Wednesday, May 20, 2009

Housing Starts and Construction Employment

From the Census:

Click for a larger image.

Let's take a look at this data and coordinate it with some other data points.

First, here is a chart of housing starts:

We are now at the lowest level in over 40 years. This is actually good news as Barry pointed out yesterday. Let's flesh out why (From Calculated Risk).

While the new home inventory is approaching realistic levels from an absolute number perspective...

The months of available inventory is at sky high levels right now. And who is going to buy these homes?

The US consumer is already in debt up to his eyeballs.

In other words, we already have plenty of homes to buy.

Let's add more dimension to this information.

Here is a chart of total construction employment from the St. Louis Federal Reserve:

The maximum rate of construction employment occurred in January 2007 when there were 7,737,000 jobs in the US. In the latest report there were 6,348,000 or a total loss of 1.389 million construction jobs. That's a ton of jobs. What are the possibilities those jobs are coming back? We already know that new housing construction is at a record low. How about commercial real estate?

Above is a chart of residential and nonresidential investment per quarter. Notice that nonresidential picked up some of the slack as residential fell. Now that number appears to have topped out.

So, while the news about new home buildings is actually good news because we already have enough homes, it does not bode well for the employment situation where it could take a long time to heal.