ive more gifts this Christmas. After all, thehealth of the US economy and its prospectsfor growth rely heavily on where, and howmuch, the US consumer chooses to shop.The term consumer spending is ubiquitous, butsometimes the familiarity leads to a misunder-standing of its importance—and at more than 70percent of GDP, it is critically important to theeconomy. As consumers recovered from the lastrecession, so did spending. From the bottom in2007, spending has increased by more than $600billion and retail sales have improved by nearly14 percent since 2009. Not simply part of theeconomic machine, consumers are the juice of the economy. Without a strong and growing con-sumer, the US economy will struggle to continuemoving forward.One of the more critical issues for the economicrecovery is how to eep the US consumer going.There are hopeful signs—unemployment contin-ues its slow decline, the housing maret has life,and consumer confidence has hit a five year high.The slightly less bullish counterpoints are thatfewer people are participating in the labor mar-et, and that housing and consumer confidenceremain well below long-term levels. But there isa possibility the consumer—and therefore muchof the economy—has only begun to recover. A continued housing rebound could create more jobsin a construction sector that has yet to see muchimprovement. More jobs create more consumersand more consumers create more jobs for retailers,a positive feedbac cycle.
Constructing a Different Picture
While the employment picture appears increas-ingly jolly, construction—especially residentialconstruction employment—has lagged behind thebroader recovery. Overall, construction peaedin 2006 with 7.73 million people employed in theindustry. Today 5.54 million people are employedin construction, a 28 percent decline. Residentialconstruction employment is even worse. At theheight of the housing boom, in 2006, just over 1million people were employed building homes.This figure has stabilized only recently at around560,000, a 45 percent decline. Meanwhile, non-farm payrolls have recovered most, though not all,of their losses from the recession with the private job maret down only three percent from its 2008pea of 115.6 million people employed.In the spirit of the season, consider this a goodthing. The consumer is alive and consuming 3percent more than the pre-crisis pea—withemployment still recovering. Constructionemployment as a whole has stabilized, and a con-tinuation of the housing recovery would begin toreplenish some of the lost construction jobs. Thesheer size of the residential maret suggests thata housing recovery could boost employment andeconomic growth dramatically. At the beginning of 2008, residential fixed investment was $813billion, but by the third quarter 2012 that figurewas down to $388 billion, a 52% decline. Asfrightful as that decline might sound, the cost tothe economy is even greater than simply the lossin housing investment. The investment multiplier
‘Tis Better to Give
A PUBLICATION OF CHILTON CAPITAL MANAGEMENT