Following the release of stronger-than-expected manufacturing and retail sales numbers earlier in the week, the Commerce Department announced Wednesday that housing starts surged 15% in September over the previous month, to an annualized rate of 872,000 units.
In his analysis of the numbers, Andrew Wilkinson, chief economic strategist at Miller Tabak & Co., notes that they represent the biggest build since 2008, with both new housing permits and new home construction gaining momentum.
Wilkinson also noted that much of the increase came in the multi-family unit category, signaling that even as the housing market rebounds, it may look different from its pre-crisis days: While multi-family starts saw an increase of 25.1%, single-family construction rose by 11.0% to 603,000. Similarly, an 11.6% overall increase in permits comprised a 20.3% jump in the multi-family category and a smaller, 6.7% increase in single-family permits.
Wilkinson did warn, however, that housing start data is volatile and subject to revisions. His analysis also points out that the labor market has not kept pace with the encouraging housing numbers: Since building and construction payrolls peaked in February, the industry has fired a net 42,000 employees. Although “it is true, and welcome, news that the 872,000 pace shows signs of further strength…” Wilkinson says, “it confirms the awkward nature of the economic recovery, and one that has been labeled a jobless recovery.”
The chart below shows that construction employment was much more robust than when housing starts were last at these levels (see circles).
Still, the data is good news for the economy: “Consumption and construction are strengthening and output is gaining to the surprise of some. It is starting to look like the fourth quarter is building into something stronger than had been expected, and we believe this is likely to build a head of steam in 2013.”