Housing starts and completions

We knew that housing starts had plunged. We now see completions are plunging. Next up…construction jobs are expected to plunge. The nonfarm payroll numbers will begin facing a very strong headwind in the months ahead as these workers fall off payrolls. By late summer, if not sooner, fed rate cutting should commence.

Click here to read the Calculated Risk summary of the housing trend

The key is the understand the correlations. Housing starts go first. Several months later, housing completions drop. A few months after that, residential construction jobs fall. The entire cycle can take 9 or more months to play out. Phase I is behind us. Phase II is with us. Phase III is on the horizon.

The Fed has really boxed themselves in with this inflation targeting nonsense. GDP has been below trend since April 2006. It is going to remain below trend until they act. Once they act, it will take time for GDP to recover. They need to act now, but won’t because inflation is 20 bps above their upper limit comfort zone? Please, this is silly. Inflation is not a problem right now and won’t be for the foreseeable future. The problem is economic growth. Lets hope they realize this sooner rather than later.

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