Saturday, December 16, 2006

Construction Workers and the 2007 Economy

I am not as worried about the 2007 economy as some, despite my reputation for gloom and doom. I acknowledge the downside risks, of course. In one particular, construction worker employment, I think the risk is typically overstated.

No doubt that the construction of new housing has slowed down and is not likely to perk up significantly in 2007. But did you or any of your friends try to get a contractor to do major repairs, additions or alterations in 2005 and 2006? Everyone was busy; pricing verged on extortion; projects started months behind schedule and sometimes ended years behind schedule.

So while there is not pent-up demand for new homes, I think there is plenty of pent-up demand for construction workers. Overtime will be cut back (if it has not already been) so many workers will have smaller paychecks. In California many overworked Mexicans may simply take a nice vacation back to their hometown, where many are building a house of their own. There will be increased competition in the repair, alter, and addition market, which will be great for frustrated home owners.

Real estate workers (dirt pimps, my friend John calls them) are seeing smaller paychecks, but that is just part of the game. Many new real estate agents who came on board in 2004 and 2005 would never have survived under normal positions. It's disappointing to have a real estate license and be lining up for a job at WalMart or Target, I'm sure, but good times will come again and at least you'll already have the license. Smaller paychecks should remind people of the importance of saving during good times, a lesson much of America seems to have forgotten.

I believe it is a bit early to be buying stock in home construction companies, given the uncertainty going forward, but if you do buy now at least you'll be buying the stock for way less than what people were paying for it back in 2004 and 2005.

Live and learn. A down cycle is just a good time to mentally flip the chart and see it as a rising inverse. Laid off by a big construction company? Hopefully you saved some money during the boom. Get your contractor license, print up some business cards, and knock on some doors. Do good work, put your customers before yourself, and soon people will be knocking at your door. Adapt and thrive.

I'll be on vacation a few days, then back to share more with you in 2007.

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