The holding pattern
I've been through this before and I'm really not eager for round 2.
Step into my time machine and let’s go back about a decade and a half. Somebody somewhere became overextended on their home equity line of credit and couldn’t pay their bills. Once his creditors came up a little bit short on the debts they themselves owned, that little ripple became a current that eventually became a tidal wave that swept across the building industry. When home prices began to crash, builders quit building them and millions were laid off and out of work. I was one of them.
Being at the front end of that industry, the firm where I worked noticed a slowdown beginning maybe the latter half of 2006. At one point soon after I was hired in 2004, we had grown to almost 20 people but once the slump began we began seeing people depart for greener pastures and the company making no effort to replace them. All the overtime I was doing in 2005 was working itself down to an average 40 hour week, but by the middle of 2007 it was obvious that work wasn’t coming in steadily enough; unfortunately the methods used to pay the bills that were still coming in got one of our employees into serious legal trouble. When I was finally laid off in December, 2008 the company was down to five people as the receptionist was let go days before I was.
Because of that, I try and stay keenly aware of how business is doing, and so does my employer - who has never ramped his business back up to where it was back in the mid-aughts and has no plans for doing so. (Once bitten, twice shy.) After the company survived for much of a decade with just three or four people before I finally returned in 2017, now it’s just the four full-timers, a part-time administrative assistant, and a summer intern. As a firm, we’ve recently turned out about sixty to seventy projects of all varieties and sizes in a standard year, but this year we may end up a little short of that number, and with smaller projects to boot. It’s obviously concerning.
I don’t know what event has triggered our most recent economic woes, but I suspect the employers of some surely-deceased Chinese lab workers and “81 million voters” just might have the clues. Regardless, the last couple of years have some serious effects to our business as the price of building materials put a lot of projects on hold. For example, we have a project on the boards that we started in mid-2020 and was really intended to be built last year, but the developer has put it on the back burner twice: once in order to coordinate construction with another nearby project of his that we started in early 2021 and then later because the eight-figure price of construction for his projects combined was more expensive than he had initially budgeted.
I also hear a lot of scuttlebutt being in my position, and the one which prompted me to write on the subject was from a steel supplier who not all that long ago was working overtime and had a waiting period of several months for steel K joists, the framing used primarily for roofs in the warehousing and retail industries because of its long span capability. That waiting period has now basically vanished because, while the supply has stayed constant, demand has slumped. Builders have complained for the last two years about supply chain issues forcing them to substitute other items for ones they specified, but you don’t hear as many complaints anymore - partly because they’ve learned to adapt but moreso because they’re just not as busy.
Another anecdotal tale is the number of houses being built in my rural area. A year ago I drove through a subdivision being constructed and counted 15 houses underway. Well, that number was down to four about a month ago and there are still building lots available there. While existing housing stock is still being snapped up - albeit at a slower pace than it was this spring - new housing isn’t keeping pace. I think there’s just too much uncertainty in the economic world right now given how many people are discussing the r-word.
It’s interesting to note, though, that a chart of housing starts going back 25 years shows we’ve never made it back to the peak days of when the housing bubble burst, a point in time when we were building well over 2 million houses a year - we topped out in the 1.8 million range this spring, but over the last month the number fell to 1.549 million. (Remember, our population has increased since 2006, so we’re probably no more than 70% of where demand would have been.) Then again, who can afford a new house with the price of materials and rapidly rising interest rates? Or new anything built, for that matter?
The claim is that unemployment is at a low of 3.6% right now, and supposedly there are more jobs out there than employees willing to work them. (The U-6 rate that I feel is more accurate was 6.7%.) But if the building industry slows down again like it did 15 years ago, there’s going to be a lot of people hurt, and I’m trying not to be one of them again.
(Is it a bad time to encourage you to subscribe to my Substack? Right now it’s free but I may make this a side hustle in the future.)
Perhaps the November elections may make a difference, but I just get the sense that the kids who have been born as part of what’s known for now as Generation Alpha (since 2012) are going to have an upbringing and outlook similar to that of the Silent Generation that came of age during a time of depression and war. Because of that, I think it’s unfortunate that we didn’t address some of our economy’s structural problems when we had the chance. Thanks to that lack of attention it’s a matter of waiting for the other shoe to drop and hoping it doesn’t fall on my head.