Construction job gains make up for tourism, media losses

Wednesday, 3 February 2021

Residential construction is steaming ahead but commercial work is slowing down.

A ''remarkable'' drop in unemployment, given the emergence of Covid-19, is being attributed in large part to unexpectedly strong growth in construction.

Statistics NZ data showed unemployment stood at 4.9 per cent at the end of December, well below economists' expectations.

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And the accompanying household labour force survey found that many of the jobs lost were offset by construction.

There were about 21,000 more people employed in the construction sector compared with a year earlier – 5800 of whom were women.

Builders have found themselves unexpectedly rushed off their feet as house prices re-ignite.

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All up, some 278,000 people were in the construction sector in the December quarter, including those working in trades like plumbing and electrical services, roofing and concreting.

Several factors were attributed to keeping construction in surprisingly good form, including a big boost in infrastructure spending, the housing shortage, and record low mortgage rates which have led to the current rampant housing market.

Kāinga Ora state housing under construction in Palmerston North. Despite initial fears, many central government and private projects carried on as planned.

Construction was also the main driver behind an increase in filled jobs, according to Statistics NZ’s quarterly employment survey (QES).

There were 18,400 more filled jobs over the year, of which 17,600 were in construction, largely in residential building and building structure services.

David Kelly, of Master Builders Federation, said that initially there were gloomy outlooks for residential and commercial building based on expectations of higher unemployment and redundancies.

That had not come to pass partly because consumer confidence had not fallen, and because of low bank interest rates and mortgage rates, sending house prices skywards again.

‘’As soon as we see house prices rise, then we often see more residential construction going on.’’

A growing number of people were also opting for the certainty of building a house rather than competing for the diminishing stock of existing houses, Kelly said.

Commercial construction had also survived better than expected, as central government and the private sector, with the exception of hospitality and hotels, had gone ahead with planned projects.

Initial concerns had been replaced with others, Kelly said.

‘’One is the availability of land, the second is the availability of materials and that is growing. And third, qualified, experienced tradespeople – that is definitely a constraint.’’

Apprenticeship numbers were growing ‘’and that is fantastic. The issue is that it is at least two years and really longer before apprentices have the experience to really help. They are useful to a certain degree but there is a lack of experienced tradespeople … We can’t grow those quickly.’’

Kiwibank economist Jarrod Kerr said the unemployment figures were ''truly remarkable'' and the construction growth was ''precisely what we want to see''.

Compared with construction, retail and accommodation and information media industries “lost about the same number between them”.

Kerr said New Zealand certainly was not without headwinds, including cooling wage growth, mixed inflation outlooks, a lack of foreign visitors, surging costs and supply disruptions.

But despite all this, “we have found ourselves in a much better place”.

‘’Our economy has outperformed most developed economies around the world.''

All going well, he predicted the economy would grow 3 to 4 per cent in 2021 and the ''national exuberance'' in housing would continue.

Reinstated loan to value ratios (LVRs) would help slow the rampant rate of house sales but more creative solutions for housing would be needed, he said.

''On the demand side, we have highlighted the need to better price the risk of different home loans.

''But it is not a demand problem, in our view. The true problems are firmly on the supply side. And any slack we see developing in the labour market should be enticed into housing development.''