Thursday, May 15, 2014

Housing Starts vs. Unemployment

Set aside, if you will, the valid and legitimate criticisms of labor force participation and people leaving the labor market.  I am merely updating arguably my favorite chart - housing starts vs. unemployment.

I happened upon this chart quite some time ago and noticed that housing stats lead unemployment figures anywhere from 6-18 months.  The logic being that housing triggers not just construction hiring, but effects nearly every other industry as a "house" virtually houses products from every other industry.  Ergo when housing recovers so too (generally) does employment in every other sector.

Empirically, this relationship is holding, but as mentioned before a large part of the drop in unemployment has been by people leaving the labor force.  I may someday compare labor force participation vs. housing starts to see how this compares (though I fear demographic trends - women entering the work force, baby boomers retiring - may mask any relationship)


RobertW said...

For those of us less economically adept, can you give us your interpretation? It looks like you are saying we are in for a big rise in unemployment next year?

SM777 said...

A very applicable chart. Are there charts on other factors? Such as the banks holding millions of foreclosed houses off of the market or the number of people who had their unemployment benefits run out and therefore, are no longer counted as unemployed? Also, from what I am seeing there are approx. 100 million unemployed people in the US, yet the "unemployment rate" is what? 7% or thereabouts?

Kristophr said...

Look at all those lemmings.

The time to do new construction is when it is cheap ... at the bottom of bust.

This also means that your project must not depend on that burst bubble for profit.

As usual, making real money is hard.

vurana miles said...

So in a nation full of empty houses and depressed real-estate markets, the right thing to do is increase supply? Wow.

Anonymous said...

I think the real unemployment rate is around 20%. Here's the thing, once you subtract QE funds which is about a trillion a year injected into the economy, it indicates our economy has shrunk over 5% since QE was enacted.

That would explain a dead job market which just about every economist has tried to paper over with some bogus explanation.

As for housing, it's in another bubble and that's very bad news for us. Banks are gobbling them up like juju beans and putting on the market as rentals, flippers are going nuts in AZ, CA and FL.

This is the canary in the coal mine and it's singing. It's a bad replay of 2002-2008 and sooner or later this one gonna burst and take the rest of our economy with it. I just don't think the Fed and PPT have any more get out of jail free cards to play should this bubble go boom!!

Kristopher B. said...


No. You use the idle construction crews to do other projects besides houses at cut rates.

Apparently the third sentence in my comment flew right over your head.

Anonymous said...

I'm pulling the FRED data and running it every way I can and not finding the correlation you say is there. There doesn't appear to be one. Can you justify what you're saying?