Eye On Housing
Recent NAHB estimates show that a 25 percent volume cap on softwood lumber imported from Canada, had it been in place in 2014, would have resulted in a loss of
A previous post showed the impact that a 15 percent tariff on Canadian lumber, the maximum allowed under the expired Softwood Lumber Agreement, would have on U.S. markets. This post takes a more forward-looking approach and considers a volume cap of the type industry stakeholders currently fear the U.S. will impose.
The most recent available data show that Canadian imports accounted for about 28 percent of softwood lumber sold to U.S. customers in 2014 (and most of the data for other recent years does not appear drastically different); so 25 percent is probably the most modest volume cap the U.S. would consider. Even so, the resulting loss of 8,941 U.S. jobs under this “modest” cap is considerably greater than the 4,666 jobs lost under a 15 percent tariff.
The basic lumber volume data and average measures of market sensitivity to price noted in the previous post imply that capping Canadian imports at 25 percent of the softwood lumber purchased by U.S. customers would result in a
A board foot is a standard way to quantify lumber and is a measure of volume equivalent to a a 12-inch square, one-inch thick board. Home builders are among the major U.S. customers of board feet of softwood lumber. Using the estimates of lumber in an average single-family and average multifamily home described here, mid-2014 prices from Random Lengths, and a conventional assumption of -1 for the price elasticity of demand for housing, the 25 percent volume cap translates to annual impacts the home building industry that include a
Even allowing for the increased output by U.S. lumber producers, NAHB’s National Impact of Home Building Model shows that the reduced investment in new housing causes the net loss of wages, taxes and jobs described at the top of the article. The NAHB model is primarily a fairly straightforward application of input-output and other GDP-related accounts from the U.S. Bureau of Economic Analysis, as described in a 2014 NAHB article.
The following table breaks down the net impacts by major industry group and type of tax (or other government revenue) lost.
The jobs are measured in full-time equivalents (i.e., enough work to keep one person employed full time for a year, based on average hours worked by full-time employees in a particular industry).
The above considers only the impacts of increased output by U.S. sawmills and reduced investment in new residential construction. It does not include any upstream impacts of inputs used by U.S. sawmills, such as timber; nor does it include negative impacts of higher prices on other industries that use lumber, such as residential remodeling.
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