$100,000 in Remodeling=Nine Tenths of a Full-Time Job

May 12, 2014

In addition to benefitting those who live in remodeled homes, remodeling also has the ability to stimulate the U.S. economy. The latest estimates released by NAHB show that spending $100,000 on remodeling generates about $48,000 in wages and salaries in the U.S., which translates to .89 of a job measured in full-time equivalents (enough work to keep one worker employed for a year).

Much like the impacts of new construction, a substantial share of the wages and salaries goes to construction laborers—those who actually install cabinets, replace windows, renovate bathrooms, etc. But the effects are broader. Every $100,000 in remodeling also supports one tenth of a full-time job in firms that manufacture building products, slightly more than that in firms that transport or store or sell those products, and about half that in businesses that supply design, accounting and other professional services to remodelers and their customers.Remod Jobs In addition to wages and jobs, it can also be worthwhile to look at profits generated for business proprietors. Many remodelers and especially their subcontractors are relatively small businesses and self-employed, so in the technical sense they don’t have jobs or earn wages, although that’s the way casual observers no doubt think of them. In the construction industry, the roughly $13,000 in profit that $100,000 in remodeling generates for mostly small businesses proprietors is more than 40 percent as large as the $30,000 generated in wages and salaries.

The wages and profits earned in the course of remodeling are subject to a variety of taxes and fees. The national impacts of $100,000 spent on remodeling also include $21,844 in federal taxes and $7,935 in fees and taxes imposed by state and local governments, for a total of $29,799 in revenue for governments at all levels.Remod TaxesThe government revenue includes a permit fee equal to 1.25% the cost of the remodeling project, the percentage based on conversations between NAHB’s Economics and Housing Policy staff and NAHB Remodelers. For other assumptions and more details about the methodology used to derive NAHB’s national impact of remodeling estimates, please consult the full report, published online as a Special Study in HousingEconomics.com.


Jobs Created in the U.S. When a Home is Built

May 2, 2014

In an article published the first day of this month, NAHB released new estimates of the impact that building single-family and multifamily homes has on the U.S. economy. The new estimates show that building an average single-family home generates 2.97 jobs, measured in full-time equivalents (enough work to keep one worker employed for a year).

A substantial share of this is employment for construction workers. But also included is employment in firms that manufacture building products, transport and sell products, and provide professional services to home builders and buyers (e.g., architects and real estate agents). A breakdown by industry is shown below, along with the wages and business profits generated in the process.Single-familyWages and profits are subject to a variety of taxes and fees. The national impacts of building an average single-family home include $74,354 in federal taxes and $36,603 in state and local fees and taxes, for a total of $110,957 in revenue for governments at all levels.

The article also shows equivalent estimates for building an average rental apartment, including 1.13 (full-time equivalent) jobs, with a breakdown by industry as shown below.MultifamilyEstimates of wages and jobs garner the most attention, but in industries like construction and real estate it can also be worthwhile to look at profits generated for business proprietors. Included in this category are many construction subcontractors and real estate brokers with relatively modest incomes, who are organized as independent contractors and therefore not technically counted as having jobs—although casual observers no doubt tend to think of them that way.

The impacts of building an average rental apartment include $28,375 in federal taxes and $14,008 in state and local fees and taxes, for a total of $42,383 in revenue for governments at all levels. For more details and assumptions used to produce the above estimates, consult the full article.

And keep in mind that these are national estimates, designed for use when the impacts on suppliers of goods and services across the country are of interest. Avoid trying to use national estimates to say something about impacts at the state or local level.  For that, keep referring to NAHB’s Local Economic Impact web page.


One Point in the HMI Eventually Means 37,000 Jobs

February 27, 2013

Every month, the NAHB/Wells Fargo Housing Market Index  (HMI) provides an overall measure of builder confidence in the strength of the single-family housing market.

Also every month, the U.S.  Bureau of Labor Statistics (BLS) produces estimates of employment in residential construction  (or at least it has since 2001, when it began to split jobs in the various trades into residential and non-residential categories, a move strongly endorsed by NAHB at the time).

Previous research has shown that the HMI has ability to predict single-family housing starts out to about 6 months in the future.  Now we can ask—is there any similar relationship between the HMI and the BLS measure of employment?

The answer is yes.  In fact, there is a positive correlation between the HMI and future residential employment.  The correlation is particularly strong (above .9) between the HMI and employment about 18 months in the future.  This tendency of the HMI to move in advance of employment is fairly evident in the following graph:

HMI and Jobs

A substantial lag between a change in the HMI and employment seems reasonable, given that the HMI tends to move in advance of starts, and it usually takes awhile for a change in the starts rate to translate fully into a change in the number of homes under construction at any one time.

A simple statistical estimate based on the above data shows that a one point increase the HMI leads to an increase of about 18,700 jobs in residential construction 18 months later.   But the employment effects of home building are broad-based—supporting jobs not only in construction, but also in the industries that manufacture building products, transport and sell building products, and provide broker, legal, accounting, architectural, engineering, and other professional services to builders and buyers.

NAHB research has shown that, when a home is built, the number of jobs generated in these other industries is about the same as the number of construction jobs.  So, as a general rule, a one point change in the HMI leads to a change of 37,000 jobs one and a half years later—about half the jobs in construction, the other half in industries like manufacturing, trade, transportation and professional services.


The Employment Situation for December – Gaining Strength? Not Really.

January 7, 2013

The Bureau of Labor Statistics (BLS) released the Employment Situation report for December on Friday. The establishment survey indicated payroll employment increased by 155,000 with private sector payrolls increasing by 168,000 and a loss of 13,000 in the government sector. Estimates for the prior two months were revised upward by a net of 14,000.

The household survey indicated the unemployment rate held steady at 7.8% in December after revising the November figure up to 7.8% from 7.7%, based on updated seasonal adjustment factors. The updated factors had little effect on the overall pattern in the unemployment rate for 2008 forward, the period covered by the revisions.

blog emp 2013_01

However, the stability in December’s unemployment rate did benefit from some favorable rounding. November’s unrounded rate was 7.753%, rounding up to 7.8%. December’s rate was 7.849%, rounding down to 7.8%. The labor force expanded by 192,000 persons in December, 28,000 of them employed, 164,000 of them unemployed. A swing of 2,000 from employed to unemployed would have pushed the unemployment rate to 7.9%.

December’s payroll gain of 155,000 was in line with the monthly average of 153,000 in 2012 and helped expand payrolls by just over 1.8 million for the year, only marginally lower than in 2011. So last month, last year and 2012 have come in consistently at a level too low to make rapid progress lowering the unemployment rate. In all of 2011 and 2012 the rate has come down just over one percentage point, from 9.0% to 7.8%. At this rate it will take the better part of 4 years to lower the unemployment rate to 6.0%, the high end of the range economists consider “normal.”

Unfortunately, this math is consistent with the Federal Reserve’s economic projections, which anticipate the unemployment rate will be between 6.0% and 6.6% by the end of 2015. A more robust (and not unrealistic) recovery would have job creation at twice this pace. With monetary policy arguably nearing the limits of its effectiveness and the tax rates part of the fiscal cliff behind us, let’s hope the remaining fiscal policy issues can be resolved in a way that adds to rather than subtracts from growth. The labor market, a broader economic recovery and the housing market all would benefit.


The Employment Situation for November – Still Positive, Still Weak

December 7, 2012

The Bureau of Labor Statistics (BLS) released the Employment Situation report for November noting that Hurricane Sandy did not affect the national employment and unemployment figures in today’s release. The establishment survey indicated payroll employment increased by 146,000 with private sector payrolls increasing by 147,000 and a loss of 1,000 in the government sector. Estimates for both September and October were revised downward by a total of 49,000. The household survey indicated the unemployment rate moved down to 7.7% from 7.9% in October.

blog emp 2012_12

The payroll numbers are indicative of a labor market treading water. They’ve been weaker in plenty of months over the last two years, but they are well below levels necessary to bring the unemployment rate down.

In a reversal of last month’s report, the decline in the unemployment rate is not as good as it looks. Last month the unemployment rate moved up based on an increase in the labor force that outpaced the increase in the number of employed persons. Adding jobs and an expanding labor force were positive gains, the increase in the unemployment rate was less important.

This month the decline in the unemployment rate is based on a decline in the labor force. The labor force shrank by the combined effect of 122,000 fewer persons employed and a decline of 229,000 in the number of persons previously classified as unemployed. Persons who want work, have looked for work in the prior 12 months, but not in the 4 weeks preceding the household survey are classified as marginally attached to the labor force and not included in counts of the unemployed or labor force. The decline in the unemployment rate wasn’t based on any real improvement in conditions.

Overall, the economy continues to add to payrolls but at a slower than robust pace. The unemployment rate is trending down since peaking in 2009, but the labor force has only recently regained the losses since the recession. We’re seeing signs of improvement but there is still plenty of ground to make up.

 


The Employment Situation for October – Continued Positive But Subpar Gains

November 5, 2012

The Employment Situation report for October released by the Bureau of Labor Statistics (BLS) Friday continued the recent pattern of positive but subpar gains in the labor market. The establishment survey reported payroll employment expanded by 171,000 based on an increase of 184,000 in private sector payrolls and a decline of 13,000 in the government sector. August and September estimates were revised up by a total of 134,000 for the two months. The household survey reported the unemployment rate ticked up to 7.9% from 7.8% in September.

The uptick in the unemployment rate is less threatening than it might appear. The BLS characterized the unemployment rate as “essentially unchanged” based on the statistical properties of the household survey, but a more encouraging perspective comes from the details of the calculation. The number of employed persons increased in October by 410,000, not as large as the 873,000 increase in September, but still a strong gain by this survey’s standards. The increase in the unemployment rate was the result of the larger 578,000 increase in the labor force. This increase follows the 418,000 increase in September. This combination of strong job growth and an expanding labor force outweigh the slight increase in the unemployment rate and indicate a recovering labor market. The BLS also reported that the number of discouraged workers declined by 154,000 from one year ago. Discouraged workers are those who are available and ready to work, but believe there are no jobs available for them.

Overall it appears that job growth has recovered from its spring lull and the unemployment rate has trended downward. The labor market is showing signs of recovery but at a painfully slow rate.

 


NAHB Completes Landmark 700th Local Impact of Home Building Study

March 30, 2012

Since 1996, NAHB has been producing customized studies that estimate the jobs, income, and taxes generated by home building in various metropolitan areas, non-metropolitan counties, and states across the country.   Early in 2012, NAHB delivered the 700th such study to the customer who commissioned it.   Parts of the country covered by the 700 NAHB local impact studies to date are shown in the map below.   The darker green shading indicates studies covering metro areas or non-metro counties; the somewhat lighter orange shading indicates studies produced for an entire state.

Over the years, the 700 local impact studies have been used in a variety of ways—including helping to get individual projects approved, countering anti-growth proposals, and simply generating favorable publicity for the home building industry in local press.  The individual studies are property of the customers who commissioned and paid for them.  However, a local impact study for a typical metropolitan area is available on NAHB’s local impact of home building page.  

Among other things, the study shows that building 100 single-family homes in a typical metro area generates

  • $21.1 million in local income,
  • $2.2 million in taxes and other revenue for local governments, and
  • 324 local jobs in roughly the first year—and                                                           
  • $3.1 million in local income,
  • $743,000 in taxes and other revenue for local governments, and
  • 53 local jobs in ongoing, annual impacts that result from the new homes being occupied, and the occupants paying taxes and otherwise participating in the local economy year after year. 

The complete “typical metro” study, which includes more detail (such as local jobs by industry, and impacts for remodeling and multifamily construction) and explains the relatively conservative methodology NAHB uses to estimate the economic benefits of home building  can be printed or downloaded instantly at no charge. 

Also available instantly and at no cost on the same web page is a companion study that shows how much new housing costs local governments in a typical metropolitan area, and how quickly new housing pays for itself.   Since 2005, many NAHB local impact studies have included estimates of the costs, as well as the benefits, of home building.

In cases where estimates for a typical metropolitan area are insufficient, and—like 700 others before you—you’d like to obtain a customized local impact of home building report, the easiest way to obtain information is to contact Elliot Eisenberg (202- 266-8398, eeisenberg@nahb.com) in NAHB’s Housing Policy Department.

Keep in mind that the NAHB studies discussed above are designed to capture only local impacts (excluding, for example, upstream jobs generated in manufacturing which aren’t typically located in the same place the homes are built).   NAHB produces separate, national impact of home building estimates that include these manufacturing jobs and have a number of other differences from the local estimates.   NAHB recommends deciding upfront if you are most interested in impacts of home building at the local or national level, picking one set of estimates (local or national), and sticking with it to avoid confusion.