For the past three years, the housing industry has bemoaned labor as its primary deterrent to increasing productivity, i.e., housing starts. Framing crews suddenly vanished when detainment and deportation of undocumented workers became more prevalent.
The initial impact on the housing industry was capped capacity. That capped capacity is just now making its way into the media. The 1.3 mm maximum capacity housing starts assumes no labor relief, which also assumes undocumented workers continue to find the risk of fugitive status not worth the reward of pretending to be a citizen, living in hiding with a good job. We are seeing, with more frequency, that is not the case. More labor is coming back to where it is wanted, needed, and welcomed. The reward is worth the risk.
In Texas, legitimate green card holders are being delayed through customs. By contrast, in the southeast, there is a significantly noticeable return of framing crews. For the past 12 months, most home builders have found a surplus of framing crews and more competitive pricing. The further from the border, the better the labor situation.
The labor return will be a problem for data dependent analyses as it reveals higher unemployment and lower wages in 2020. What I do not know at this writing is if the “return” consists of documented or undocumented immigrants or if it’s a sector of the unemployed US labor force that is attracted by higher wages.
Regardless, this information is super informative. Let’s look just at the labor that fled for fear of legal entanglement and call it one third of the total construction job pool. That explains why there was, and in spots still are, unfilled jobs. Higher wages kept age 60–70-year-old veterans from retiring.
There is a problem brewing: businesses’ willingness to employ undocumented workers. That pits small business against the government. The scary thing is, throughout history, bad things happen to countries when there is discourse between the ruled and the rulers.
My forecast for housing and lumber is that “the wall” may reduce the migrant traffic for a couple of years, but, as long as US businesses continue to provide good paying jobs, undocumented workers will find cracks to slip through. Until the wall is built, labor will return everywhere it is needed and welcomed. Ultimately there will be a showdown when Uncle Sam enforces his will.
Bottom Line: For 2019–2020, as labor “comes back,” so will lumber demand. You heard it first from LLG.
Looking Forward...ML
A veteran lumberman, Matt Layman publishes Layman’s Lumber Guide, the weekly forecasts and buying advisories that help component manufacturers save money on lumber purchases every day. You can reach Matt at 336-516-6684 or Matt@laymansguide.info.
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