With a large percentage of the US manufacturing moving offshore, I wonder if nonresidential investment will be as large as it used to. This doesn't address the yoy changes and lag effect of nonresidential construction but I do wonder if anyone has considered this and what effects it would have on future estimates of nonres investments.
hmmmm you all beat me to the punch. i live in dc and woke up to this article by the wapo. i was thinking, hot damn! i love it when a plan comes together.
it seems the 'expansion' can almost continue ad infinitum due to loading up on ever more debt. in my neck of the woods (NY,NJ,CT) local and state governments continue to borrow money to pay for things they can't afford given current budgets. and why should anyone complain? all they're doing is following in the federal government's footsteps.
It's like the VIX. People look at the graph, decide that voliatility is down, predict the future will be more of the same. We see the same thing in house price appreciation expectations among homeowners.
Whipsaw, whiplash, backlash, blowback, blowdup, upset, reset. We are gonna look back in a few years and wonder why everyone didn't see it coming.
Those y/y changes...is this a time where we want to look at the market share and raw numbers to avoid a interpretting a change in a depressed market (com & industrial) due to a much more lucrative and larger segment (residential)? [ie Was the baseline for the y/y changes in the commercial market artificially low?]
Last thing: Can it absorb the less qualified labor market (dare one say illegal aliens?) of the residential market?
CR, A few weeks ago you said you'd periodically check back as states signed on to CSBS Nontraditional Mtg. Guidance. I looked at the CSBS web site this morning & see that only NINE states are on board (I believe this is same # you last mentioned?). Do you know any more of response expectations?
IMO the surest indicator to how close we are to the cliff is the structure & break-out of home purchase & refi loans in PK's "zones" in the last 30 days. I spent Sun. looking at homes in Naples area of Long Beach (I'd highly recommend the area at about 1/2 the current $1,000/' asking price)! Thanks in advance.
calmo you make an excellent point about the large illegal/undocumented labor force in the construction industry. where are these people going to go as the market slows down? how are their skills transferable to other industries with the added difficulty of being illegal?
Regarding the CSBS Guidance. Here is the response I received from the NJ Division of Banking and Insurance when I inquired as to when the guidance would be adopted.:
Dear Mr. Bednar,
The Department is in the process of review all on the information in
reference to the above subject. When the review has been completed, a
decision will be made on how best to proceed forward. We appreciate your
interest in this matter, and it is the Department's intention to arrive at
a decision shortly.
Terry K. McEwen, Director
NJ Department of Banking & Insurance
where are these people going to go as the market slows down? how are their skills transferable to other industries with the added difficulty of being illegal?
No work in land of plenty
State's unemployment claims in construction industry up 32 percent
By Timothy Pratt
Las Vegas Sun
At 2:30 in the afternoon, Remedios Bernal opens the door of his mobile home with his right hand, rubbing his eyes with his left.
Barefoot, he takes a step or two back and slumps onto the living room couch where he had been napping. His very pregnant wife, Karina, sits across from him in a matching couch, stroking the hair of their 19-month-old-daughter, Naydeline.
The apparent domestic calm belies the crisis this growing family faces.
Bernal had been dozing off after running out of places to look for construction work. He was laid off three weeks ago, an apparent casualty of the valley's 13th consecutive month of declining year-to-year home sales. Stories published November 20, 2006Las Vegas Sun
dc1000, sorry for the wet blanket. At least business is strong now, but I suspect non-residential construction will follow the usual pattern.
Robert, that data is from the BEA. See the GDP data.
Bailey, re:CSBS. It was seven when I posted, so it's up two since then. Since last week was Thanksgiving, I was going to check with the CSBS this week. I bet we see more states added this week.
James Bednar, Thx. Obviously, You're on top of this (as much as us outsiders can be.) Their response seems deliberately vague to me, but if you do hear more, I'd love to hear about it. I'm still having way too tough a time getting away from r.e. infomercials on my SoCal. t.v.
The Federal Reserve had some idea of the problems posed by inflated housing values back in 2002, according to summaries of meetings held by the Federal Advisory Council.....Although the signs were limited, the summary shows that the Fed was already discussing the possibility of a housing bubble as much as four years ago, not long after the technology-stock bubble burst.
The problem with using CR's nonresidential vs. residential activity chart as a forecasting tool for the economy, stock or bond markets is that it shows the same "soft landing" vs. "hard landing" results that we all remember.
So it comes back to: has the Fed and the economy changed in the last 20 years that a repeat of the '94-95 "soft landing" is possible, or are we headed into a severe slowdown or even recession?
I work in the construction industry (A large general contractor on the west coast, all major cities). Recently we subscribed to a webcast run by economics who specialized in the constuction industry. They were forecasting that this is just the tip of the iceburg for non-residential comerical construction. Their reason being that capital improvements are currently on the books and companies have been content to work with what they have had for the last few years and now are more willing to spend on improvements. Alot of their data was spectulative tho.
To answer the question on how transferable workers are esp illegals it depends on the project. All public projects are very difficult to complete with illegals. The Arbys down the street in rural American can have the floors done with them. Major constuction projects do not use them much. To much risk for those involved.
Comment on the LV Sun article!
Recuerdo de Mexico.
I imagine that a lot of folks are going to go home for Xmas and just not return. Slumlords will suffer from empty shacks. Just tragic I tell you.
It will be interesting to see the effect of the first large scale recession on the state economies when the marginal worker is not eligible for social benefits. I imagine the number of children in school in January will fall in some of these areas, in some cases precipitiously. Growth stops at the margins first...
so pay attention to the defaults on truck loans....after all it is hard to repo that fine truck in Sinaloa!
First off, I am much less knowledgable than many here.
Michael, thanks for the insider viewpoint. I question the sanity of these planned commercial "investments." I look around and I see market saturation. I think it is just a function of too much liquidity. I recently read a quote that I believe applies to any industry. "It is hard to get a man to understand something when his livelihood depends upon him not understanding." Do you think this applies to the construction industry at present?
I see that many people are predicting that the Fed will cut rates again in '07. I honestly don't know which camp is correct, but my question is, how often can the Fed cut rates before it becomes painfully evident that this economy is running on fumes? I mean, how much "money" can be created before things spiral out of control?
From what I have heard, public construction jobs are booming with no signs of slowing down in the near future. Got to make sure they spend those property tax and Google stock windfalls! Regarding construction in Dem districts instead of Rep: the more things change, the more they stay the same.
Dr Who - that is what I suspected and have heard. I know it can be cyclical, so I wish you financial success in the next year. Curious as to what your thoughts are on a potential commercial bubble. I know that it is your livelihood, but just wondering if you'd be willing to share. I have a hard time believing that all these new commercial buildings will actually find long-term success. Thanks!
I like the fact that (the graph shows) the ends of the recessions perfectly coincide with the rebounds from the bottom of nonresidential investment.
With a large percentage of the US manufacturing moving offshore, I wonder if nonresidential investment will be as large as it used to. This doesn't address the yoy changes and lag effect of nonresidential construction but I do wonder if anyone has considered this and what effects it would have on future estimates of nonres investments.
thanks from germany
Is the data for the graph available? I'd like to do a 3 datum moving average to smooth out those wild spikes.
hmmmm you all beat me to the punch. i live in dc and woke up to this article by the wapo. i was thinking, hot damn! i love it when a plan comes together.
then i get the wet blanket.
sigh.
The amplitude of the swings definately decreased after the early 80s.
"The amplitude of the swings definately decreased after the early 80s."
It's probably because since then, the Fed has been able to cut rates every time we encountered a slowdown.
Now that rates are back at low levels, should we statrt to expect increased volatility again for the next couple of decades?
I think articles like these explain, in part, why the US consumer may not be very concerned - they're being told everything is A-OK.
it seems the 'expansion' can almost continue ad infinitum due to loading up on ever more debt. in my neck of the woods (NY,NJ,CT) local and state governments continue to borrow money to pay for things they can't afford given current budgets. and why should anyone complain? all they're doing is following in the federal government's footsteps.
It's like the VIX. People look at the graph, decide that voliatility is down, predict the future will be more of the same. We see the same thing in house price appreciation expectations among homeowners.
Whipsaw, whiplash, backlash, blowback, blowdup, upset, reset. We are gonna look back in a few years and wonder why everyone didn't see it coming.
Those y/y changes...is this a time where we want to look at the market share and raw numbers to avoid a interpretting a change in a depressed market (com & industrial) due to a much more lucrative and larger segment (residential)? [ie Was the baseline for the y/y changes in the commercial market artificially low?]
Last thing: Can it absorb the less qualified labor market (dare one say illegal aliens?) of the residential market?
CR, A few weeks ago you said you'd periodically check back as states signed on to CSBS Nontraditional Mtg. Guidance. I looked at the CSBS web site this morning & see that only NINE states are on board (I believe this is same # you last mentioned?). Do you know any more of response expectations?
IMO the surest indicator to how close we are to the cliff is the structure & break-out of home purchase & refi loans in PK's "zones" in the last 30 days. I spent Sun. looking at homes in Naples area of Long Beach (I'd highly recommend the area at about 1/2 the current $1,000/' asking price)! Thanks in advance.
calmo you make an excellent point about the large illegal/undocumented labor force in the construction industry. where are these people going to go as the market slows down? how are their skills transferable to other industries with the added difficulty of being illegal?
Bailey,
Regarding the CSBS Guidance. Here is the response I received from the NJ Division of Banking and Insurance when I inquired as to when the guidance would be adopted.:
Dear Mr. Bednar,
The Department is in the process of review all on the information in
reference to the above subject. When the review has been completed, a
decision will be made on how best to proceed forward. We appreciate your
interest in this matter, and it is the Department's intention to arrive at
a decision shortly.
Terry K. McEwen, Director
NJ Department of Banking & Insurance
where are these people going to go as the market slows down? how are their skills transferable to other industries with the added difficulty of being illegal?
No work in land of plenty
State's unemployment claims in construction industry up 32 percent
By Timothy Pratt
Las Vegas Sun
At 2:30 in the afternoon, Remedios Bernal opens the door of his mobile home with his right hand, rubbing his eyes with his left.
Barefoot, he takes a step or two back and slumps onto the living room couch where he had been napping. His very pregnant wife, Karina, sits across from him in a matching couch, stroking the hair of their 19-month-old-daughter, Naydeline.
The apparent domestic calm belies the crisis this growing family faces.
Bernal had been dozing off after running out of places to look for construction work. He was laid off three weeks ago, an apparent casualty of the valley's 13th consecutive month of declining year-to-year home sales.
Stories published November 20, 2006Las Vegas Sun
dc1000, sorry for the wet blanket. At least business is strong now, but I suspect non-residential construction will follow the usual pattern.
Robert, that data is from the BEA. See the GDP data.
Bailey, re:CSBS. It was seven when I posted, so it's up two since then. Since last week was Thanksgiving, I was going to check with the CSBS this week. I bet we see more states added this week.
James Bednar, thanks for the update on NJ.
Best to all.
James Bednar, Thx. Obviously, You're on top of this (as much as us outsiders can be.) Their response seems deliberately vague to me, but if you do hear more, I'd love to hear about it. I'm still having way too tough a time getting away from r.e. infomercials on my SoCal. t.v.
CR, Excellent post. Good arguement that the Fed will be cutting interest rates sometime in 2007
Interesting tidbit from wsj blogs:
The Federal Reserve had some idea of the problems posed by inflated housing values back in 2002, according to summaries of meetings held by the Federal Advisory Council.....Although the signs were limited, the summary shows that the Fed was already discussing the possibility of a housing bubble as much as four years ago, not long after the technology-stock bubble burst.
Distant Early Warning - MarketBeat - WSJ
The problem with using CR's nonresidential vs. residential activity chart as a forecasting tool for the economy, stock or bond markets is that it shows the same "soft landing" vs. "hard landing" results that we all remember.
So it comes back to: has the Fed and the economy changed in the last 20 years that a repeat of the '94-95 "soft landing" is possible, or are we headed into a severe slowdown or even recession?
I work in the construction industry (A large general contractor on the west coast, all major cities). Recently we subscribed to a webcast run by economics who specialized in the constuction industry. They were forecasting that this is just the tip of the iceburg for non-residential comerical construction. Their reason being that capital improvements are currently on the books and companies have been content to work with what they have had for the last few years and now are more willing to spend on improvements. Alot of their data was spectulative tho.
To answer the question on how transferable workers are esp illegals it depends on the project. All public projects are very difficult to complete with illegals. The Arbys down the street in rural American can have the floors done with them. Major constuction projects do not use them much. To much risk for those involved.
Comment on the LV Sun article!
Recuerdo de Mexico.
I imagine that a lot of folks are going to go home for Xmas and just not return. Slumlords will suffer from empty shacks. Just tragic I tell you.
It will be interesting to see the effect of the first large scale recession on the state economies when the marginal worker is not eligible for social benefits. I imagine the number of children in school in January will fall in some of these areas, in some cases precipitiously. Growth stops at the margins first...
so pay attention to the defaults on truck loans....after all it is hard to repo that fine truck in Sinaloa!
First off, I am much less knowledgable than many here.
Michael, thanks for the insider viewpoint. I question the sanity of these planned commercial "investments." I look around and I see market saturation. I think it is just a function of too much liquidity. I recently read a quote that I believe applies to any industry. "It is hard to get a man to understand something when his livelihood depends upon him not understanding." Do you think this applies to the construction industry at present?
I see that many people are predicting that the Fed will cut rates again in '07. I honestly don't know which camp is correct, but my question is, how often can the Fed cut rates before it becomes painfully evident that this economy is running on fumes? I mean, how much "money" can be created before things spiral out of control?
As far as public construction - any bets on what a Dem congress does in the face of a potential construction lead recession?
My guess is more bridges to nowhere & the like... but it will be different this time... they'll be in Democratic districts instead of Republican ones.
I doubt public non-res construction drops all that much.
From what I have heard, public construction jobs are booming with no signs of slowing down in the near future. Got to make sure they spend those property tax and Google stock windfalls! Regarding construction in Dem districts instead of Rep: the more things change, the more they stay the same.
I wonder if the Fed can lower rates with the dollar under assault?
"It's probably because since then, the Fed has been able to cut rates every time we encountered a slowdown."
Or is it that the Fed hasn't raised rates to cause a slowdown (aka contain inflation) because globalization contained inflation instead.
shrugs
As a large commercial contractor here in CA, my '07 pipeline is essentially full. I am now turning down all but extraordinarily profitable projects.
Dr Who - that is what I suspected and have heard. I know it can be cyclical, so I wish you financial success in the next year. Curious as to what your thoughts are on a potential commercial bubble. I know that it is your livelihood, but just wondering if you'd be willing to share. I have a hard time believing that all these new commercial buildings will actually find long-term success. Thanks!