Construction Industry Already Well Into Recession [Housing Tracker]

by: Judy Weil

Quote of the Day

“My guess is that the job declines across the economy are greater than the monthly numbers we are now seeing, and that will be evident when revisions are published later this year.” - Jan Hatzius of Goldman Sachs. (NY Times, July 4th)


Macro Effects of the Housing Slump

Builders Bearish On California.  California Building Industry Association: "The downturn has caused a sharp decline in construction-related employment," the trade group reported, with an estimated loss of 181,300 jobs in the construction, finance and insurance industries. CBIA chief economist Alan Nevin: "In the past year the state lost 120,300 construction-related jobs... The residential housing business has suffered throughout the U.S. but nowhere more than in California. The volume of foreclosures should decline substantially by the end of 2008... With prices remaining depressed into 2009. Interest should pick up in resale housing next year.”  (Inman News, July 7th)

Housing, the Subprime Mortgage Crisis and the Enduring Resilience of the U.S. Economy.  “The economy of the last decade has mostly produced low-inflation economic growth despite a series of shocks—Long-Term Capital Management in 1998, the [tech bust] in 2000, 9/11… and now the subprime mortgage crisis… American Enterprise Institute’s Peter Wallison: “The financial resources of the government today are no longer large in relation to the size of the private sector." The Federal Reserve's balance sheet is $800 billion while the real assets of the 10 largest private-sector banks are $17.4 trillion—more than 20 times larger. Currency markets trade something like $618B every day. The Fed can take on loans from Bear Stearns. But its capacity for intervention is limited.”  (U.S News & World Report, July 7th)


Outlook Darker as Jobs Are Lost.  “Bureau of Labor Statistics: Apart from the 62,000 jobs eliminated in June — and 438,000 since January — most workers lost ground to inflation last month. While the average weekly wage of most ordinary workers was up 2.8% in the 12 months through June, the Consumer Price Index was up more than 4%… The [biggest] job cuts were in… professional and business services, which lost 51,000 jobs, most of them temps... Construction was next on the list. For the 12th straight month, employment in that sector shrank, this time by 43,000 workers.”  (NY Times, July 4th)


Residential Construction Sheds More Jobs in June. “Bureau of Labor Statistics: The residential construction… sector lost roughly 6,700 jobs in the past month. Specialty residential trade contractors… lost 14,300 jobs in June. Ivy Zelman of Zelman and Associates: “Since the peak, jobs related to residential construction have fallen 17% and residential contractor employment has declined 15%.” Nigel Gault, chief U.S. economist at research firm Global Insight of Lexington, Mass. “Private payrolls fell 91,000, with losses widespread across manufacturing, construction, and private services...” Zelman: we believe construction payrolls could decline another 10%-15%, resulting in a drag on the national economy of 720,000 to 1.08 million jobs, or 0.5%-0.8% of the workforce.”  (Builder Online, July 3rd)

State Budgets Axed By Housing Downturn.  “BusinessWeek: At least 29 states and Washington, D.C., have budget shortfalls for the F2009 that total $48 billion… Arizona, Florida, Nevada, Rhode Island and California, which are among the states that are reeling from a real estate downturn, are also topping the list among states with revenue shortfalls… Tom Zimmerman, head of mortgage research at UBS: The housing market "has been in a recession for the past year" and there is a likelihood that the housing market is headed for a "depression" once the "overall economy slips into a recession."  (Inman News, July 3rd)


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