Evan Soltas
Mar 2, 2012

Building from the Basement

Construction spending is on the way up

I've got good news where there hasn't really been that much good news in a while, although green shoots had begun to appear in permits and starts by late 2011: construction is coming back. We are beginning to see year-over-year gains in construction spending.

There is evidence that this improvement could be sustained, too. Payrolls have begun to rise in the industry. For the first time in seven years, also, there were more housing units under construction this month than last month. Weekly hours are back where they were in the heyday of the housing boom, thanks to the huge contraction in construction employment.

Yet the most optimistic piece of evidence also suggests a sustained and severe shortage of homes in the future: shipments of construction machinery have soared to all-time highs. These are durable goods, which suggests that construction firms are expecting substantial demand in the near future.