Article source: ConstructConnect

It’s as if they knew. The Bank of Canada just raised its key policy-setting interest rate, the ‘overnight rate’, by 25 basis points (where 100 bps = 1.00%) to 4.75%. This was in the belief that the Canadian economy is continuing to run too hot. 2023’s Q1 ‘real’ (inflation-adjusted) gross domestic product (GDP) growth annualized was +3.1%, an above average result. (The annual change in Canada’s GDP over the first 22 years of this century has been +2.1%.)

But it seems likely that the at-the-time upcoming Labour Force Survey report for May would have been foremost on the minds of the BOC’s decision makers, with a worry that it would show an ongoing super-charged jobs market. They were right to be concerned. While the actual change in total employment in May was -17,000 jobs, there was a great deal extra going on behind the scenes.

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Article source: ConstructConnect

What’s not to like about May’s upbeat Employment Situation Report from the Bureau of Labor Statistics? No doubt, it depends upon one’s point of view, with the Federal Reserve probably not comfortable with the results at all, but more on that in a moment.

The total number of employed positions in the U.S. economy rose by +339,000 in May, although that understates the true strength in jobs creation, since the previous month’s gain was revised higher by +93,000. Therefore, the total number of jobs in May versus what was reported a month ago for April was +432,000 jobs.

An uptick in the number of people participating in the labor force caused the seasonally adjusted (SA) unemployment rate in the latest month to move to 3.7% from 3.4% in April and 3.6% in May of last year. The not seasonally adjusted (NSA) unemployment rate was 3.4%, a bit looser than the 3.1% in April, but the same as in May of 2022.

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Article source: ConstructConnect

This is an article for posting to ConstructConnect’s corporate website and to our Forecaster Newsletter online location. It will also supply an 

An expected fallout from higher interest rates is a decline in housing starts. In both the U.S. and Canada, that proposition is being partly realized, but not to a full degree. The story is best told in graphs and the bullet points below cover the highlights.

United States Housing Starts:

• The series of hikes in U.S. interest rates caused a more or less steady decline in new home starts from April 2022 through January 2023. In the first four months of 2023, however, U.S. housing starts have leveled off close to 1.4 million units seasonally adjusted at an annual rate (SAAR) (Graph 1).
• The decline in U.S. new home starts from most recent peak a year ago, in April 2022 (1.8 million units SAAR) to now (April 2023’s 1.4 million units SAAR) has been -22.3%, which in stock market terms would summon up the phrase ‘bear market’ (Graph 1).
• Nevertheless, April 2023’s level of housing starts (1.4 million units) was still a little higher than the long-term monthly average for the U.S. of 1.3 million units SAAR. It may be a backhanded compliment, but housing starts are presently sticking above where they were during a dozen-year stretch from mid-2007 through early 2019 (Graph 2).
• Single-family starts have borne almost the entire brunt of the downturn. On average through the first four months of 2023, they are -29% compared with January-April of 2022. Multi-family starts, in units, are off by only -1% year to date (Graph 3).
• In units, singles as a share of total have fallen to 60%, serving up the remaining 40% to multiples. This is about as far as the U.S. has ever gone in lifting up multiples relative to singles (Graph 4). As will be set out later, in Canada, the proportional shares of singles versus multiples are wildly different, with the latter far more dominant.
• Regionally, the biggest blows to housing starts year to date in 2023 have come in the Midwest and the West, each -30%. The drops in the Northeast and South have been more moderate, -8% and -16%. The South is currently accounting for nearly 60% of total starts, with the West in second place at a little over 20%, or one-fifth (Graph 5).
• Even in current depressed market conditions, the year-to-date number of residential building permits issued in Houston and Dallas-Ft Worth is astonishing, 23,100 and 20,600 units respectively. By way of comparison, New York City in third place is well back at 14,200 units (Graph 6).
• On a year-over-year basis, however, it’s two cities in Florida that are shining. Miami-Ft Lauderdale (+36%) and Tampa (+18%) are leading a group of only seven cities that, year to date, have recorded an increase in total number of residential building permits. Houston and Dallas-Ft Worth, even with their outsized numbers (in units), are not keeping up with last year. (Graph 7).
• The Miami and Tampa ‘total’ increases are being driven by strength in the number of units contained within multi-family structures, +87% and +164% respectively. Other U.S. cities with exceptional ytd increases in multi-family units are Nashville, +138%; Phoenix, +41%; and Charlotte, +35%.

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