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Thread: weekend commentary - plunge in new housing construction ...

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    Default weekend commentary - plunge in new housing construction ...

    14.3% in January vs December, and 37% compared to January 06



    This HAS to mean major layoffs in the construction industry, along with the building materials industry, along with the home furnishings / durable goods industries etc. on top of layoffs and bankruptcies in the real estate brokerage and mortgage lending industries.

    There is also major concern that the rapidly escalating avalanche of credit defaults is going to lead to a general 'credit crunch' which affects other types of consumer lending ...



    (snip)"Normally when a sector like housing or real estate or tech goes into a boom and bust cycle, the “real cycle” precedes the “credit cycle”. In other terms we would have expected that weakness in housing would lead first to large job losses, lower income generation, higher unemployment first (the “real” cycle). Only when the “real” cycle is underway one would usually expect – as in the 1980s S&L fiasco – that a “credit” cycle would be triggered and emerge leading to further real and financial distress.

    Instead the most surprising thing about this housing bust and subprime meltdown is how the “credit” cycle started much earlier than the “real” cycle and much more rapidly than anyone would have ever suspected. Now in an economy with still high growth, still high job creation, still very low unemployment rate, still high income generation we are already observing massive increases in subprime defaults and foreclosures, 20 subprime lenders going out of business in two months, the ABX going into free fall and the cost of insuring against the BBB- tranche of the ABX index going to a spread relative to LIBOR of over 1000bps (yes that's a 10% spread - sic). So, if all this happening in what the consensus terms as a “Goldilocks economy” what would happen if the economy – as likely – will start to slow down more in 2007? How much more carnage can we expect in many sectors and markets when the economy is weaker than in recent months?

    The fact that the downward “credit” cycle has emerged so fast and so sharply in a still “strong” economy is the most important signal that this sub-prime mess cannot be easily dismissed as a niche problem that will have no contagious effects on the rest of the economy and of financial markets."(snip)

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    Default Re: weekend commentary - plunge in new housing construction ...

    yup, durable goods sector is now getting hit hard ...



    (snip)" Hamilton, 36, lost her $11.20-per-hour job last month because Collis's main customer, Whirlpool Corp., the world's largest appliance maker, cut production after a drop in home sales reduced demand for new refrigerators, washing machines and dishwashers. Whirlpool fired 500 workers at its Evansville plant and Collis fired 160, including Hamilton.

    ``Working for Collis was the best job of my life,'' said Hamilton, a mother of two who lives on the outskirts of Evansville. ``Money is going to be tight.''

    New and existing home sales dropped almost 10 percent last year, depressing demand for products from copper pipes to kitchen sinks and resulting in the loss of about 100,000 jobs in the U.S. Housing-related unemployment probably will increase in 2007, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts.

    Even if the housing market improves in the second half of 2007, as the National Association of Realtors predicts, sales of furniture and construction supplies will stagnate, said Amal Bendimerad, a research analyst at the Harvard center. Housing and related industries account for about 23 percent of the economy, according to the center.

    ``Appliance manufacturers and other suppliers are already feeling the heat, but they may not feel the full impact until the end of 2007,'' Bendimerad said. ``There's typically a lag of as much as a year.''

    Furniture Makers, Plumbers

    By the end of this year, job cuts at companies including Whirlpool, Masco Corp. and Emerson Electric Co. may exceed the fallout from the 1991 housing slump, said Paul Puryear, managing director at Raymond James & Associates. The Bureau of Labor Statistics doesn't give data for housing-related job losses. "(snip)

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    Default Re: weekend commentary - plunge in new housing construction ...

    I feel sorry for this woman if an $11.20/hr retail job was the best job of her life, at age 36.

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    Default Re: weekend commentary - plunge in new housing construction ...

    Emily! Jeez. There's a whole entire country full of poor people here for whom that's reality. Her alternatives are probably minimum wage jobs at Wal-Mart.

    I knew this was coming, along with the drop in existing housing prices, which is going to make it easier for us when we buy here

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    Default Re: weekend commentary - plunge in new housing construction ...

    I understand being poor and being upset that you lost your job. But it was a shitty job. There are tons of those. Probably all the ones that people left to supply the housing boom needs.

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    Default Re: weekend commentary - plunge in new housing construction ...

    depending on what part of the country you live in, 11 an hour is a very comfortable salary, hardly 'shitty'. we can't all make 200k a year, nor should people making less than six figures be spat on.

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    Default Re: weekend commentary - plunge in new housing construction ...

    you are missing my point. I'm not looking down on someone just because they make $11/hour. I really don't care and at one time I thought that was great money myself.

    I look down on someone boo-hooing because they lost their $11/hr job as if her world just fell apart. She's 36 with two kids. Time to grow up and find another $11/hr job.

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    Default Re: weekend commentary - plunge in new housing construction ...

    ^^^ yes but herein lies the problem with cheaper offshore 'labor arbitrage' ... the amount of decent (i.e. union) jobs available for unskilled Americans that pay $18 an hour are fast disappearing. Now even the 'shitty' jobs for unskilled Americans that pay $11 an hour are being threatened. While this news story didn't mention it, US appliance makers are taking advantage of the slowdown in sales / demand for their products to close US factories ... but are investing in new factories offshore which will be ready to produce new appliances at a much higher profit margin when sales / demand returns.

    I would also add that for durable goods makers 'offshore' now also apparently means Canada. By opening factories in Canada, not only do US corporations get to pocket Canadian gov't incentive money, but the US corporations are also able to avoid the rapidly escalating employer costs of US employee health insurance / benefits thanks to Canadian national health insurance (which is paid for by higher taxes on Canadian employees instead of the employer). And where refrigerators etc. are concerned, US corporations can avoid the high shipping costs of importing large / heavy products built in Asia by importing from Canada by truck.

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    Default Re: weekend commentary - plunge in new housing construction ...

    Quote Originally Posted by Emily View Post
    you are missing my point. I'm not looking down on someone just because they make $11/hour. I really don't care and at one time I thought that was great money myself.

    I look down on someone boo-hooing because they lost their $11/hr job as if her world just fell apart. She's 36 with two kids. Time to grow up and find another $11/hr job.
    I thought about it in terms of perhaps the job had good benefits, scheduling flexibility, a good work environment...all the other things that make you happy at work, not just money.

    Of course, the article didn't mention that, but it's a possibility you may not have considered.

    There are plenty of people out there that make heaps of money but hate their jobs.

    And her world might very well have fallen apart if, say, she lost health coverage for her and her kids and doesn't have much in the way of savings.

    Not everyone can/wants to strip or has the opportunity for a good education or connections to get them a high-paying job.
    "She has written so well, and marvellously well, that I was completely ashamed of myself as a writer...But this girl, who is to my knowledge very unpleasant and we might even say a high-grade bitch, can write rings around all of us who consider ourselves as writers"

    Ernest Hemingway on writer, aviation pioneer and horse trainer Beryl Markham


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    Default Re: weekend commentary - plunge in new housing construction ...

    Sometimes even a shitty $11/hr job is hard to find or replace. As Susan was saying, we've got a country full of people for whom losing a job like that would be financially devastating. Most people don't have it quite as good as we do.

    Quote Originally Posted by pheno View Post
    When you lead a nontraditional life don't try to measure it with traditional milestones.

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    Default Re: weekend commentary - plunge in new housing construction ...

    Quote Originally Posted by NinaDaisy View Post

    Not everyone can/wants to strip or has the opportunity for a good education or connections to get them a high-paying job.

    That's not what I'm saying! I don't think everyone should be rolling in big bucks. I'm saying find another job just like that.

    If you can't get another $11/hr job, then maybe it's time to go some place where you can. The can't be that difficult to find. Waitresses at Applebee's probably make that. Pizza delivery. Cashier.

    This isn't an article about a loss of jobs. This is an article about a loss of jobs in the home building sector. Where do you think the people that filled those jobs came from?

    But yes, the article leaves A LOT out, like other perks of the job or why she likes. It doesn't say if there are other jobs available. it also leaves out if she's married or not.

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    Default Re: weekend commentary - plunge in new housing construction ...

    Waitresses at Applebee's probably make that. Pizza delivery. Cashier.

    This isn't an article about a loss of jobs. This is an article about a loss of jobs in the home building sector. Where do you think the people that filled those jobs came from?
    For the most part, the people that filled newly created direct jobs in the real estate construction industry, as well as expanded jobs in real estate boom related financial industry (i.e. banking, mortgage lending, appraisals, insurance), in the building materials industry (i.e. plywood, wire, concrete), in the home 'furnishings' industry (i.e. appliances, furniture, bed/bath), as well as expanded jobs in related retail, professional (i.e. architectural, engineering, landscaping, home decorating), utilities (i.e. new electric / gas / cable installations) etc. came from industries that NO LONGER EXIST in the USA. Thus any assumption that these people can simply go back to 'where they came from' as the housing bust erases their current jobs simply isn't true. By several estimates, the number of jobs that were created as a direct or indirect result of the real estate construction boom since 2000 - the types of jobs described above - is on the order of 1.2 - 1.3 million.

    But this is not the entire extent of the 'damage' that a bursting of the housing boom could cause. Another huge aspect of the housing boom was 'cash-out refinancing' i.e. the rising value of real estate allowing homeowners to extract cash from their real estate holdings (via out and out cash back re-fi's, via home equity loans, via 2nd mortgages etc.) which provided a de-facto second source of 'income' to a large number of homeowners. The 'cashed-out' cash was then available for spending on everything from new cars to plasma TV's to vacations to restaurant meals to untold other 'non-essential' purchases of goods and services. However, with the end of rising real estate market prices, this de-facto second income source has now dried up completely. As such, many homeowners no longer have the cash available for spending on 'non-essential' purchases that they used to. This will have secondary effects on these industries and businesses. By several estimates, the number of jobs that were created / retained in the 'non-essential' goods and services industries that benefitted from the spending of 'cash-out' cash number about another 1/2 million. Thus the total number of jobs which were in some way related to the housing boom since 2000 for their (continued) existance actually numbers around 1.7 - 1.8 million.

    During the same 2000 time span, approx 3 million manufacturing jobs in areas that were NOT related to the housing boom were lost. This mostly consisted of blue collar union job losses in the auto industry / heavy manufacturing / textiles etc. Arguably, the vast majority of people who lost manufacturing jobs since 2000 migrated to new jobs that were directly or indirectly related to the housing boom. Also arguably, some portion of the people who lost manufacturing jobs since 2000 migrated to growing jobs in the public sector (teachers, public works employees, cops and clerks) that were also directly or indirectly related to the housing boom (and whose salaries were paid for by rising property tax revenues, income taxes collected from workers in the housing industry etc.)

    Those 3 million US manufacturing jobs are still gone, with more manufacturing jobs being offshored every year. Those white collar jobs are still gone, with more professional services being outsourced every year. But now, instead of having a thriving housing boom to absorb a large percentage of these job losses, housing bust related job losses will now add to the problem instead of mitigating it.

    By several estimates 1.5 million existing jobs that are directly or indirectly related to the housing boom could cease to exist as housing construction / durable goods etc. goes bust over the next few months, on top of the ongoing losses in US manufacturing + US white collar sectors. Arguably, additional job losses in the public sector must follow as a bursting housing bubble causes property tax revenues and housing related income tax revenues to fall.


    (snip)"The research firm Economy.com has reported that during the 1990-91 recession, which involved a housing collapse, 825,000 housing-related jobs disappeared. Double that loss
    can happen now, in as short a time, or shorter.

    The U.S. Bureau of Labor Statistics announced that during the month of October alone, the construction sector slashed 26,000 workers’ jobs. The process has begun to accelerate, which could lead to the liquidation of 1.5 million housing-related jobs within a year. The devastation of the physical economy would be completed in the process"(snip)


    One really has to stop and wonder who is going to be able to afford to eat at Applebees regularly a year from now - as well as wondering who is going to be able to regularly afford lap dances !


    ~
    Last edited by Melonie; 02-25-2007 at 12:27 PM.

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    Default Re: weekend commentary - plunge in new housing construction ...

    as far as i can recall, indiana is not a high COL state. if it's anything like texas, for example, 11/hr is hard to come by without a degree. employers expect you to take 7-9/hr if you didn't go to college, unless you have many years experience specific to their industry. it's so ridiculous, but it's just life for sooo many people. at one straight job i had, there was massive workplace scheming to keep 9-10$/hr jobs with 5-10 hours of overtime per week. i know people with a dozen years of management experience who struggle to get even 20 an hour.

    and a perusal of median incomes puts indiana in the lower half of all states.

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