On some measures, activity in housing construction has slumped by more than a quarter since early 2006. Yet employment in the sector has fallen by less than 4%, or around 140,000 people, from its peak. Economists at Deustche Bank point out that if employment had moved in line with the reduction in activity, around 900,000 jobs would have been lost. Lack of tracking of temporary workers and undocumented immigrants may help buffer those unemployment figures.
A possible explanation for the discrepancy between the current unemployment rate (4.5%) and that predicted by the Fed last year (4.75 - 5.00%) is that jobs are being lost but they are held by illegal immigrant workers, who do not show up on the books. In a notoriously cyclical business, the use of temporary workers and undocumented immigrants is widespread.
Legal Hispanic workers account for nearly a third of employment in construction. Illegal Latino workers play a significant role too and, like legal temps, are most vulnerable to job losses during a downturn. By tracking the sensitivity of Hispanic employment to shifts in house-building activity, the Deutsche Bank researchers conservatively estimate that around 500,000 undocumented Latino workers have been laid off in the industry since last year. If correct, this helps resolve the puzzle of resilient employment and suggests America's labour market is less tight than it appears.