Housing Soon to Join Party

Residential construction spending and construction employment have yet to show the same rebound as overall economic growth and employment.  However, the emerging economic recovery coupled with a housing response will soon invite housing to the party.

First quarter construction spending was up a very small 0.2% but residential spending was down 11% after two successive positive quarters.  The decline was concentrated in the multifamily and other sectors while single-family construction spending did increase 3% in the first quarter of 2010 following more substantial increases of 14.6% and 5.3% in the third and fourth quarters of 2009 respectively.  The slump is the result of a construction plateau late in 2009 as the first time home buyer tax credit was expiring.  Single-family starts increased almost 10 percent from fourth quarter 2009 to first quarter 2010 and that increase will soon be felt in increased construction spending.

April total employment increased almost 300,000 jobs but the additions were not in the residential sector.  Total construction employment increased a modest 14,000 jobs in April after a 26,000 increase in March but residential was a net drag by declining another 10,000 jobs after similar declines in every month this year.  Unemployment remains the highest in construction (residential specific unemployment rates are not available) compared to other sectors and compared to past construction unemployment. 

As in other industries, re-hiring waits for solid revival indicators.  Until then, contractors and subcontractors are using the workers they have on the payroll more intensely rather than hiring.  As starts continue to rise, builders will gain the confidence to re-hire and residential construction employment will begin to rise. 

Single-family construction and employment will see a pickup in the April data as builders responded to the home buyer credit expiration.  Beyond the credit, single-family construction and home sales will respond to low mortgage rates, low home prices, continued positive affordability conditions and a stabilized employment market. Multifamily construction will begin reviving as employment revives and new employees look for their own home to rent.



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