Homebuilders Struggle to Add to Payrolls

Starts of new single-family homes have jumped approximately 26% since May 2011 (and more than 46% since bottoming out in early 2009). Unfortunately, the rebound in starts does not appear to have bolstered job creation within the residential construction sector as payrolls have inched 1% higher in the past year. The homebuilding industry as a whole, which includes building contractors and specialty trade contractors, was the hardest hit segment of the construction sector during the economic downturn as employment tumbled by 1.5 million on net (or 42%) from the peak. By comparison, the nonresidential and nonbuilding (e.g. highway and street) saw total payrolls decline by 23% and 18%, respectively.

While payrolls in the overall homebuilding industry have increased only modestly off their trough, there have been some glimmers of improvement within the industry. For example, a rising pace of apartment construction has yielded an appreciable gain in job growth, with employment levels averaging 3.7% higher through the first 4 months of 2012 compared to 2011. Remodeling employment has also held up quite well, increasing 5.7% on the same basis. The traditional reasons for remodeling such as repairing/replacing old components, adding newer amenities and expanding the living space continue to drive activity; however, tax incentives for energy efficient equipment have also moderately bolstered remodeling activity. Falling home prices have impacted the remodeling decision for homeowners. As prices have fallen, many homeowners have lost a sizable share (in some cases all) of the equity in their homes and selling could result in a potential loss. Consequently, households seeking to avoid moving have instead opted to remodel their current home rather than risk a potentially unfavorable outcome from selling.

Note: Data for 2nd chart seasonally adjusted by NAHB



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