2. Construction. Nationwide construction unemployment was 17% in August, up from 16.5% in the same month last year. Over the course of the summer, government statistics have shown sharp drops in the construction of new homes and apartments. Building permits are also down. Most large housing markets have more than 12 months of unsold inventory on hand. There is also a “shadow inventory” of unsold homes – those that have gone into foreclosure but have not been put on the market by banks. Foreclosures and defaults are expected to rise another 3 million to 3.5 million this year.
3. Installation, maintenance, and repair. A set of industries related to housing and commercial construction and maintenance will also not generate new jobs. This is the employment sector the government calls “installation, maintenance, and repair.” Jobs in this sector are dependent on real estate. While many of the workers in these industries, such as plumbers and electricians, are relatively well paid and many work on homes and commercial buildings, some are mechanics who work on industrial equipment, aircraft and plants. These industries will be more crowded as people with training in related work leave the Armed Forces with the draw drawdown in troops in Iraq, which will put downward pressure on wages.
4. Automotive manufacturing. General Motors has cut over 100,000 people since the beginning of the recession in December 2007. Ford has cut over 20,000 and Chrysler 15,000. This does not include foreign car companies with workers in the US. By some estimates, every car company worker layoff leads to three more layoffs in related industries that supply the car and light truck manufacturing business. That includes hundreds of car dealerships that have been closed in the last two years.
5. Pharmaceuticals. This industry has bled workers for three years, and that trend is likely to continue. The largest companies in the sector, such as Pfizer and Merck, have a number of blockbuster drugs that have lost their patent protection in the last decade. They have other pharmaceuticals that will lose that protection in the next decade. Sales of most of these drugs will move to generic companies that will sell them for far less, and erode critical revenue sources for the huge pharma firms. Most companies in the industry admit that they cannot replace the drugs that go “off patent” fast enough to keep their revenue high. The other reason employment in the sector will stay down and may drop further is that big drug companies are merging to save costs and most of those costs are people. Pfizer has cut 30,000 people since the start of the recession. Merck has cut 25,000, and these companies and their peers expect that they will have to bring down costs even more.
6. Big Telecom. AT&T, Sprint-Nextel, and Verizon have passed their peak employment levels. Employment in the sector will not recover and could shrink for two reason: (1) the landline business is falling rapidly as home phone users move to VoIP and (2) increased adoption of cellphones. The cellular subscription business has been damaged by price wars meant to gain market share in the wireless industry; one that has stagnated due to a 90% market penetration in the US. Sprint made substantial cuts as it posted three years of losses. The most recent was 2,500 people in November last year. In 2008, AT&T said it would lay off 12,000 people. Verizon recently said it would fire 13,000 employees from its land line business, and its CFO said the downsizing is not over.