Markets are lower this morning after housing starts disappoint. Bonds and MBS are flattish.
Today is Fed day. We should get the decision around 2:00 pm EST. Expect bond market volatility (or at least be prepared for it). The consensus seems to no move and very hawkish language in the statement.
Initial Jobless Claims fell to 264k last week, an extremely strong reading. People who have jobs are keeping them.
The Bloomberg Consumer Comfort Index fell to 40.2 from 41.4 last week. 31% of respondents think the economy is excellent / good, while 69% think it is not-so-good / poor.
Housing starts fell to a 1.12 million pace in August, below the 1.16 estimate. July was revised downward from 1.21 million to 1.16 million. Building Permits rose to 1.16 million from an upward-revised 1.13 million. Both single fam and multi-fam dropped. We are entering the seasonally slow period for the builders, so I wouldn’t read too much into these numbers.
We have tremendous pent-up demand for homes and the inventory of homes for sale is very light. So why aren’t we seeing more homebuilding? Part of the problem is a shortage of labor. Many of the construction workers from the housing boom have either left to new industries (mainly energy), aged out of the workforce, or left the country. 22% of construction workers are foreign, and the NAHB is asking for a temporary guest worker program to fill demand for workers. Right now, the builders are stealing skilled workers from each other using higher pay as an incentive to move.
This of course begs the question why there is a shortage in the first place. The labor force participation rate is stuck at almost 40 year lows and presumably many would want these jobs, which pay well. They aren’t retail / hospitality minimum wage jobs. Are the people who involuntarily left the workforce too old to do construction work? Are they untrainable? It seems strange we would have labor shortages with so much apparent slack in the labor market, but here we are….
Filed under: Morning Report |