Housing Starts Continue to Rise

The U.S. Department of Housing and Urban Development released its monthly report on new residential construction, showing a vast improvement in the housing market from one year ago.  The annual rate of housing starts was 866,000, up 2.2% from September, and up 41.9% from October 2011.  This key economic indicator plummeted to below 500,000 following the recession and stabilized from 2009 to 2011.  Near the end of 2011, however, construction began to increase steadily.  While still nowhere near its peak of over two million housing starts, the rate continues to rise.  With that said, the annual rate of housing units authorized by building permits - future construction - was down in October.  The rate fell 2.7% from September, perhaps indicating a minor decrease in the near future for housing construction.

Housing Starts and Prices Rise

The U.S. Department of Housing and Urban Development’s September report on new residential construction illustrated a 15% jump in housing starts.  The annual rate rose to 872,000 in September compared to 758,000 in August – the highest level in four years.  The 872,000 new residential construction projects is well below the heavily inflated annual rate of over 2 million, which was the norm while the housing bubble remained intact.  Housing starts bottomed out in mid-2009 at 478,000, but have since rebounded nicely.  Coupled with housing starts is housing prices, a figure that is highly important in understanding the overall housing market in America.  The Case-Shiller Home Price Indices, a measure of home prices in 20 major metropolitan regions in the U.S., showed a 2.0% increase in prices from August 2011.  This is the largest increase in two years, and represents three straight months of year-over-year gains.  

Housing Prices Still Low, But Sales Fail to Pick Up

While housing prices have stabilized, the quantity of one-family homes sold throughout the U.S. continues to fall to levels unseen in decades.  Though prices continue to rebound, the median cost of a single-family home is still at its lowest in 8 years ($227,000).  The drop in price, however, has not motivated Americans to buy homes.  The Department of Housing and Urban Development’s estimates the sales of new single-family houses at a seasonally adjusted annual rate of 372,000.  Though up 25% from July of last year, housing sales haven’t been this low since before the Census began tracking the figure in the 1963.  Sales fell 76% from 2006 to 2011, and have yet to show significant periods of recovery.  With a record low number of houses starting construction this year, and an unemployment rate still above 8%, the recession’s lingering consequences still hinder a sales rebound.  With that said, prices have fallen three straight months; will relatively low prices incite a rebound in the housing market? 

Construction Spending Rises Slowly

In the U.S. Department of Commerce’s press release detailing construction spending, it appears construction is slowly creeping upwards after a precipitous drop off following the recession.  The May 2012 estimate of annual construction spending pegged the seasonally adjusted rate at $830.0 billion, up 0.9% from April’s estimate.  At its peak in early 2006, the rate topped off at just over $1.2 trillion, and today’s level is similar to that of a decade ago.  Additionally, the total construction spending of $310.4 billion during the first 5 months of the year is 9.4% greater than the $283.8 billion spent for the same period in 2011.  With that said, there exists a discrepancy between private and public spending on construction.  Private construction spending is up 13.1% from 2011, while spending in the public sector has fallen 3.9%. 

Housing Construction Starts to Rise Slowly

The U.S. Department of Housing and Urban Development issued its monthly press release on May 16^th regarding residential construction in April.  Privately-owned housing starts were at a seasonally adjusted annual rate of 717,000, up 2.6% from March, and up 29.9% from April a year ago.  This rate is up only marginally since February 2009, when housing construction hit rock bottom and the annual rate was only 583,000.  Before the recession, the housing starts rate was well over 2,000,000.   The seasonally adjusted annual rate of building permits, an indicator for future construction, was at 715,000.  This rate was down 7% from March, but chalk the decrease up to the volatile apartment category, which dropped 23%.  The building permit rate was also 23% above the April 2011 estimate of 578,000.

"Disappointing" April Jobs Report

A recent Wall Street Journal article discusses what it refers to as a "disappointing jobs report" for April.  While the unemployment rate decreased to 8.1%, this drop can largely be attributed to the 342,000 people who left the labor force over the same time period.  The interactive graphic from the article, which includes three graphs, highlights several unemployment trends since the recession began in 2008.  In one graph, the percentage change in payroll employment from 2008 to 2012 is compared to four other periods of recession.  As the graph shows, all jobs had been recovered by year five of the previous recessions but have still not been recovered since the recession beginning in 2008.  Another graph shows the percentage change in payroll employment since 2008.  As this graph indicates, construction has made little improvement at -25.8% while the education and health sector have improved by 9.1% since 2008.  Lastly, the third graph shows the percent change in payroll employment since 2008 by gender.  According to the graph, men were hit worse initially by the recession but have since made a more rapid recovery.  Currently, however, women are only 2.6% below pre-recession employment while men remain 4.6% below.

Internet Economy Expected To Grow Rapidly

As the world enters the information age, and the Internet continues to assimilate into the everyday lives of billions of people, the question begs: how impactful is the Internet to the economy?  The Economist has released a graph based on a recent report from the Boston Consulting Group (BCG) detailing the Internet’s contribution to the economies of the G20 countries.  The Internet economy in Britain is now larger than its construction and education sectors, comprising over 8% of GDP and forecasted to amount to over 12% by 2016.  BCG predicts that the Internet economy will grow at more than 10% annually, and by 2016, will comprise 5.3% of GDP in the G20 nations.  BCG also notes that as of now, the European Union has not capitalized on Internet revenues due to a lack of a single, all-encompassing digital market.

3.2 Million Job Openings in November

A report from the U.S. Bureau of Labor Statistics (BLS) shows that there were 3.2 million job openings in November, unchanged from October. This is still below the 4.4 million job openings that were recorded when the recession officially started in December 2007, though it exceeds by one million the number of openings in July 2009, which was "the most recent trough for the series." According to the report, "The number of job openings has increased 30 percent since the end of the recession in June 2009."

The report notes, "Several industries saw increases in the number of job openings over the year, while the number of job openings decreased for finance and insurance, professional and business services, and federal government. The Midwest and South regions had increases in the number of job openings and the West experienced a decline over the year."

The BLS Editor's Desk further summarizes, "There were 2.8 million job openings in private industry. Within private industry, there were 87,000 job openings in construction, and 606,000 in education and health services."