Something funny happened on the way to one of the worst housing declines in U.S. history: the struggling construction companies forgot to fire workers.
At least that's the way it seems from the government's employment data, which suggest the sector’s employment number is only down less then 1 percent since last September, in a year when the full-blown housing market went bust in midst of the subprime mortgage woe.
Now a private report says the government is simply miscalculating its job number, and the Fed might be overly concerned about inflation.
According to numbers issued by the government, the construction sector employs 7,681,000 workers in June, down 0.6 percent from the industry peak days of September 2006.
Meanwhile, housing construction is down by 24 percent. Particularly in construction of single-family home, housing starts have plummeted 36 percent to 1,170,000 in May from 1,837,000 in January 2006 when the market peaked.
That head-scratcher is critical to the Federal Reserve, which has been looking for slack in the job market to go along with the weaker economy.
The Fed has kept short-term interest rates at 5.25 percent, unchanged for the past year, despite U.S. real GDP growth of less then 2 percent in the year ended in March, a pace normally associated with a rising unemployment rate. Instead, job growth has remained strong. The unemployment rate fell from 4.8 percent to 4.5 percent in June, a number uncomfortably low for a Fed nervous about inflation.
But a report issued by private payroll companies Automated Data Processing and Macroeconomic Advisors Monday suggests the government may have been overstating jobs number in the past year, because it failed to count as many as 160,000 job losses in the construction industry.
They also say in the next year and a half, the construction sector could lose another 100,000 jobs, which puts the total job loss at a quarter million.
ADP and Macroeconomic Advisors issue a monthly ADP National Employment Report, which comes ahead of the government payroll report. For the construction sector, it tracks 21,000 companies nationwide, while the government surveys around 12,000 companies.
The report says the government overlooked job losses, partly because the first workers fired by struggling companies are likely to be immigrant day laborers, some of them illegal in this country, who normally don't ask for jobless claims or show up for unemployment benefits.
When contacted by CNBC for comment, the Bureau of Labor Statistics, which works with the Department of Labor to issue the monthly government payroll report, says it stands by its numbers.
"We believe our estimates are reasonable and within a small error range,” said assistant commissioner Pat Getz. “We don't see any particular problems with our sample or estimation methods."
But Getz suggested that there could be a lagged effect, where the job losses show up later.