The construction employment puzzle, redux

Unbeknownst to me, during my summer break many bloggers commented on the construction employment puzzle (see yesterday's post). Brief recap: housing construction has, by all measures, fallen more than 40% from peak while residential construction employment has barelly budged.

Here's Nouriel Roubini's take and Jim Hamilton's is here. The WSJ's Economics Blog also has good info on this (see here and here).

Severl months onwards, the original mystery has only deepened and no one has provided a convincing answer.

I will say that the argument that states that employment hasn't fallen that much because the workers fired so far have been off-the-books illegals is nonsense. Construction employment rose sharply over 2001/2006 tracking housing construction and it should follow it on its way down.

Also take into account that the underlying force driving housing demand, household formation, is expected to be pretty steady over the next decade (a bit less than 1.5 million annually). Thus, it wouldn't make much sense to argue that residential construction employment registered a permanent jump in employment over the past few years and builders are "hoarding" employees while the storm passes.