Hi Eric, love your work. One question - a significant majority of residential builds are contract workers (not employees). In other words, no layoffs just no new contracts. Is this reflected in the residential housing employment data?
I don't think you can ignore the off books reduction in the labor supply, associated with the changes in immigration, which will not show up in the data. Additionally, the Fed juicing the economy led to the biggest wealth transfer historically, The top 10% is flush like never before distorting the aggregate. The bottom half is clearly in recession.
Good article. Another factor in the construction industry has been the huge increase in migrants since the Pandemic. Most were illegal and could not get work permits, so they provided very cheap labor for construction companies. That helped keep profit margins up. Ultimately the much higher interest rates since 2022 and the huge increase in home prices have had a negative effect on home building and sales. The demand is still there. People just can't afford them. That issue will have to be resolved, as housing is a significant part of the economy.
Microsoft fell 10% in one day, first sign investors are starting to get scared of all datacenter build out. If this escalates datacenter build out will slow down, and commercial construction payrolls will start to fall, recession will be inevitable. My point is, residential construction will be irrelevant in that case.
The builders are hanging on to their labor force as long as possible. After the GFC, rehiring became difficult and costly. They don't want to go through again if they can avoid it. The elevated margins are runway for them to retain labor longer into this downturn.
Hi Eric, love your work. One question - a significant majority of residential builds are contract workers (not employees). In other words, no layoffs just no new contracts. Is this reflected in the residential housing employment data?
Great question. A huge portion of residential construction labor is 1099 not W2.
I don't think you can ignore the off books reduction in the labor supply, associated with the changes in immigration, which will not show up in the data. Additionally, the Fed juicing the economy led to the biggest wealth transfer historically, The top 10% is flush like never before distorting the aggregate. The bottom half is clearly in recession.
Good article. Another factor in the construction industry has been the huge increase in migrants since the Pandemic. Most were illegal and could not get work permits, so they provided very cheap labor for construction companies. That helped keep profit margins up. Ultimately the much higher interest rates since 2022 and the huge increase in home prices have had a negative effect on home building and sales. The demand is still there. People just can't afford them. That issue will have to be resolved, as housing is a significant part of the economy.
Microsoft fell 10% in one day, first sign investors are starting to get scared of all datacenter build out. If this escalates datacenter build out will slow down, and commercial construction payrolls will start to fall, recession will be inevitable. My point is, residential construction will be irrelevant in that case.
The builders are hanging on to their labor force as long as possible. After the GFC, rehiring became difficult and costly. They don't want to go through again if they can avoid it. The elevated margins are runway for them to retain labor longer into this downturn.