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Economists were dismayed when the government announced recently that there was no increase in labor productivity in the nonfarm business sector in the third quarter. Now, one economist is fingering an interesting culprit: housing.
Here’s the idea: Construction has fallen drastically. But the builders haven’t cut payrolls much yet. That means the output per hour worked in the homebuilding sector—i.e., productivity—has fallen. According to Andrew Tilton of Goldman, Sachs & Co., that one change could explain more than a full percentage point of decline in the growth rate of nonfarm business productivity.
Here’s Tilton from a report today:
This suggests the industry continues to employ far too many workers, and aggressive job cuts in this industry may eventually result as firms try to bring capacity into line with demand—leading to a weaker labor market overall.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.