The scarring of the Great Recession on construction labor and housing supply

This study examines the long-term impact of the Great Recession on employment in residential construction, and consequently housing supply. Using regional variation in house price declines during 2006-2009, I find that more severely impacted areas experienced a persistent reduction in construction employment but higher wage growth postrecession, consistent with a downward shift in construction labor supply. This contraction has a causal negative effect on housing production output. A 10% decrease in house prices during the crisis induced a 17%-20% reduction in 2019 construction employment, which in turn led to a 3.0%-5.7% decline in housing construction.