Housing Rebound Is Providing Bigger Boost to U.S. Labor Market
Construction hiring jumped in February by the most in almost six years, highlighting the benefits to the U.S. economy from a revitalized housing market.
Builder payrolls surged by 48,000 workers, the most since March 2007 and the ninth straight increase, Labor Department data showed today in Washington. The gain accounted for 20 percent of the 236,000 increase in total employment. The jobless rate fell to a four-year low of 7.7 percent.
Orders at builders including D.R. Horton (DHI) Inc. and Hovnanian Enterprises Inc. (HOV) are spurring demand for contractors -- from electricians and roofers to plumbers and masons. The industry that was at the center of the financial crisis has emerged as an economic bright spot as Americans take advantage of cheap borrowing costs and improving access to credit.
The construction gains are “a very positive sign,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, a unit of the largest U.S. mortgage lender. “The overall flow of the economy is really improving, and I’m encouraged that housing is continuing to kick in.”
Silvia estimates as many as 30,000 construction workers a month will find jobs in the next year. The industry, which includes homebuilding, commercial building and civil engineering, took on 154,000 workers from September through February, the strongest six months gains in employment since the period ended April 2006.
Payrolls at specialty-trade contractors, who perform work such as pouring concrete and installing electrical wire, have climbed 106,000 in the last six months, accounting for about 69 percent of the gain in total construction employment.
In residential building, payrolls totaled 577,500 in February, the most since June 2010, according to Labor Department data.
D.R. Horton, the largest U.S. homebuilder by volume, said in January its homebuilding revenue for the quarter rose 39 percent from a year earlier to $1.23 billion. Orders jumped 39 percent to 5,259 homes. The Fort Worth, Texas-based company’s contract backlog, an indication of future sales, rose 80 percent to $1.76 billion.
Red Bank, New Jersey-based Hovnanian, the largest homebuilder in the Garden State, said this week that net contracts climbed 25 percent to 1,344 homes. The company’s contract backlog rose 33 percent to 2,301 dwellings.
“Population is up, sentiment about buying homes is up, households are unbundling, creating demand for housing,” Larry Sorsby, executive vice president and chief financial officer, said at a Feb. 26 conference. “Consumer confidence is rising, rents are rising. So people are more anxious to buy today than they were a year ago and we think that trend is going to continue.”
Increases in hiring indicate companies need to ramp up, reflecting the sustained housing rebound.
“There’s typically a lag between housing starts and construction jobs of just over a year,” said Michelle Meyer, senior U.S. economist at Bank of America in New York. “There’s often capacity to handle the initial turn.”
Purchases of new homes, logged when contracts are signed, jumped in January to a 437,000 annual pace, the strongest since 2008, according to Commerce Department data.
Gains in homebuilding ripple through the economy, contributing to job growth beyond the industry. Each single- family home built creates one year of work for three other workers and a multifamily unit provides work for one, according to David Crowe, chief economist at the National Association of Home Builders in Washington. The calculations include occupations such as mortgage lending, architects, and manufacturers of household goods.
“Subcontractors feel comfortable that they can hire because there will continue to be homebuilding work available,” Crowe said. “There had been a hesitancy given how long it’s taken to get the industry functioning, to believe the recovery is credible and here to stay.”
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