- by New Deal democrat
As promised, economic data resumed this morning, and with it my extended posts.
First, the usual point that housing is a very important and leading sector of the economy, typically turning down more than a year before a recession begins. And with higher mortgage rates as well as surging prices, housing has indeed turned down.
This morning the Census Bureau reported that housing permits, the most leading of these metrics, rose 1,000 annualized, while starts, which are noisier and typically lag permits by a month or two, declined -149,000 back into their general 2024 range (although their three month average, which smooths out some of the noise, rose to a 12 month high):
The trend is slightly higher compared with this past summer, but within a limited range over the past two years.
But as I always point out as well, the *real* economic measure of housing is total construction. That had levitated for almost two years after permits peaked before turning down last year. And they declined more this month, down -20,000, or -17.8% percent from their peak (gold, right scale):
Housing construction is now down well into the range where in the past a recession was more likely than not to occur in the near future.
But as I wrote about last week, before a recession begins the even more lagging measure of housing construction employment almost always turns down as well. And as I wrote last week, that measure is *still* levitating, with job growth continuing right up through the latest employment report:
Finally, turning to the metric that leads even permits, here is a look at mortgage rates averaged monthly (blue, left scale) compared with single family permits (red, right scale), which are the least noisy most leading measure of all, and which were unchanged at their 10 month high):
With mortgage rates back hovering around 7%, I expect more of the same from housing permits and starts: very little room to improve in the next few months, and more likely to stagnate or turn back down slightly.
If housing construction is a drag on the economy, and manufacturing is no more than treading water, that makes services all the more important. And I read yesterday that one way to really put a damper on employment and spending is to lay off 100,000’s of federal workers, putting fear into the decisions of not only the workers not laid off, but all of the people likely to be caught up in the ripple effects thereof.
