CONSTRUCTION SPENDING DECLINES 4th STRAIGHT MONTH

[unlawflcombatnt]

Construction spending has declined for the 4th month in a row. June construction spending declined 0.3%, following a downwardly revised 1.7 percent decline in May. (May's decline was previously understated at -0.9%) This follows a decline of 1.0% April and a 0.2% decline in March. The total decline in construction over the last 4 months is 3.2%. This information can be found at:
http://www.briefing.com/Silver/Calendars/EconomicReleases/const.htm


The above graph shows the decline of total construction spending over the last 4 months.

Home construction declined even more that than total construction. June's decline of 0.4% follows declines of 3.4% in May, 2.0% in April, and 1.0% in March. Home construction has declined a whopping 6.8% over the last 4 months. This is especially concerning given that home construction is 16-25% of our economy. One source states that housing related jobs have accounted for 43% of our recent job growth. This link can be found at:
http://www.pulsejournal.com/business/content/shared/news/nation/stories/06/05_HOUSING_BUBBLE.html

This decline in construction implies that home builders are anticipating a decline in future new home demand and prices. This seems reasonable, considering new home prices dropped 5.5% in June to $214,800. And this followed May's decline from April's $232,000. That makes a total new home price decline of 7.7% in the last 2 months. Over the last year, new home prices have declined 0.4%. Thus a decline in home construction is completely consistent with the laws of supply and demand, in that price declines cause declines in production of supply. In spite of the media hype to the contrary, the home construction industry is anticipating further price declines.

It is clear that our economy is not "strong, and getting stronger." It also appears the "housing bubble" is starting to deflate. Ignoring this will make the deflation much worse. It's time to face some obvious realities. Increased corporate profits alone do not define economic "growth." Wage growth must increase as well. And it has not. And we are about to see the results.

unlawflcombatnt

[Trillo]

1. You can say that again!

"Wage growth must increase as well."

A Living Wage would be nice, but good luck getting it past Congress or the Executive Branch.

[Johnny Noshoes]

2. New home construction may be down

but I swear luxury condo buildings are sprouting like friggin mushrooms here in NYC. What does it mean? I haven't a clue as I didn't do well in economics in college. I do think that there will be an awful lot of overpriced condos and co-ops in the near future and nobody will be able to buy them for the asking price.

"No matter how good you feel, if four friends tell you you're drunk, you better lie down."

[unlawflcombatnt]

3. I think you're right

Johnny Noshoes,

I think you're completely right about there being a lot of overpriced condos that no one will be able to buy at the current asking prices. I think the home construction industry is seeing this already. They're running out of buyers who can afford the skyrocketing prices. Now that new home prices have fallen 2 months in a row, the writing is on the wall.

unlawflcombatnt

[unlawflcombatnt]

5. Wage Growth

I was already working on a post on wage growth today when I saw the construction number decline. Given that this relates to the housing bubble, I decided the construction decline would be a better subject today.

But I'll be posting more about the wage decline. The wage-productivity gap is at the very heart of our economic problems today. And it is also related to the housing bubble.

The excessive profits in relation to low wages are a major part of the stock market decline and also part of what is causing the housing bubble. Again, I'll address that in another post.

unlawflcombatnt

[Trillo]

6. That makes some sense.

If people don't have any money (disposable), their purchases tend toward necessities and going without where they can.

[unlawflcombatnt]

4. Copy Graphs

I just wanted to remind people that if they like the graphs they should copy them down. They aren't permanent and most likely will be changed by Briefing.com to protect the guilty.

unlawflcombatnt