September job cuts signal recession into next year

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september job cuts signal recession into next year

Insight and Analysis of Construction Industry Trends

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Jim Haughey

RCD Chief Economist

Oct 03, 2008

Contractors laid off 25,000 workers in August but more significantly cuts aggregate work hours 1.3% from August after raising work hours slightly in August from July. This was a larger cutback than any other industry. Manufacturing cut back 1.0% and finance 0.5%. The next reports on construction materials production and construction equipment sales are likely to be grim. A revised construction spending outlook, now much weaker, has just been posted to http://www.reedconstructiondata.com/market-insights/

Hiring has become much more cautious since the September jobs survey was taken three weeks ago. The September layoffs include the impact of the Boeing strike and the evacuations and loss of electrical power after Hurricane Ike. Both of these sources of job cuts will be reversed quickly but will be replaced by job cuts stemming from the capital shortage.

The September job cuts clearly include the first round of layoffs from reduced credit access and the fear of reduced credit access for customers. There is also a hint in the 51,000 lost manufacturing jobs that export orders are weakening. Europe, Japan, Canada and Mexico, our major export customers, are all experiencing abruptly slowing economies and may also already be in recession.

The pattern of jobs cuts is typical of an early recession period: auto (-34,000), truck transportation (-11,000) and temporary help (-24,000). So far the service industry job cuts are hourly workers who are not guaranteed a 40 hour week and can be readily laid off and rehired. Job reductions will spread to salaried service industry workers and even to government by the end of the year.

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