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The recession has begun
The 63,000 job decline in February on top of a 22,000 drop in January is too large to be offset by the improving trade balance so expect a small first quarter decrease in GDP and almost certainty a further decline in the spring.
The consequence for construction is a further reduction in space and facility demand and more available space and facility capacity. Most of this weaker outlook was incorporated in the construction spending forecast recently posted on this site. The immediate negative impact will hit commercial building construction much harder than other sectors. The value of February commercial starts fell 30% from January, well more than the usual seasonal decline. Full details for February starts will be posted on this site early next week. The big job losses will also extend the housing recession but that impact will not appear in the market data until late summer.
The pattern of job losses in February is typical of the onset of a recession. Manufacturers cut 52,000 jobs. Every manufacturing industry laid off except for 1,300 new jobs at computer manufacturers. Contractors cut 39,000 jobs, including 9,000 in nonresidential building. Retailers and wholesalers dropped 41,000 jobs including 6,800 layoffs at building material retailers. And temporary help service jobs fell 26,000, a very reliable signal of an abrupt weakening in the economy. These are the employers most sensitive to changing economic conditions.
By contrast, governments hired 38,000 people. Health care added 36,000 jobs. These employers are insulated from the immediate impact of a weakening economy. But their hiring will slow in a few months and then will stop late in the spring if private employment continues to fall.
The consensus economic outlook expects a two quarter recession with the economy expanding again by the summer. This outcome requires “something” to boost buyer confidence. It could be cheaper energy, cheaper food, cheaper credit rates or, unfortunately, cheaper buildings.
The recession has begun
March 7, 2008
The 63,000 job decline in February on top of a 22,000 drop in January is too large to be offset by the improving trade balance so expect a small first quarter decrease in GDP and almost certainty a further decline in the spring. The consequence for construction is a further reduction in space and facility demand and more available space and facility capacity. Most of this weaker outlook was incorporated in the construction spending forecast recently posted on this site. The immediate negative impact will hit commercial building construction much harder than other sectors. The value of February commercial starts fell 30% from January, well more than the usual seasonal decline. Full details for February starts will be posted on this site early next week. The big job losses will also extend the housing recession but that impact will not appear in the market data until late summer.
The pattern of job losses in February is typical of the onset of a recession. Manufacturers cut 52,000 jobs. Every manufacturing industry laid off except for 1,300 new jobs at computer manufacturers. Contractors cut 39,000 jobs, including 9,000 in nonresidential building. Retailers and wholesalers dropped 41,000 jobs including 6,800 layoffs at building material retailers. And temporary help service jobs fell 26,000, a very reliable signal of an abrupt weakening in the economy. These are the employers most sensitive to changing economic conditions.
By contrast, governments hired 38,000 people. Health care added 36,000 jobs. These employers are insulated from the immediate impact of a weakening economy. But their hiring will slow in a few months and then will stop late in the spring if private employment continues to fall.
The consensus economic outlook expects a two quarter recession with the economy expanding again by the summer. This outcome requires “something” to boost buyer confidence. It could be cheaper energy, cheaper food, cheaper credit rates or, unfortunately, cheaper buildings.
Posted by Jim Haughey on March 7, 2008 | Comments (0)
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