Entire U.S. Hit by ‘Inexplicable’ Plunge in Housing Construction

An “inexplicable” 12.2% plunge in new housing construction in May hit every area of the country, the Commerce Department said Friday, and analysts warned that the domestic economy may be sliding into the doldrums.

“The rebound in housing has peaked,” said Larry Chimerine, chief economist for the WEFA Group of economic forecasters in Bala Cynwyd, Pa.

“A lot of people who think we’re in a boom are focusing on the manufacturing industries and ignoring the slowdown in domestic spending, construction, retailing,” he said.

Other government reports this week showed that industrial production is up and that factories are operating nearly flat-out to satisfy foreign demand for American products, but domestic consumer spending is off, retails sales are down and now the housing construction industry looks grim.

David Wyss, senior economist for Data Resources Inc. of Lexington, Mass., said he expects that 50,000 to 100,000 people could lose their jobs in the construction industry in the next few months if the slump continues.

Construction of privately owned housing, the bulk of the building activity, was begun in May at a seasonally adjusted annual rate of 1.384 million units, down 12.2% from the revised April rate of 1.576 million units, the department’s Census Bureau said. The bureau had previously reported the April rate at 1.561 million units.

The plunge was the sharpest since a 15.7% dive from November to December and takes the annual rate to the lowest since January’s 1.382 million.

Chimerine said, “It’s a flip-flop from where we were a few years ago, and we’re essentially a two-tiered economy,” with export-oriented industries booming and the domestic economy sagging.

White House spokesman Marlin Fitzwater said of the decline: “There’s no way I can hide that one. We’re hoping for a turnaround.”