South By North Strategies, Ltd.

Heidi Shierholz of the Economic Policy Institute explains why the nation’s high unemployment rate is “not primarily driven by lost construction jobs.”

We often hear that today’s high unemployment is being primarily driven by workers who were laid off from construction jobs, but it’s not true. It istrue that the bursting of our $8 trillion housing bubble meant an enormous loss of construction jobs and that unemployment in construction is severe. But the bursting of the housing bubble didn’t just cause home builders to radically downsize after overbuilding during the bubble. It also caused a massive drop in demand for goods and services (and therefore a drop in the demand for workers) due to households pulling back on spending because of the loss of wealth due to declining home values, and businesses cutting back on investments in plants and equipment because of a lack of demand for their goods and services. The drop in demand for workers was therefore widespread—which means that today’s unemployment problem is not at all limited to construction.