Nobel laureate and well-known economist Paul Krugman raised an interesting question on its Twitter page about housing starts versus employment in the sector.
Krugman cited a chart of the Federal Reserve St. Louis and wondered why housing starts have fallen while employment in the sector has maintained its momentum.
Single-family housing starts, which reflect the bulk of residential construction, fell 4.3% in January to a seasonally adjusted annual rate of 841,000 units, Reuters reported last month, citing the commercial department. Single-family home construction plummeted 27.3% year-on-year.
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At the same time, overall housing starts fell 4.5% to 1.309 million units, the lowest level since June 2020.
Employment: In comparison, however, employment in the industry shows steady momentum, as the chart shows.
“If you look at housing starts, you would think there was a significant slowdown [the] Procedure. But employment has not declined at all. I honestly don’t know exactly what’s happening, but that’s certainly a big part of the mystery,” Krugman tweeted.
Krugman said it was “the most confusing chart in economics to date.”
“Lots of speculation as to why the Fed hikes haven’t done much to slow the economy but are too focused on businesses and consumers; in housing, monetary policy usually has the most traction,” he tweeted.
Notably, the average interest rate on the 30-year fixed-rate mortgage broke the 7% mark last week and hit 7.1% on fears of continued inflation and sustained rate hikes continue to impact markets.
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