homes at the end of March 2020 because of Covid-19. There was an all-time record number of one-month job losses in Utah of 134,000 recorded in April 2020 (8.5 percent below March). After April, this rebounded, and there was a continuing employment climb back through the remaining Covid-19 months of 2020.
By December 2020, total jobs in Utah were essentially equal to the number counted in December 2019. It should be noted that in a normal year there would have been about 44,000 additional new nonfarm jobs which did not develop.
During the months of 2021, the upward improvements in employment continued with some resistance from Covid-19 variants.
In the first quarter of 2022, employment levels in January, February and March averaged 117,000 jobs, more than were recorded 3 years prior (January, February and March of 2019). This is an average increase of 39,000 jobs per year for the three years from the 2019 first quarter to the 2022 first quarter. This is somewhat lower than what the Utah economy would have probably produced over 3 years without Covid-19, but it does indicate a relatively strong and vibrant recovery from the depths of the Covid-19 recession.
Construction Industry Job Counts
Figure 2 portrays the same time period by month for Utah construction employment (January 2019 to March 2022). The graph shows there is very little indication of any total monthly construction employment declines from Covid-19. There is a small pause in construction growth in April compared to March 2020, but other than that, employment levels are fairly normal during 2020. The monthly 2021 construction job growth is stronger than the 2020 growth, with this strength continuing into the first three months of 2022.
Same Month, Year-Over Percent Job Changes
It is possible to more fully appreciate the relative strength of construction job growth compared to overall total nonfarm payroll job growth by comparing the percent change in employment for a given month with the same month a year prior. Such a year-over percent-change comparison is provided in Figure 3.
First, the year-over percent change pattern for total nonfarm payroll jobs is important to note (the blue line). At the beginning of 2019, Utah nonfarm jobs were increasing by about 3.0% compared to job count at the beginning of 2018. The year-over growth rate was trending down during 2019 and was 2.4% in December 2019. By March 2020, the growth rate had dropped to 1.6% compared to March 2019. Then came the Covid-19 crash with April 2020 employment down by 7.7% compared to the previous April.
As noted earlier, the recovery for nonfarm jobs proceeded from May 2020 so that jobs by December 2020 were about equal to the number in December 2019, roughly a zero year-over percent change. By April 2021, there are new levels of job growth compared to the very depressed 7.7 percent drop in April 2020, so the year-over percent change jumps all the way up to 11.9%.
Moving forward, the year-over percent change drops each month as the current-year comparisons are less favorable against the year-prior depressed employment levels. This slowing of growth rates settles within an encouraging range of 4.3% to 4.6% from October 2021 to March 2022. A 4.3% rate of year-over growth includes some aspects of employment recovery from those industries more affected by pandemic-related job losses in 2020. For example, leisure and hospitality (including food and logging, recreation and arts), retail trade, and personal services all have high recovery rates.
During the last half of 2022, statewide year-over job growth will likely settle down to between 3.0% and 4.0%. From 2012 to 2019, year-to-year nonfarm job growth averaged 3.2%. A 3.0% to 4.0% percent year-over job growth by the end of 2022 would still be considered a favorable job growth rate in an environment of relatively high inflation, high-interest rates, and a tight labor market expected to remain through the end of this year and into 2023.
Returning to Figure 3, it is clear that construction employment was expanding during 2019 and into 2021 with the year-over growth rate increasing to 7.7% in February 2020. Covid-19 and its effects resulted in the year-over growth slowing to 3.6% by November 2020. Thereafter, construction strengthened with the year-over growth at or near 6.0% for the last six months of 2021 and into 2022. Throughout the 39 months depicted in Figure 3, construction activities and its job opportunities contributed to the vibrancy of the Utah economy.
Increasing Importance of Construction
Construction jobs accounted for 5.5% of all nonfarm jobs in 2012 (see Table 1 below). This percentage has increased every year through 2021 where it now comprises 7.6% of nonfarm employment. Over this same period, the construction’s average annual employment growth rate was 6.5%, which is more than double the corresponding growth rate of 2.9% for total nonfarm jobs during the same time span.
County-level Construction Employment
Tables 2 and 3 provide a listing of Utah’s 29 counties with regards to total non-farm employment and construction employment.
The Six County Groups
The top 13 counties listed are divided into three groups. These are metropolitan counties. All of these counties have their own large urban cities or are neighboring counties that are economically tied to the four largest metropolitan Wasatch Front counties.
Likewise, the bottom 14 are divided into three groups that are all considered rural counties. The Oil and Gas group consists of two counties and the two smallest counties are listed in a separate rural group as well.
For the most part, the counties are sorted by the average number of non-farm jobs in 2021, from largest to smallest with three exceptions that are highlighted in pink. The exceptions to the sort order are Juab, Morgan and Duchesne counties. These counties are ordered within the county group to which they belong (see the first column county groups). Juab and Morgan are within the Wasatch Back county group and Duchesne is within the Oil and Gas group with Uintah County.
Table 2 shows the overall positive job growth from 2012 to 2019 in all but four counties. The two Oil and Gas counties - Uintah and Duchesne - had significant job losses from 2012 to 2019 related to the ups and downs of oil prices. Carbon and Emery counties also show some job losses that are related to the declining fortunes of the coal industry.
COVID-19’s negative job impacts can be seen in the 2020 average annual jobs column. Listed are 19 counties that lost jobs in 2020 compared to 2019, with average annual jobs in 2020 that are highlighted in yellow. There were 10 counties that gained jobs in 2020 in spite of the pandemic.
Finally, the last column of Table 2 shows a percent change in the recovery year of 2021 compared to the pre-pandemic year of 2019. The percent change in average annual employment from 2019 to 2021 was positive in all but four counties.
Table 3 provides the same information as Table 2 for construction industry jobs, with the addition of two new columns at the end with construction jobs as a percent of total non-farm jobs.
Items of particular note in Table 3 are:
- How strong construction employment growth was from 2012 to 2019, with 15 countries increasing 50% percent or more. Iron County with a 180.22% increase and Wasatch County with a 137.8% increase.
- Only six countries had fewer average annual construction jobs in 2020 than they had in 2019.
- Construction jobs increased by more than 20.0% for the two years 2019 to 2021 in five counties, with Iron County having the highest increase of 38.5%.
- Construction jobs as a percent of total jobs increased in 26 of 29 counties from 2012 to 2019 (see the last two columns of Table 3).
- Construction jobs comprise 23.7%, 16.9%, and 14.7% in Morgan, Wasatch and Wayne counties respectively in 2021.
Conclusion
Prior to the Covid-19 pandemic, construction activities and employment were strong and gaining momentum. Several notable large projects and trends include: the Salt Lake airport rebuild, a new state prison, the Temple Square renovation, and an unprecedented boom in the construction of apartments and multi-family dwelling units in Salt Lake and other urban counties. In addition, home renovations were stimulated by the pandemic. Many high-growth counties with significant construction activities continued on with their expansions. Construction activities, while slowing somewhat for a few months during the pandemic, soon picked back up with employment resuming robust growth rates in 2021 and into 2022.
As with all sectors of the economy, construction has been dealing with numerous supply chain issues and the very tight labor market Utah has experienced over the last 18 months or so. Without these impediments, construction activities would likely be somewhat higher.
Significant new headwinds have arrived for the construction Industry. Inflation, and particularly high interest rates, should develop into significant challenges to construction going forward. The high construction-employment growth rates highlighted in this article bear close monitoring in coming months as construction activities come under pressure from policies to reduce inflation.