Ghost Theory, The Lack Of Labor For Construction

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First of all Happy Halloween!

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Today I heard from our housing pundits the predictable statements that we have record breaking demand for housing but not enough workers to build more homes.

When you hear statements like this, please keep in mind the following: In October of this year we have more construction workers then we did in 1994 or 2000, when demand was booming.

Construction employees:
October 2017  6,911 Thousands of Persons
October 2000  6,814 Thousands of Person
October 1994  5,177 Thousands of Persons

From Fred:
https://fred.stlouisfed.org/series/USCONS

Construction jobs October
During those times in 2000 and 1994 we also had a lot more housing starts with less workers.

Housing Starts: 
October 2017 1,127,000
October 2000  1,549,000
October 1994  1,450,000

From Fred:
https://fred.stlouisfed.org/series/HOUST

October Nominal home prices

Construction wages are at all time highs

Average Hourly Earnings of All Employees: Construction $29.19 

From Fred:
https://fred.stlouisfed.org/series/CES2000000003

November Construction wages all


Average Hourly Earnings of Production and Non-supervisory Employees: Construction $27.20

From Fred:
https://fred.stlouisfed.org/series/CES2000000003

September wages Construction Non supervisory

Monthly supply of new homes (inventory of homes waiting to be purchased)  in this cycle has always been higher every month compared to the previous cycle.

From Fred:
https://fred.stlouisfed.org/series/MSACSR

October Monly Supply

If we take a look at demand for new homes, adjusted for population, with a 6 month moving average we can see that we simply don’t have the demand to warrant more building yet. This will change when demographics get better for home buying.

From Doug Short:
https://www.advisorperspectives.com/dshort/updates/2017/10/25/september-new-home-sales-jumps-almost-20

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As much as a I harp how wrong the great American recession bears have been with their bad macro-economic theories, the housing community in getting away with bloody murder with this thesis. Happy Halloween!

Stay safe and enjoy your evening everyone!

Logan Mohtashami is a financial writer and blogger covering the U.S. economy with a specialization in the housing marketLogan Mohtashami is a senior loan officer at AMC Lending Group,  which has been providing mortgage services for California residents since 1987. Logan also tracks all economic data  daily on his own facebook page https://www.facebook.com/Logan.Mohtashami