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Home Builders Face Labor Shortage Woes

The lack of workers with the necessary skills is hurting the construction industry.

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Home Builders Face Labor Shortage Woes

In the last quarter of 2015, the findings of a survey by the Associated General Contractors of America already gave a preview of the labor shortage woes that home builders are currently facing. The survey revealed that nearly 80 percent of construction businesses were having a difficult time finding qualified skilled labor.

In fact, in “The construction labor shortage: Where did all the skilled labor go?” — an article published on the Tradesmen International website — it was pointed out that the current labor shortage actually began when the home construction industry bottomed out in 2011.

Long-Term Dilemma

“The shortage of skilled craft workers in the U.S.” — a research paper presented by the Construction Industry Institute (CII) — confirmed that labor shortage woes have persisted. The CII conceded, “Shortages of skilled craft workers continue to plague the construction industry. Employers have attempted to identify the root causes and to develop strategies to overcome these shortages. Despite this research and the efforts to stem the problem, the construction industry’s skilled worker pool continues to shrink.”

In a feature in The Wall Street Journal, Kris Hudson and Jeffrey Sparshott reported, “The delays, economists and builders said, could dent builders’ profits in the short term due to higher labor costs and concessions to buyers.”

They went on to cite the September 2015 survey of 74 builders by industry tracker John Burns Real Estate Consulting Inc.. which reported slowdowns as long as two months. Yes, home builders have had to wait that long for carpenters, drywall workers, foundation pourers, and housing construction specialists.

In November 2015, data from the Bureau of Labor Statistics and National Association of Home Builders (NAHB) revealed that there were 143,000 vacant construction positions all over the country.

The National Association of Home Builders (NAHB) is a trade association based in Washington, D.C. that aims to “enhance the climate for housing and the building industry.” It has more than 800 state and local associations under its fold and over 140,000 members.

At that time, the NAHB likewise revealed that 69 percent of its members “were experiencing delays in completing projects on time due to a shortage of qualified workers, while other jobs were lost altogether.”

Roots of the Problem

Industry experts have identified several factors that have consistently contributed to the labor shortage. They are the following:

1. The skilled workers may have quit the industry or relocated. The Bonded Builders Warranty Group cites a recurring trend: “A likely reason for the shortages and unfilled openings is that, during the downturn, many workers left the industry, developed new skills, and are not coming back. Other workers may have simply moved away and are not now living in the places where demand for new housing is recovering at the fastest pace.” Moreover, NAHB chief economist David Crowe also revealed in a November 2015 Builder feature: “The Census Bureau recently published a report utilizing detailed employment records over the past 15 years. About 60 percent of former construction workers either went to some other industry or remain unemployed. Only 40 percent returned to construction after the bust.”

2. There’s no new blood. Most high schools have stopped holding shop classes. More and more high school graduates have also opted to pursue four-year college degrees. They eventually seek white-collar jobs. As the CII observed: “The journeyman-level work force is as educated as the rest of the U.S. population.” The group likewise added that “the construction work force is failing to attract women and minorities.”

3. They wages are not attractive. “Construction pay scales have not kept their relatively high position over the bust and start of the recovery,” Crowe noted. This, of course, puts off skilled workers just as it would put off other workers in different industries.
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Building Solutions

With the main factors causing the labor shortage identified, experts have come up with strategies to address the problem.

1. Employers have to actively look for talent or get creative. One of the key strategies highlighted in High Skills, High Wages 2008-2018: Washington’s Strategic Plan for Workforce Development, involves education. The paper noted: “As education resources tighten, it’s essential that post-high school programs continue to focus on high employer demand fields — that is, fields of learning where employer demand for people with a certain level of education exceeds the supply of graduates coming out of state colleges, universities, and apprenticeships.” That means companies may have to recruit potential workers way before they enter the workforce. Other home builders could take their cue from Doug French, CEO of Texas-based Stylecraft Builders, who forged a relationship with a truss factory owner. As Les Shaver documented in the article, “Builders get creative to crack the Labor Code,” French offered “to buy the trusses if the factory produced and installed them turnkey.” Fortunately, the factory owner agreed. Thus, French suddenly doubled his framing capacity.

2. Employers have to plot out a career path for skilled workers. CII asserted, “The construction work force can be characterized as two divergent work forces: one that is satisfied with the work and is willing to participate and improve skill levels; and a second that is transient, unsatisfied, and will quickly leave the industry when other opportunities arise. These two work forces have vastly different characteristics and need to be managed accordingly, thus there is a need for two different work force management strategies.” They have to know that they have a future in the industry and that that they can update their skill set accordingly.

3. The wages have to go up. Employers have to pay more to attract and keep more workers in the industry. As Heidi Shierholz of the Economic Policy Institute explained, “If skills are in short supply, the simple logic of supply and demand implies wages should be increasing substantially in occupations where there is a shortage of skilled labor. In other words, employers who face shortages of suitable, interested workers should be responding by bidding up wages to attract the workers they need.”

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Economy

Wall Street Gave Campaign Donations

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Biden Received $74M, Trump Received $18M

Despite enjoying one of the best bull runs in history, the market is looking forward to a new sheriff.  According to the Center for Responsive Politics, Biden is the chosen one. Wall Street gave campaign donations to Democrat Joe Biden $74 Million, while incumbent President Donald Trump got $18 million. This included contributions since 2019 and until the first two weeks of October.

RELATED: Trump and Biden War Over Social Security

Biden’s Wall Street Supporters

Joe Biden’s campaign is about to amass $1 billion in the remaining days before the election. Among the Democratic nominee’s supporters is former Goldman Sachs President Harvey Schwartz. He gave $100,000 this October to the Biden Action Fund and other various party fundraisers.

During the 3rd quarter, Wall Street investors lined up to support the Dems. Beginning last week, Biden, the DNC, and other committees received over $330 million. In comparison, Trump and the GOP received a total of $220 million.

Bigger than Obama, Smaller than Hillary’s

Biden’s Wall Street donations are larger than the total of Obama’s two runs for president. It falls short of Hillary Clinton’s $87 million hauls in her doomed 2016 run.

As early as January, the Biden campaign approached Wall Street hotshots for support. These included Evercore founder Roger Altman and investor Blair Effron, Blackstone CEO Jonathan Gray, former Citigroup exec Ray McGuire, Centerbridge Partners co-founder Mark Gallogly, and former U.S. Ambassador to France Jane Hartley. A lot of them hosted fundraising events or donated money.

Biden also got big money from supporters from Paloma Partners and Renaissance Technologies. Renaissance’s founder Jim Simons donated $7 million to two super Biden PACs way back in March.  He added over $350,000 to the Biden Action Fund in June. Henry Laufer, Renaissance’s chief scientist, gave $625,000 in June to the American Bridge PAC. Meanwhile, Paloma Partners founder Donald Sussman gave $9 million to Biden’s super PACs. An added $20 million from other hedge funds and private equity firms rounded off the total.

Most Ever Spent by the Industry for an Election

This year, the investment community gave $625 million in contributions for election campaigns. This covers not only the presidential elections but also congressional and senate contests. It stands on record as the most ever spent by the finance and investment industry.

From the total, $370 million went to super PACs and groups allowed to raise infinite funds.

Democrats got the lion’s share at 63% while the GOP got 37%. $161 million went straight to Dem candidates, while $94 million went to Republicans. Compare it to 2016, where the GOP received half of Wall Street’s money.

Funding for the Dems remained high despite talks of pushbacks to big business. There is opposition within the camp in naming business leaders to the Biden cabinet. Progressives are vocal about not wanting their candidate to cozy up to the big business.

Jeff Hauser of the Revolving Door Project researched potential Biden Cabinet selections.  He is “cautiously optimistic” that Wall Street’s funding can influence future appointees. Hauser does believe that the sector’s contributions can help open doors to the Biden White House. He voiced concerns about “conventional thinkers within the Biden world.” These people might insist on paying “deference to the source of that $75 million.” 

Meanwhile in the White House

For Donald Trump, Wall Street isn’t as enamored if you look at the numbers. He received a paltry $20 million during his initial run for president. Four years later, donations to his cause are $2 million less. Analysts noted that many previous finance backers held back on the reelection campaign. These include people who gave millions during Trump’s 2017 inaugural.

Records show that previous supporters helped Republican Senate or House candidates instead. The market’s support for Trump waned due to his coronavirus response. Anonymous sources noted that investors backed off despite Trump’s tax and regulation cuts. Since they think Trump is about to lose, these leaders don’t want to invest in him further.

Trump donor Dan Eberhart said “Wall Street is watching the same polls as everyone else. They can see the direction the campaign is going and they are starting to alter their strategy.” He added that “It’s about risk management. If they can’t beat Biden, they know they are going to have to join him.”

Watch this as CNBC breaks down Wall Street campaign donations during the 2020 election:

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With its contributions, Wall Street implied a decision to support Joe Biden. Should he eke a win, Wall Street will definitely look for returns on its investment. They should remember that this man won over progressives like Senators Elizabeth Warren and Bernie Sanders, who aren’t exactly priority invites to ring the stock exchange opening bell. How do you think this will pay off for big money? Let us know what you think by sharing your thoughts in the comment section below.

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Business

Stocks Post Its Worst Day in A Month

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Wall Street took a beating Monday as stocks posted its worst day in a month. Rising coronavirus cases and a fading stimulus relief led investors to sell-off.

RELATED: A Stock Market Rally On New Stimulus Bill Could Be ‘Short-Lived’

The Dow Jones Industrial Average closed 2.3% lower. It fell down 935 points during the day before settling 650 points lower. All Dow stocks closed in the red except Apple, which eked out a .01% gain. It was the Dow’s worst day since September 3.

Meanwhile, the S&P 500 closed for the day at 1.9%, marking its worst day since late September. The tech-heavy Nasdaq Composite, which bounced back from its lows in the morning, finished lower at 1.6%.

While all sectors across the board experienced losses, some got crushed more. These include energy, industrials, and financials.

Higher Cases of Coronavirus

With eight days remaining before the elections, investors are starting to get jittery. Despite lots of talks, Congress has yet to approve a stimulus package. Cases of coronavirus are jumping in all states, and it recently hit a daily high average of 68,767 last Sunday.

Meanwhile, big tech companies are set to report earnings later this week. This lot includes Microsoft, Apple, Google, Facebook, and Twitter.  Fawad Razaqzada of Think Markets noted that the reports can inject further volatility. In the note, Think Markets believed that “on a more macro level, ongoing US stalemate over US fiscal stimulus and the rapidly spreading Covid-19 is going to determine the direction for the wider markets.”

Tom Lee, head of research at Fundstrat Global Advisors, thinks Covid is a big influence over the market. He said “It’s almost as important as the Fed right now. Covid is suppressing the economy, and it’s essentially offsetting easy money. If we didn’t have Covid, people would be going out and spending money. It’s acting as a huge headwind.”

No Relief in Sight

Brad McMillan, CIO of Commonwealth Financial Network, thinks the reality hit investors hard. He told CNN business: “I think a big difference this time around [is]…there’s been a tremendous amount of hope baked into the market for quite a while, and we saw some things over this weekend that hit those assumptions hard.” The negotiations for a new relief package is gone at least until after the elections. Senate Majority Leader Mitch McConnel adjourned the Senate after confirming new Chief Justice Amy Coney Barrett. They will resume their session on November 9, or six days after the elections.

Without a clear stimulus plan, the US economy could start to double-dip. And if the rise in coronavirus cases continues, the business will shut down again. This nightmare scenario is haunting the market at present. Steven Wieting, the chief strategist at Citi Private Bank, sees dimmer prospects. “The ability to fight the virus further right now is very much in question, and it’s a political question.” Wieting believes that Washington could take months before anything gets done. This made investors tentative.

Tom Lee added that “We have a lot of things to be anxious about in the next couple of weeks. That’s why this is a pre-election market. But post-election, I think a lot of things that make people nervous turn into a tailwind. The post-election stimulus is a when not an if. Even if it’s a mixed Congress, I think there’s still some common ground. It’s just the scope that’s different. It would be a smaller package.”

Eight Days Remaining

The final eight days before the elections usually brings good vibes for Wall Street. This year, the bulls will need some extra running following Monday’s selloff spree.

Sam Stovall, chief investment strategist history, observed this bull phenomenon. Since 1944, the S&P 500 rose on average 2.5% in the eight days before elections. The index is up 17 out of 19 times, or 89%. The biggest rise came during the recent financial crisis, with the S&P 500 roaring back 18.5% in a bear market rally. That year, Democrat Barack Obama won over the GOP’s John McCain. The market sunk back to new lows after the election. It bottomed out four months later. The first decline in 1968 (-0.8%), happened as Richard Nixon won over Democrat Hubert Humphrey. The other was in 1988 when Republican George H.W. Bush won against the Dems’ Michael Dukakis.

Wall Street needs to get its act together with eight days remaining. A short, decisive victory by either party can help uplift America’s image. And with all the drama removed, maybe the market can go back to its winning ways.

Watch this as Stocks fall sharply at open amid Covid-19 resurgence:

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Business

US Housing Sales Boom Will Last Until 2021

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Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.

RELATED: Biden Is Latest Dem to Support Ridiculous Free Housing Proposal

Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion. 

Why do people buy houses during a recession? 

During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.

The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap. 

The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy. 

Demand coming from the rich 

Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”

People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.  

Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said:  “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.” 

Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”

Shrinking inventory of houses for sale

With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data. 

Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”

Demand won’t last forever  

The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities. 

The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.

Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:

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Are you house hunting right now, or have you already bought a house this year? Why are you doing so? Let us know why buying a home is a good idea right now. Share your thoughts in the comments section below.

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