As I explain in a forthcoming column in Forbes magazine, the poor housing market is a major reason why I have remained skeptical about an economic recovery. Today's report on housing starts reinforces my view.
Housing starts in June fell to a seasonally adjusted annual rate of 549,000, 5% less than a month ago and almost 6% less than a year ago. The number was also significantly below the consensus estimate. Of course, much of the blame for the shortfall goes to the expiration of government tax credits. That should not surprise anyone.
Housing foreclosures and inventories are also on the rise. Foreclosures are closely related to the employment market. Despite the recent decline in the unemployment rate to 9.5%, there is little evidence of private sector job gains. Most of the employment growth is in the public sector. Although state and local governments have reduced payrolls, the federal government has more than made up for those job losses.
One bright sign is the financial services sector in New York City. Some firms, including Goldman Sachs, are finally hiring again. While this could be a turning point, it is still too early to be certain.