Residential and NonResidential Construction Through September

Residential construction spending was higher in September than in August, which was itself higher than in July, which was itself higher than in June.

Interestingly, I predicted last December that the housing market would turn around in the summer of 2009. By now, we have seen enough housing price and construction data to see that prediction was correct.

My prediction was based on the assumption that a credit crunch would not be an housing important factor. In other words, I expected any significant credit market restraint of the housing market to cause the market to turn around later than summer 2009. That’s not to say that credit is flowing easily — just that credit conditions are reacting to the housing market (in particular, its new and lower levels of price and construction) rather than the other way around.

But look at nonresidential construction: it’s fallen significantly since spring. Why?

  • Credit crunch?
  • housing construction crowding out non-residential construction?
  • an expectation that labor will remain low for a while to come.

I am skeptical that a credit crunch is all that important — certainly not the entire story (if it were, why did the housing market turn around as quickly as I predicted?). Housing construction right is now not significant enough to crowd out much non-residential construction. Thus, the bad news is that non-residential investment spending may be indicating more tough times for the labor market. I’m going to write more about that tomorrow on nytimes.com.

About Casey B. Mulligan 76 Articles

Affiliation: University of Chicago

Casey B. Mulligan is a Professor in the Department of Economics. Mulligan first joined the University of Chicago in 1991 as a graduate student, and received his Ph.D. in Economics from the University of Chicago in 1993.

He has also served as a Visiting Professor teaching public economics at Harvard University, Clemson University, and Irving B. Harris Graduate School of Public Policy Studies at the University of Chicago.

Mulligan is author of the 1997 book Parental Priorities and Economic Inequality, which studies economic models of, and statistical evidence on, the intergenerational transmission of economic status. His recent research is concerned with capital and labor taxation, with particular emphasis on tax incidence and positive theories of public policy. His recent work includes Market Responses to the Panic of 2008 (a book-in-process with Chicago graduate student Luke Threinen) and published articles such as “Selection, Investment, and Women’s Relative Wages,” “Deadweight Costs and the Size of Government,” “Do Democracies have Different Public Policies than Nondemocracies?,” “The Extent of the Market and the Supply of Regulation,” “What do Aggregate Consumption Euler Equations Say about the Capital Income Tax Burden?,” and “Public Policies as Specification Errors.” Mulligan has reported on some of these results in the Chicago Tribune, the Chicago Sun-Times, the Wall Street Journal, and the New York Times.

He is affiliated with a number of professional organizations, including the National Bureau of Economic Research, the George J. Stigler Center for the Study of the Economy and the State, and the Population Research Center. He is also the recipient of numerous awards and fellowships, including those from the National Science Foundation, the Alfred P. Sloan Foundation, the Smith- Richardson Foundation, and the John M. Olin Foundation.

Visit: Supply and Demand (in that order)

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