Segments of the Economy are Beginning to Show Signs of Improvement

 

The drop in residential construction employment may not fully reflect residential construction activity spurred by the first-time home buyer tax credit.

Real (inflation-adjusted) gross domestic product for the third quarter rose by 3.5 percent at a seasonally adjusted annual rate after four consecutive quarters of decline. In addition, industrial production advanced for three months, from July through September, pushing up capacity utilization.

While the nascent recovery is gaining some footing, the economy is still losing jobs — 190,000 in October as the national unemployment rose to 10.2 percent for the month — up from 9.8 percent in September.

The construction unemployment rate, which includes residential and commercial construction, increased to 18.7 percent in October, up from 17.1 percent the month before. This included a drop in residential construction employment of 15,000.

When residential construction slowed markedly in 2006, many building firms shifted from residential projects to nonresidential projects without properly reporting the change in classification to Bureau of Labor Statistics. Consequently, because those firms were building, the loss in residential construction employment did not appear to totally reflect that slowdown.

Conversely, now that residential construction is showing some improvement with nonresidential construction still in decline, many of the steep job losses from nonresidential construction that are occurring may still classified and reported to the BLS as residential construction losses, inflating those figures.

There is a little positive news that can be eked out of the overall employment report. Total job losses in October were the smallest recorded since August 2008. In addition, September job figures indicated an increase in the hiring of temporary employees.

Temporary workers are often hired during the early stages of a recovery. Even though business is improving and employers have to hire more people to meet increased demand, they are reluctant to hire permanent, full-time employees until the demand and recovery grow stronger. Look for the construction employment figures to improve, which will also help out the landscape industry.

– Courtesy of NAHB