The home building industry received mixed signals today with the release of February’s construction spending numbers from the Census Bureau and March’s construction employment report, put out by the Labor Department. While February’s spending numbers moved downward, dropping 3.7% in residential construction from January, the residential building construction sector gained 600 jobs in March. Overall, construction unemployment dropped to 20%, down from February's rate of 21.8% and dropping from March 2010's rate of 24.9%.
“Historically, and after annual data revisions, these two numbers track one another well,” said Patrick Newport, U.S. economist at IHS Global Insight, in a press release today. “Lately, though, they have diverged.”
That divergence may have something to do with the disparity between new home sales numbers—which achieved a record low in February, according to the U.S. Census Bureau—and what builders are seeing on home sites and feeling in their gut.
Builder recently conducted an informal survey of home builders around the country to get a pulse on how the spring selling season is faring. Nearly all of the 20 builders we spoke with reported that while it’s still hard to get a prospective buyer to sign on the dotted line, traffic is up just about everywhere. And that’s giving them hope.
That sentiment was echoed in the most recent NAHB/Wells Fargo Housing Market Index, which tracks, among other things, home builders’ confidence in sales expectations over the next six months. Even as home building metrics were at some of their lowest levels on record, the builder confidence index rose two points in March.
And broader metrics give some substance to that hope. Nationally, 216,000 jobs were added last month, the largest monthly increase in four years, which means that there’s a greater chance all those prospects builders are seeing are looking at models more seriously.
With most industry indicators still stuck at the bottom, when that turnaround will come is still in question. However, economists seem to be in general agreement that the second half of the year is when improvement will really start to show. “There are leading indicators, including Associated Builders and Contractors’ own Construction Backlog Indicator, that suggest that the recovery of privately financed construction will begin sometime later this year,” Anirban Basun, chief economist at Associated Builders and Contractors, said in a press release today.
Patrick Newport agrees. He expects to see single- and multi-family construction “improve somewhat in the second half [of the year], as the economy adds jobs.”
For now, it’s hard to tell whether the construction spending numbers or the employment numbers are speaking more accurately for the industry. But “the bottom line” for the rest of the year, says Newport, is that “the construction spending numbers may not be as bad as current estimates indicate."
Claire Easley is senior editor, online, at Builder.