Sept. 26, 2007 ― State construction job, income growth vary widely; housing starts, prospects skid
Construction employment increased over the month in 20 states, fell in 16 and was unchanged (or within 100 of July levels) in 15 plus DC. Compared to August 2006, construction employment rose in 30 states, fell in 15 and was roughly level in five plus DC. Nationally, construction employment fell 22,000 for the month and 90,000 (1.2%) over 12 months, driven down entirely by tumbling residential employment. The largest year-over-year percentage gains in construction were in Utah, 12%; Montana, 10%; Hawaii, Tennessee and Mississippi, 6% each. The largest losses were in Arizona, California, Florida, Idaho, -3% each; and Michigan, -10%.
Personal income grew at a 1.2% rate in the second quarter after increasing 2.5% in the first quarter, the Bureau of Economic Analysis reported on Thursday (www.bea.gov).
“Most state personal income growth rates were very similar to the national average. Utah, however, had a notably higher growth rate in the second quarter and has grown substantially faster than all other states over the past year. The main contributors to its second-quarter growth were professional services, construction and durable manufacturing.”
Year-over-year growth ranged from 9.3% in Utah, 8.4% in Wyoming and 8% in Texas to 4.9% in Maine, 4.7% in Tennessee and 3.6% in Michigan. Mark Vitner and Adam York of Wachovia (www.wachovia.com/economics) noted in a commentary on Tuesday that Texas’ “economy has been booming [and] saw the largest [numerical] gain in nonfarm jobs over the same period. Gains are evident across the board, particularly in higher-paying industries such as energy, commercial construction, and high technology….we project that Texas will add more jobs over the next three years than any” other state. A third state in which construction has done well is Hawaii. But Carl Bonham of the University of Hawaii Economic Research Organization (www.uhero.hawaii.edu) and Paul Brewbaker of the Bank of Hawaii, in a September 5 report, predicted that “Growth in real contracting receipts will slow in 2007 and turn negative in 2008-09, with hotel renovation and industrial and commercial construction providing a stabilizing influence in the face of a steadily weakening residential sector.”
Except for Michigan, the states with large declines in construction jobs formerly had very hot housing markets that are now plunging. Yesterday, Standard and Poor’s reported that data through July for its S&P Case-Shiller Home Price Index declined for the seventh straight month. Average prices increased in only five of the 20 metro areas tracked - Seattle, 7%; Charlotte, 6%; Portland, 4%; Atlanta and Dallas, both 1% - and all five decelerated over the past year. The deepest drops were in Phoenix and Washington, -7%; San Diego, -8%; Tampa, -9%; and Detroit, -10%.
The prospects for home construction dimmed further yesterday with the report by the National Association of Realtors that existing-home sales, including single-family, townhouses, condos and co-ops, fell 4.3% in August, seasonally adjusted, bringing the rate down 13% from August 2006. The inventory of unsold houses, a signal to homebuilders of whether supply is tight enough to warrant new construction, rose 0.4% to 10 times the August sales rate, up from a 9.5-month supply at the end of July.
Nationally, new housing starts in August dropped 2.6% from July, seasonally adjusted, and 19% compared to August 2006. the government reported on September 19. Single-unit starts fell 7.1% and 27%, respectively, while multi-unit starts were up 13% and 14%. Building permits, normally a reliable indicator of future starts, sank 5.9% for the month and 24% year-over-year. Single-unit permits were down 8.1% and 28%; multi-unit permits were level for the month but down 15% from a year ago.
The recent increase in multi-unit starts and permits does not jibe with multifamily owners’ and builders’ sentiment as recorded by the National Association of Home Builders (NAHB). Responses are rated on a scale of 1 to 100, with a rating of 50 generally indicating that the number of positive responses is about the same as the number of negative responses. NAHB reported on Thursday that its index of condominium developers’ sentiment “lost 14 points in the second quarter of this year to stand at 18, which is 14 points lower than it was a year ago-and its lowest level since NAHB created the index five years ago.” NAHB Chief Economist David Seiders said, “The problems in the mortgage market are rattling consumer confidence in for-sale housing at the same time that the condo sector is trying to shake off excess inventory in a lot of markets. That combination is delaying any recovery in the condo sector.” In a separate survey released on September 19, NAHB reported, “Builder confidence in current rental apartment market conditions dipped in the second quarter of 2007, amid concerns that an excess supply in the for-sale market is creating a shadow inventory of available rentals.”