Residential Construction Employment Continues Upward Trend

Residential Construction Employment

Residential Construction Employment Continues To Rise by Todd Sullivan, ValuePlays

“Davidson” submits:

Monthly Supply of New Homes for Sale rises to 6.0, but so does Residential Construction Employment- look at the trend of the LIGHT BLUE LINE in the chart below.

We are getting steady growth in Residential Construction Employment. Because construction projects are typically financed(not paid for with cash), they tend to reflect the bank lending climate. At the moment conditions continue to be tight with only the best borrowers being able to obtain financing. Nonetheless, Residential Construction Employment continues to trend higher which means that good paying jobs are being created. It would certainly be nice to see this accelerate further, but as more individuals enter the workforce, individual credit qualifications improve and bank lending even with restrictive lending standards will find that there are more individuals who qualify over time.

Add to this good news the historical relationship which the Mtg Bankers Assoc found several years ago in which each new construction job equated to another 7 elsewhere in the economy. This is because construction projects once started flood the economy with spending in many areas of the economy.

The economic news remains on trend for economic expansion in the months ahead. The talk of economic correction does not have support from many measures of economic activity. With construction just lifting off we very likely will experience improved construction hiring for the next 5yrs-7yrs.  As long as the economy continues to expand, market corrections tend to be small and short lived [SPDR S&P 500 ETF Trust (NYSEARCA:SPY)]. It is the continued ‘good economic news’ which drives market psychology over the longer term.

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About the Author

Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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