Housing Data: Gains and Challenges for Small Business

By SBE Council at 19 April, 2022, 11:48 am

by Raymond J. Keating –

The latest report on residential housing construction from the U.S. Census Bureau pointed to continued gains in March, though at a slow rate. If we move beyond the volatility of month-to-month numbers, housing has seen a move up in recent months in terms of permits and starts, but with completions down.

Of course, the housing story always is a small business story, as 92.4 percent of employer firms in the residential building construction industry have fewer than 10 employees, and 97.3 percent fewer than 20 workers.

At a seasonally-adjusted annual rate, housing permits (a measure of future housing starts) were up in March by 0.4 percent versus February, and 6.7 percent compared to a year earlier.

As for housing starts, they were up in March by 0.3 percent versus February, and by 3.9 percent compared to March 2021.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

As noted in the charts above, housing permits and starts recovered strongly after the pandemic first hit in March and April 2020, leveled off from the spring and into the fall of 2021, and have since stepped up growth since October of last year.

The permits and starts data point to a solid housing market. However, another noteworthy factor needs to be pointed out. Housing completions have been declining since March 2021.

Source: Federal Reserve Bank of St. Louis, FRED

This points to the impact of a tight labor market and supply-chain struggles. Price signals will continue incentivizing returns to the labor market and investments in supply chains. Of course, policymakers could aid this process by, for example, reducing tax and regulatory burdens to help spur entrepreneurship and investment, and fixing our immigration system so that those who are willing to work and contribute to the nation are able to do so.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.