The construction sector has had a tough go over the past 12 years.
We all know the beginning of the story. In 2006 and 2007, the housing bubble popped. Then financial markets tanked, banks hunkered down, trillions in corporate and household wealth went poof, and economies on both sides of the Atlantic sunk into the worst recession since the Great Depression.
The sector hit hardest by the recession was construction.
What happened to construction in Glynn goes a long way in explaining why the recession was so much worse here than in the U.S., Georgia, and many local economies.
The housing boom was bigger in Glynn than in most other places. From 2000 to their peak before the bubble popped, home prices jumped 42 percent in Georgia, 65 percent in the U.S. and 79 percent in the Brunswick Metro Stastical Area, a census region. (The Brunswick MSA consists of Brantley, Glynn, and McIntosh counties. Glynn accounts for about 80 percent of economic activity in the Brunswick MSA.)
The magnitude of the housing boom here is better reflected by construction activity than home prices. Over those same years, the construction sector’s contribution to inflation-adjusted GDP increased moderately in both the U.S. and Georgia — less than 6 percent in each case. In the Brunswick MSA, construction’s contribution to local inflation-adjusted GDP increased from $244 million in 2001 to $412 million in 2006, an increase of 69 percent.
That’s a big deal. As vital and prominent as the industry is, in 2006 construction accounted for a bit more than 5 percent of GDP in the U.S. and in Georgia. It accounted for 10.4 percent of GDP in the Brunswick MSA. In other words, on the eve of the crash, construction was a much larger part of our local economy than it was of other economies, national, state and local.
As is often the case, the bigger the boom, the bigger the bust. During the bust, home prices fell 19 percent in the U.S., 24 percent in Georgia, and 31 percent in the Brunswick MSA.
Construction activity fell even more. Between 2006 and 2009, the construction industry’s contribution to inflation-adjusted GDP fell 23 percent in the U.S. and 36 percent in Georgia.
In the Brunswick MSA? Unlike construction activity in the U.S. and Georgia, which largely flattened out between 2009 and 2012 before resuming moderate growth, activity in the Brunswick MSA fell almost without interruption through 2014. In 2014, construction’s contribution to local inflation-adjusted GDP was $107 million, a 74 percent fall from the 2012 figure of $412 million.
A 74 percent hit on an industry that made up more than 10 percent of our local economy — that’s a major reason for our long and nasty recession.
If there’s any silver lining here — and there isn’t much — it’s that construction activity is on the rise again in the U.S., in Georgia, and in Glynn. But the industry is not the same. Construction activity accounts for less than 4 percent of GDP in all three economies.
This is a case of a crucial feature of capitalism’s ceaseless churning: the decline of once prominent firms and industries. But there’s another crucial feature of capitalism’s churning: as some firms and industries decline, others — some new and some old but transformed — blossom and thrive. In my next column we’ll talk about a thriving industry that’s about to blossom in Brunswick.
(Data sources: On home prices, from the Federal Housing Finance Agency; on construction activity, from the Bureau of Economic Analysis of the Department of Commerce.)
Reg Murphy Center