• Bull.




We're anticipating fresh construction spending data for July on Sept. 1, but we've yet to discuss last week's building permits data. While Tier 1 is a flows desk, grasping the macro is fundamental to understanding the employment market, which feeds the AUM for passive funds. In the U.S., almost 2 million people are involved in real estate activities, whether buying, leasing or management, with another 8 million in construction. This doesn't even include those in retail and wholesale roles supporting the real estate industry.

Tier 1 Alpha: Concerns Building on Slowing Construction Data - 17

In July 2023, U.S. building permits slightly increased by 0.1% to an annual rate of 1.442 million, falling short of the expected 1.463 million. While single-family authorizations rose by 0.6% to a one-year high of 930,000, there were declines in permits for larger buildings. There was a 13% decline in national permits compared to the previous year.

The tight labor market results from significant shifts, notably the surge in workers with college degrees over the past 30 years. Unemployment rates for this group are rising, while rates for those without degrees are falling. Current data suggests white-collar workers with degrees are approaching a job market tipping point. Although construction market data indicates a labor shortage, this may soon change given the declining number of permits and starts. As our own ProfPlum pointed out in his May 7th Substack, this market situation, contrasting 2008, is both favorable and challenging: the present seems better than official reports indicate, but future projections may be revised downward due to various economic factors, including slowing permits and financial tightening. Additionally, there's a trend to abandon specific projects after permitting due to worsening economic conditions. The lagging effects of Chairman Powell's rate policy are now hurting.