Eye on the Economy
Home Building a Leading Sector in the Q3 Rebound
The economy rebounded sharply during the third quarter, as GDP registered a 33.1% seasonally adjusted annual growth rate. This bounce back followed a gradual reopening of the economy in the wake of the coronavirus pandemic. Prior shutdowns of economic activity had predictably large macro effects, resulting in annualized GDP declines of 5% and 31.4% in the first and second quarters, respectively. This led to an unemployment rate of almost 15% in April. The gains during the third quarter helped reduce the unemployment rate to 6.9% in October, but broad-based economic distress continues. As virus-related hospitalizations increase this fall, policymakers should choose focused protection over shutdowns given the potential economic costs.
Home building has undoubtedly been a bright spot for the economy during this period of economic distress. Demand for single-family housing has increased on historically low interest rates, a need for more residential space, favorable demographics for home buying, and an evolving geography of housing demand that favors low density, more affordable markets. Indeed, builder confidence reached an all-time high in October, as total single-family starts in 2020 are poised to post a notable gain. These data are consistent with the rise of the home building share of GDP (the dollar value of single-family, multifamily, and remodeling-related construction activities). This measure increased at a 59% annualized growth rate in the third quarter. And the overall housing share of GDP now stands at 15.5%.
The gains for home building have led to growth in residential construction employment. The number of residential construction jobs rose in September and October by 24,000 and 23,800, respectively. Residential construction employment stands at 2.9 million as of October, marking the first year-over-year growth since before the Great Recession. Although employment in the sector remains below its total from before the 2020 recession, NAHB is forecasting continued gains for home building and remodeling jobs in the months ahead.
–NAHB Chief Economist Robert Dietz