http://www.reedconstructiondata.com/jim-haughey/ Reed Construction Data Chief Economist Jim Haughey discusses how current developments in the US economic environment will bring opportunities and challenges for designers, contractors, and materials and services providers. en rcdwebmaster@reedconstructiondata.com Copyright 2009 2009-11-20T09:08:01-05:00 http://www.reedconstructiondata.com/jim-haughey/post/lets-stop-counting-stimulus-jobs/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/lets-stop-counting-stimulus-jobs/#When:09:08:01Z Everyone involved in the folly of counting stimulus jobs could be more productive rearranging their sock drawer or scrubbing their kitchen floor with a toothbrush. No accurate count is possible by surveying stimulus fund recipients. They do not know the answer, even if they avoid the absurd errors that have been reported recently. Much of the money was simply added to existing budgets. Accounting systems are set up to count pennies not jobs, especially jobs saved. Another large share of the funds paid for temporary construction projects which created temporary jobs which can not be converted into an estimate of permanent jobs. Many of the jobs created are private jobs resulting from more public spending. Other than construction workers none of the surveys make any attempt to count these jobs. We do not need to survey accounting clerks. There is another way to count stimulus jobs that is easier and has already been done. Market Insights, Economy & Finance 2009-11-20T09:08:01-05:00 http://www.reedconstructiondata.com/jim-haughey/post/new-municipal-bond-program-boosts-public-construction/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/new-municipal-bond-program-boosts-public-construction/#When:09:32:00Z A new type of municipal bond, authorized in the stimulus plan, will surpass shovel ready project grants as a boost to public construction spending in the next few months. Sometime next year, Build America Bonds will surpass earmarked stimulus funds for buildings as a boost to public construction spending. Over $50 billion of these new taxable municipal bonds with a 35% federal subsidy on interest payments have been issued. New issues now total over $10 billion a month with the pace expected to grow quickly through the expiration of the bond program at the end of next year. The Build America Bond program has offset weak sales of tax exempt municipal bonds and lowered interest cost 50-60 basis points by opening up sales to pension funds and foreign investors who do not pay US federal income taxes. Market Insights, Commercial Building & Heavy Engineering, Construction Forecasts, Economy & Finance 2009-11-19T09:32:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/october-housing-starts-plunge-as-tax-credit-expires/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/october-housing-starts-plunge-as-tax-credit-expires/#When:16:48:01Z Housing starts dropped 10.6% in October but this does not change the housing outlook for next year. A fallback was expected after the expiration of the $8,000 first time buyer tax credit. This was exactly what happened to auto sales after the end of “cash for clunkers”. That post-subsidy dip lasted one month and then was largely reversed the following month. Expect the same for housing starts where the rebound will be boosted by the recent extension and expansion of the down-payment tax credit. Market Insights, Economy & Finance, Housing 2009-11-18T16:48:01-05:00 http://www.reedconstructiondata.com/jim-haughey/post/exports-will-sustain-us-recovery-but-export-mix-will-change/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/exports-will-sustain-us-recovery-but-export-mix-will-change/#When:09:19:01Z A surge in exports contributed 1.5% of the 3.5% Growth in US GDP in the 3rd quarter. How fast the US economy recovery proceeds depends significantly on the pace of expansion in the export sector. Exports had declined 15% in the previous four quarters, equal to more than 60% of the overall decline in GDP over the four quarters. US export growth depends on the ability of US firms to finance production for export markets and the ability of foreign customers to buy imported products. The forecast for US exports is for a 6-7% gain in 2010 and probably a 10% plus gain in 2011. This is enough to sustain the initial recovery now underway. But overall GDP growth will be subpar compared to previous recovery periods because domestic economic growth will be very sluggish. Market Insights, Economy & Finance 2009-11-18T09:19:01-05:00 http://www.reedconstructiondata.com/jim-haughey/post/washington-eyes-takeover-of-commercial-construction-and-real-estate-lending/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/washington-eyes-takeover-of-commercial-construction-and-real-estate-lending/#When:10:29:00Z Construction finance practices will change abruptly if legislation to permit federal bureaucrats to take control of large financial institutions, now working its way through both the House Financial Services Committee and the Senate Banking Committee, is adopted. The target date is to send a final plan to the President early next year. The current plan creates a nine member Financial Services Oversight Council to take over the role of the Federal Reserve Board in managing a credit crisis among banks to big to fail. The plan would prevent the quick, independent action that resolved the credit crisis last fall and make access to credit less reliable for commercial construction loans and mortgages. Market Insights 2009-11-17T10:29:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/consumer-caution-keeps-construction-materials-sales-falling/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/consumer-caution-keeps-construction-materials-sales-falling/#When:18:46:00Z Octobers’ 1.2% jump in retail sales does not signal that consumers are ready to open their wallets and spend the economy to a normal, robust recovery. Retail sales at building materials dealers dropped 2.4%. The sales increase was entirely a rebound in auto sales after the post “cash for clunkers” collapse in September auto sales. Consumer spending is more likely to dip than rise in the next three months before beginning progressive but modest growth early next year. This is due to the negative headwinds from depressed confidence and household wealth, declining consumer purchasing power and the temporary nature of a significant share of consumer income. Market Insights, Costs & Materials, Economy & Finance 2009-11-16T18:46:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/home-mortgage-rates-set-to-move-higher-next-spring/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/home-mortgage-rates-set-to-move-higher-next-spring/#When:19:07:00Z 30-year fixed mortgage rates, averaging 5% so far in 2009, could jump as much as 100 basis points next spring when the Federal Reserve Board stops buying mortgage backed securities from the federal housing finance agencies. Freddie Mac, Fannie Mae and FHA now provide most of US mortgage financing. And the Federal Reserve Board buys about 80% of the bonds they issue to get the mortgage capital. So far the FRB has bought $900 billion in bonds and has announced that it plans to raise the total to $1.25 Trillion by the end of March and then begin selling its agency bond holdings. Market Insights 2009-11-11T19:07:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/contractors-cut-62000-more-jobs-in-october-mostly-for-nonresidential-buildi/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/contractors-cut-62000-more-jobs-in-october-mostly-for-nonresidential-buildi/#When:16:00:00Z Construction employment continues to drop rapidly at a pace little changed from previous months. 30,000 of the October layoffs were made by nonresidential subcontractors which is consistent with the current rapid decline in this sector. However, nonresidential general contractors only cut 3,000 jobs. This disparity suggests that business expense cut mandates are deeply trimming maintenance, repair and small remodeling projects done directly withy subcontractors. A similar cutback in small residential projects occurred earlier in the recession. Market Insights 2009-11-06T16:00:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/federal-highway-funding-still-temporary/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/federal-highway-funding-still-temporary/#When:18:30:00Z Federal highway funding has been extended for a second seven week period to December 18, 2009. The extension is nominally at the 2009 FY level but works out to permit states to obligate about $1 Billion per month less than in the last fiscal year. This is not yet an immediate problem for spending at highway job sites but does shrink the pipeline for 2010-11 work. The highly likely failure to enact a permanent funding solution by December 18th would begin to restrain highway construction spending very early in 2010. Market Insights, Commercial Building & Heavy Engineering, Economy & Finance 2009-11-03T18:30:00-05:00 http://www.reedconstructiondata.com/jim-haughey/post/housing-gets-another-boost-from-washington/?nid=4268 http://www.reedconstructiondata.com/jim-haughey/post/housing-gets-another-boost-from-washington/#When:12:00:01Z Congress appears set to extent the $8,000 first time home buyer tax credit for six months. The Senate version would also include a $6,500 credit for people who had have owned their current home for at least five years. And the income limits would be raised to $125,000 for single people and to $225,000 for joint tax returns. The boost to housing will begin in November after small setbacks in the housing recovery in September and probably again in October. The peak impact will likely be early in the winter when home construction is at its seasonal low point. Market Insights 2009-11-02T12:00:01-05:00