[lbo-talk] Max's house (was capitalism and collapse)

[Marvin Gandall]

Doug wrote:
>
> On Aug 12, 2007, at 8:57 AM, bitch at pulpculture.org wrote:
>
>> Exactly. so, shouldn't the question be: as the real estate bubble
>> based
>> economy tanks, what kind of effect will it have on the employment
>> situation
>> of those in industries dependent on a booming real estate market?
>> Or, is
>> that so negligible it won't have any sort of domino effect?
>
> According to several Wall Street estimates, about half the growth in
> jobs and GDP through 2005 came from housing, directly or indirectly.
> (Indirectly = because of the wealth effect or the direct extraction
> of equity via cashout refinancings and lines of credit). Remarkably,
> though, while we're seeing a slowdown in retail sales lately, that's
> partly a reflection of the housing reversal, the decline in
> construction employment has been very modest so far - off only about
> 5% over the last year, while residential investment is off about 17%.
========================================
The decline in construction employment may be seriously understated.

There was a recent Deutsche Bank study which puzzled about why the official
US unemployment rate is still hovering at a relatively low 4.5% - about the
same as last year - even though residential housing has fallen off a cliff.
Employment in the sector has reportedly only fallen by 140,000 workers,
though The DB economists expected to see upwards of 900,000 construction
jobs reported lost proportionate to the real estate downturn.

They concluded that the reason for the discrepancy is the strong presence in
construction of undocumented Hispanic workers, who have born the brunt of
the losses - some 500,000 by their reckoning - and whose layoffs aren't
captured in the government figures. ("A Bumpier Ride", The Economist, July
18, 2007).

This underreporting must extend to the rest of the economy where there are
millions of undocumented workers who are generally among the first to be
laid off.

Some of the slack in residential construction employment is probably being
offset by hiring in commercial building, which is still very strong, isn't
it? (We'll see what the coming weeks and months bring.)