As New York City climbs out of the deep pandemic-dug economic hole, the construction industry is flashing a warning signal for how difficult it will be to recover from the worst downturn since the Great Depression.
Despite being one of the first industries allowed to resume work after the shutdown 15 months ago, New York City’s building sector remains 25,000 jobs below its pre-coronavirus peak.
Hopes to plow through the withering backlog of planned construction largely rest on President Joe Biden’s efforts to pass an infrastructure plan with a price tag of around $1 trillion. Meanwhile, uncertainty over who the next mayor will be and Gov. Andrew Cuomo’s political fate injects more unknowns at a critical time.
“The best and fastest way to restart New York’s economy and get people back to work is through large-scale infrastructure projects supported by the federal government. In the wake of such a challenging and devastating period, the building industry is primed to lead the recovery across our country,” said Carlo Scissura, chief executive of the New York Building Congress.
The city added 41,300 jobs in May, the fourth consecutive month of increases as the unemployment rate fell to 10.9% from 11.4% in April, the state Labor Department reported last week. The biggest gains came in restaurants and the arts — the two sectors hit the hardest by the coronavirus crisis — and transportation.
Still, New York remains 510,000 jobs below its pre-pandemic total of almost 4.7 million. On a percentage basis, only San Francisco and Los Angeles have regained fewer jobs than New York among the nation’s 10 largest cities, according to an analysis by James Parrott, an economist at the New School.
Meanwhile, the city’s unemployment rate is nearly twice the national average.
How the Bottom Fell Out
The construction industry is crucial because it provides relatively high-paying jobs that don’t require advanced degrees, becoming an economic lifeline for many immigrants and workers of color.
The average salary in the industry reached $87,200 in 2020, the fourth highest of any sector in the city, according to a new report from the state comptroller’s office. Immigrants hold about half the jobs, most from Latin America and the Caribbean.
About a quarter of the jobs go to commuters from the suburbs. Hispanics and white workers each comprise about a third of the workforce.
“Walk on to a construction site today and you will see the diverse makeup of the workforce,” said Gary LaBarbera, president of the Building and Construction Trades Council, an umbrella union group.
He added that 68% of all apprentices are workers of color.
The pandemic disrupted what had been a decade-long expansion based on the city’s booming economy, helping fuel its record gains.
The industry added jobs for eight consecutive years through 2019, bringing the total to an all-time high of 161,300 — making construction the fastest-growing sector over that period. Construction spending grew an average of 20% during that time, reaching a record of $61 billion in 2019.
Then the bottom fell out.
Spending plunged by $5 billion the next year and is expected to remain flat for at least two years. Only two new projects of more than 300,000 square feet pursued permits in the first three months of the year. That’s compared to applications for 405 such projects last year.
“When we have seen other downturns, it has usually taken the construction industry up to five years to get back to where it was,” said State Comptroller Thomas DiNapoli.
Airport and Jails Loom Large
Even maintaining current levels of activity and jobs depends primarily on government spending. Insiders expect a post-pandemic travel boom will spur an acceleration of the Cuomo-pushed $15 billion Kennedy Airport overhaul. But last week, the governor’s controversial plan to build a $2 billion AirTrain to LaGuardia Airport got delayed by the feds at a time when he faces investigations over sexual harassment accusations.
The industry is also counting on the city’s $8.5 billion program to replace Rikers Island with smaller jails in four of the five boroughs, though it isn’t clear if the next mayor will be committed to the plan — the major candidates have a variety of stances. It’s also unknown how friendly to development Mayor Bill de Blasio’s replacement will be.
The long-delayed federal approval of the Gateway tunnel project under Hudson River offered a potential boost for construction jobs, pending an infrastructure package passage. But elsewhere on the transportation front, the MTA’s ambitious $51 billion capital plan remains precarious given the agency’s financial woes as ridership improves, but remains well below pre-pandemic levels.
Also at risk are 100 hotel projects that remain in the pipeline — half of which are in the boroughs outside of Manhattan. With tourism so far below economically profitable levels for hotels, cancellation of some of those projects seems likely.
The key to the construction industry’s fortunes, stakeholders say, will be the size of whatever infrastructure program the Biden Administration is able to get through Congress and where the money will go.
“So much of what has kept the construction industry going is government spending,” said DiNapoli. The pending proposal for there to be a major infrastructure industry out of Washington would be a home run for us.”