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“Conditions in financial markets have improved further, and activity in the housing sector has increased,” reported the FOMC in a statement released late in September. “Household spending seems to be stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”
Despite the improved outlook, economists agree that recovery will be slow as unemployment rates continue to rise. According to the U.S. Bureau of Labor Statistics, overall nonfarm payroll dropped 263,000 in September raising the national unemployment rate to 9.8 percent.
Although a slowing in the job loss rate is occurring, construction job losses remain high. According to Ken Simonson, chief economist for the Associated General Contractors of America (AGC), construction lost 15 percent of its Sept. 2008 jobs in the last 12 months, compared to 4 percent for the entire nonfarm economy.
“September losses totaled 51,000 in nonresidential building, specialty trade, and heavy and civil engineering construction combined, nearly the monthly average loss of 54,000 over the past 12 months,” reported Simonson. “Residential building and specialty trade contractors shed a combined 13,000 jobs in September, barely a third as many as the monthly average over the 12-month span.”
One section that rose slightly was architectural and engineering services employment. Often used as an indicator of future demand for construction, Simonson reported that this number rose for the first time in 15 months.
Job losses may have continued to decline in September, but August’s construction spending was up 0.8 percent as compared with the same month last year, according to the AGC. Private residential spending was the greatest contributor to this increase, rising 4.7 percent for the month, although 27 percent lower than August of 2008.
Due to the slow recovery predicted, the Federal Reserve has decided to leave interest rates where they currently stand as well as taking other measures to promote stability and stave off inflation.
“Although economic activity is likely to remain weak for a time, the committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability,” stated the FOMC.
“With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the committee expects that inflation will remain subdued for some time.”
Publication date: 10/26/2009