From the daily temperatures to housing starts data, January's numbers came as a bit of a good surprise for the housing industry. Substantial order backlogs at the end of 2005 already meant that the beginning of the year would be strong for many builders, but milder-than-usual winter weather gave them an extra boost. Housing starts outpaced January 2005 data by 4 percent and were on a seasonally adjusted annual pace to top last year's record by 10 percent.
The industry needed extra help to keep up with the work: According to the Bureau of Labor Statistics, total construction employees reached 7,460,000 in January, up from 7,414,000 in December and 7,115,000 a year earlier—a 4.9 percent increase in jobs. Residential construction proved strong within the group, growing to 977,400 from 934,100 in January 2005. Residential specialty trade contractors, such as carpenters and electricians, grew more dramatically, gaining 176,300 jobs during the year. Construction far outpaced the nation's overall employment gain of 1.6 percent between January 2005 and January 2006.
Despite the good numbers news, most economists and industry experts continue to forecast a slight falloff in housing activity this year as investors back out of the market. That slowdown may not manifest itself in the national data until midyear, though, as builders continue to work through their backlogs for the next several months.
The UCLA Anderson Forecast made waves late last year when it projected that a housing slowdown would cause the loss of 500,000 construction jobs and 300,000 associated jobs in financial services. Michael Carliner, an NAHB economist, is more optimistic. Though he acknowledges the likelihood of job cuts in a slowdown, he says that changes in housing may keep the industry from shedding as many jobs as some expect. “In the past five years, we've added about half a million jobs, but I don't think we're going to go back to [five years ago]. The average unit is larger and requires more work than it did five years ago,” he says.
A housing slowdown may not be all bad news for individual employees. Nonresidential construction activity had dipped in recent years but has begun to pick back up, and both Carliner and Ken Simonson, chief economist for the Associated General Contractors of America, expect that sector of the construction industry to add positions to offset those lost by housing. “Total construction employment is likely to continue to grow,” Carliner says. “So problems with getting enough qualified people will probably continue.”
WHAT SLOWDOWN?: Builders didn't seem too concerned about the widely reported housing slowdown in January, starting 4% more total units than they did a year earlier. Both single-family and multifamily starts posted gains.
FIXED IS IN: More buyers are opting for fixed-rate mortgages as adjustable rates rise. One-year ARM rates were up 125 basis points compared with February a year earlier.