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The No 1 Gold Stock for 2019

U.S. Economy to Get Jolt from 1.2 Million Homebuilding Jobs

Economics / US Economy Apr 16, 2013 - 12:01 PM GMT

By: Money_Morning

Economics

David Zeiler writes: An accelerating rebound in new home construction over the next two years should finally give the U.S. economy the jump-start it needs to progress toward a truly robust recovery.

New home construction continues to bounce back from the lows of 2009, after the housing bubble burst, but still has a long way to go.


With housing one of the prime drivers of the U.S. economy - historically construction accounts for 5% of the U.S. gross domestic product (GDP) and related economic activity another 13% - a spike of activity in this area could drive the growth that's long been lacking from the recovery.

"A revival in new home construction will have a huge stimulative effect on the larger economy," Brad Hunter, chief economist for housing research firm Metrostudy, told Bloomberg News. "When home construction goes up, so does demand for furniture, tile, lumber, concrete, draperies, paint and appliances of all sorts."

More Jobs for the U.S. Economy
Among the many stimulative gifts that a resurgence in homebuilding will bestow on the U.S. economy is jobs - lots of jobs.

Over the next two years, new home construction could add 1.2 million jobs - 500,000 this year and 700,000 in 2014, Russell Price, a senior economist at Ameriprise Financial Inc., told Bloomberg News.

The National Association of Homebuilders estimates that for every single-family home that is built, three jobs are created.

With unemployment still high at 7.6%, such numbers would be a major boon to a labor market that has struggled to get past the 200,000 new jobs per month needed just to keep up with population growth.

Homebuilders will need all those workers - and maybe more - judging by recent data.

Housing starts, which increased 28% in 2012 to 780,000, are on pace to reach 930,000 in 2013, according to a Bloomberg survey of 63 economists.

Reinforcing this trend are the numbers of applications for building permits, which the survey said was up to an annualized rate of 943,000 in March.

What's more, Moody's Analytics has projected new home construction for 2013 at nearly 1.2 million. That would be a 53% increase on top of last year's gains (and a far cry from the 2009 low of 554,000).

But even that would fall well below the average annual rate of 1.64 million homes the Joint Center for Housing Studies at Harvard University projected the U.S. will need to meet demand over the next decade.

Reaching that level - normal - could mean 2 million more housing-related jobs than existed in 2012.

"There's a lot of pent-up demand for housing, and very little supply," Celia Chen, housing economist for Moody's Analytics, told CNN Money. "As demand continues to improve, home builders have nothing to sell. They'll have to build."

U.S. Economy Will Get a Boost From Home Construction
While the jobs alone will help the U.S. economy, home construction creates a powerful ripple effect of spending that can significantly boost GDP, which has languished around 2% for the past year.

A homebuilding renaissance could add 0.5% to U.S. GDP in 2013, JPMorgan Chase economist Michael Feroli wrote in a note to clients last week.

Home construction in recent years has been well below historic norms. Even with last year's improvement, residential construction was just $382.9 billion - just 2.44% of GDP, which is half of the historical norm.

A return to 5% of GDP would double the value of new home construction to about $780 billion.

That's the sort of shot in the arm that could get the U.S. economy back to the kind of 3%-plus growth it needs.

"Early-cycle indicators like housing now look like they typically do in the early stages of a recovery," Joseph LaVorgna, chief U.S. economist at Deutsche Bank in New York, told Reuters. "The economy could definitely surprise to the upside this year."

Source :http://moneymorning.com/2013/04/15/u-s-economy-to-get-jolt-from-1-2-million-homebuilding-jobs/

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