(In)stability in Special Trade Employment

NAHB tabulations of employment data from the Bureau of Labor Statistics (BLS) show that nearly 1.4 million specialty trade (or subcontractor) employees left the industry from 2006 to 2011. In spite of the significant drop in the number of specialty trade employees observed in the BLS data on companies, annual statistics for specialty trade nonemployer firms (one-person firms) have been much less volatile during the same period.

Specialty trades are essential to the residential and non-residential construction industry. Specialty trades include masons, plumbers, painters, electricians and other subcontractor professions. The purpose of this post is to highlight the difference in volatility between employees of subcontracting companies and one-person firms and also the importance of considering both employees and one-person firms in specialty trades. A total picture of the labor shortage in residential construction requires a look at the one-person specialty trade firm.

A one-person firm has no paid employees and is subject to individual federal income taxes rather than corporate. In 2012, average receipts for specialty trade one-person firms were just over $47,000. The relatively small size suggests one-person firms do not have significant fixed costs and hence these firms are likely more flexible in downturn.

The chart below shows the number of special trade employees and specialty trade one-person firms from 2002 to 2012; the latest year available for one-person firms. The decline in one-person firms is less severe than employment within multi-employee firms.

Chart1

The peak for multi-employee firm employment was in 2006 with just over 4.9 million workers. The number of specialty trade employees currently stands at just over 3.5 million. The peak for one-person firms was in 2007 with just over 1.9 million workers. The number of one-person firms currently stands at just under 1.7 million.

Year-over-year changes in annual figures highlight the difference in volatility between company employees and one-person firms. The second chart shows the annual change in workers between company employees and one-person firms. For example, companies’ lost almost 750,000 employees while one-person firms decreased by just over 67,000 in 2009.

Chart2

Year-over-year percent change shows similar lower volatility in one-person firms versus company employment. Employment in multi-employee firms decreased 12.2% from 2007 to 2008 and 19.4% from 2008 to 2009 while one-person declined by 5.4% from 2007 to 2008 and 3.7% from 2008 to 2009.

Chart3

The housing market relies heavily on specialty trades or subcontrators. Employment statistics for multi-employee firms do not provide a complete picture of the labor resources available to home builders. One-person firms are flexible enough to fill in for when demand fluctuates and small enough to be able to survive when cycles reduce demand.



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9 replies

  1. Why is there no data available for 2013? Are we still living in the Stone Age?

    Or is there a political calculation occurring…

    • Unfortunately, 2013 nonemployment statistics have not been released. The latest available for nonemployer statistics is 2012. For more information on nonemployer statistics, please visit the U.S. Cenus Bureau webpage – http://www.census.gov/econ/nonemployer/index.html

      Employment statistics were obtained from the Bureau of Labor Statistics (BLS) Current Employment Statistics (CES) program. This series, however, is released monthly with preliminary figures for June 2014 available at the BLS webpage. For more information on the CES, please visit the following webpage – http://www.bls.gov/ces/cesprog.htm#Data_Available

      In addition, Eye on Housing frequently provides analysis of the monthly employment situation. For example:

      The Employment Situation for June – Labor Market Momentum? – July 3, 2014

      Construction Job Openings Decline – June 10, 2014

  2. Josh,
    It would be interesting to track the earnings by those who reported themselves as being one-person firms. I would not be surprised if those who are one-person firms continued to report themselves as such even though their income and number of jobs fell off dramatically. They likely take great pride in their status as a sole proprietor even when they are doing very little work in new residential construction.
    I think that most builders already know the value of one-person contractors and they are fully aware of the benefits that both parties get from maintaining those relationships through the recession and protracted home building slump. There just does not seem to be anything remarkable about the data presented here. And I would find it curious to think that builders are not already making use of these smaller companies on a regular basis to keep their costs under control.

    • I’m sure you’re right about builders being aware of and using one-person contractors. This post is aimed at a more general audience–people who look at employment reports, for example, without factoring in the existence of one person contractors, something I think is quite common.

  3. Josh,
    Your link to the labor shortage post actually takes the reader to a post about building lot shortages. Which post did you really want it to link to?

    As I have said in other comments about the labor shortage, the NAHB needs to take a comprehensive approach to filling the shortage with US citizens and US residents who are already in the country rather that constantly asking the federal government to manipulate the labor pool by changing the immigration laws and regulations through immigration reform. That approach will only discourage those who are already experienced with the work and encourage builders to use less skilled workers than they should.

    The skills needed to build today’s more energy efficient and sophisticated homes are not being properly recognized by the NAHB and the result will damage the credibility of our industry in the eyes of the consumer. The NAHB needs to get serious about developing training programs that match the needs of the industry more than at any time in the history. The NAHB takes credit for helping to train a few thousand workers per year. As homebuilding returns to health, we will actually need 10 time that number every year for several years to come. It stands to reason that without training, builder will be using unskilled workers and producing lower quality homes.

    I know it will be hard to find this information about low skills and poor training in any census bureau report, but it needs some attention from the NAHB before our industry has more than labor shortages to contend with. And it will take leadership in the NAHB who have a clear vision for the future rather than a neatly prepackaged Census Bureau report of employment numbers from the past to chart our course for replacing the missing workers in the future. Some of the training needed will be in business subjects such as estimating, job costing, safety, and scheduling that go beyond the trade skills needed to build homes of today and long into the future.

  4. Single employee firms are more difficult to hire as the insurance requirements from home building companies can be a burden most single employees can not justify.

    • Dan, Good point, but the builders seem to be using these contractors anyway, no?
      And… either they are really in business and have all the necessary insurance, or they are not. Is there a special class of single employee firm that is improperly insured who should be counted differently by the census bureau, or left out of the counting altogether?
      How large is this issue of not having the right insurance, really? Are there any published numbers? Should the government sponsored census reports leave all of the uninsured contractors out of their tally of single employee specialty contractors so that Dr. Miller has more useful data to report next time? Wouldn’t it be wise for the NAHB to ask the Census Bureau to stop counting these uninsured single employee business so that we will have some truly useful information with which we can make prudent business decisions? What is the official position of the NAHB on this issue?
      Or, is this simply a case of there being an underclass of employee who are not properly protected and flying under the radar of the government watchdogs?

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