One-click data cable The loss of residential construction workers is a sign of the recession. Before every recession, the number of workers building single- and multi-family homes and performing remodeling jobs tends to decline as rising interest rates take a toll. Economic impact through housing.
Although the unemployment rate has risen recently, jobless claims have not risen to levels that would cause a jobless recession. But one employment sector in particular could push jobless claims higher, pushing the unemployment rate to 5% or higher.
Today, housing starts are at levels last seen during the brief 2020 pandemic-induced recession. home depot Warnings are that renovation work is slowing. The trend here is clear and has been going on for several months. Not long ago, house line Editor-in-Chief Sarah Wheeler and I discuss the risk of a recession due to a lack of construction labor.
Let’s take a look at today’s home construction report to see how we’re doing.
from U.S. Census Bureau:
building permit
The number of private housing units issued with building permits in July was at a seasonally adjusted annual rate of 1,396,000. This is 4.0% lower than the revised growth rate of 1,454,000 in June and 7.0% lower than the July 2023 growth rate of 1,501,000.
New house construction started
Private housing starts in July were at a seasonally adjusted annual rate of 1,238,000 units. This is 6.8% (±10.3%) lower than the revised June estimate of 1,329,000 and 16.0% (±10.5%) lower than the July 2023 estimate of 1,473,000.
I wanted to make this article very simple and easy to understand. If you look at the chart below, we’re basically at recessionary levels today. But during this time, the number of residential construction workers has been increasing. Why does this happen?
There are several reasons that make this economic cycle unique and have been driving those who thought the economy would be in recession since 2022.
1. We have a large backlog of housing orders this cycle.
2. It takes an average of 21 months to complete a five-unit project. The turnaround time from start to finish on a project is long, which keeps people working longer than usual.
3. Large publicly traded homebuilders have gross profit margins in excess of 20%, which means they can lower mortgage rates to sell homes.
4. New listings data have been at historically low levels over the past few years. Many people who remodel their homes live there longer.
5. There are many new homes that have been approved but have not yet started because builders have higher prices in mind. They become more aggressive when interest rates fall, which keeps labor reserves high in case demand rebounds.
Things have changed recently. Home construction data is at recession-like levels, single-family home permits are still declining and remodeling activity is slowing. As more and more units are completed, we are getting closer to no longer having such high employment levels for construction workers unless more construction starts.
in conclusion
In order for single-family home permits to start increasing again, we need to lower mortgage rates. With interest rates falling steadily since June, we have seen a slight improvement in the forward data from the Homebuilder Confidence Survey.
But to get things moving again and make sure people stay employed, we need to keep interest rates lower for longer and avoid going back to a 7% to 8% interest rate world. These do little good to small builders.
For the multifamily (5+ units) construction community, the situation is a little more complicated because their financing is not directly tied to 30-year mortgage rates and apartment rental growth is cooling. In places like Texas and Florida, where inventories are growing faster than in other parts of the country, we’re seeing more severe weakness there than elsewhere.
So if Fed Preventing rising unemployment claims and the resulting rise in job losses requires repossession. The existing home sales market has been in recession since June 2022, but the new construction market has not.
