Veritas

   In 1980 the unemployment rate in the United States took a jump from 5.8 to 7.1%, as rising interest rates were beginning to draw the nation into its worst econo-mic condition since the great depression. That year, the Flint area’s jobless rate soared from 8.9% to 17.7%.
   Over the next 8 years, unemployment at the national level averaged 7.5%, with a high (‘82) of 9.7% and a low (‘88) of 5.5%. During the same period, the Flint area averaged 13% unemployment, with a high (‘82) of 21.1% and a low (‘86) of 10.8%. And, over the next five years, while the U.S. averaged 6.4% without jobs, local unemployment was at a 10.8% rate.
   Throughout the last quarter of the 20th Century, the Flint area experienced an unemployment rate which was consistently 4 to 11 points above the national average, and local business, and particularly the housing industry, experienced dramatic swings in response ... that is, until the past six years. From 1995 through last year, the area’s jobless rate was usually within 1% of the nation’s.
   As evident in the chart below, local unemployment trends were on a sharp decline from 1988 (despite a slight rise during the ‘90/91 recession) to ‘96, while housing activity was on a sharp upswing. Since ‘96, both have been relatively stable, at least from an historic perspective.
   The drop, and subsequent stabilization of Flint area jobs’ data, came despite the continued reduction of General Motors’ jobs which, as frequently noted, have fallen from the 70,000 range to roughly 20,000 since 1980.
   Last Wednesday, the Journal ran a story on the local jobless rate running at 5.2% last year, the lowest level in more than 30 years. The article noted that manufacturing jobs had fallen from “35,900 in June ‘99, when Buick assembly closed,” to approximately “29,000 at the end of 2000.” It also quoted a labor market analyst from the state who claims the size of the (local) labor force shrank by 6,600 during the period, as “those people either quit looking for work or moved from the area.”
   Of course, most likely it was neither, as “those people” are probably still living in the area, but commuting outside, a concept that seems lost on Michigan analysts.
   The Journal story followed the release of the Genesee County fourth quarter Business Index, which included some interesting comparisons of the “types of jobs” in Genesee County with those around the nation. Mark Perry, an Economics Professor at U-M Flint, who author’s the index, explains: In ‘78, 51% of Genesee County jobs were in manufacturing, while only 19% were in the service sector. At the same time, only 29% of the nation’s jobs were in manufacturing, while services supported 29% as well. By 1998, manufacturing jobs made up just 16% of the U.S. workforce, while service sector jobs had grown to 52%. Locally, the rates went to 21% and 51% respectively.
   So, with the local job distribution closer to the U.S. average, the impact of massive layoffs in one sector is no longer as devastating, and downturns in the economy are likely to affect the Flint area much in the way they impact the nation as a whole.
   Note: Because so many GM employees, formerly employed locally, found jobs in facilities outside the county, but continue to reside here, it’s likely that roughly 30% of Genesee Co. workers remain dependent on manufacturing ... still, that’s a long from the 51% of 1978.

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New housing stand’s alone?

While the anti growth debate rages on, it’s becoming more and more evident that the home building industry stands alone in support of the American Dream. The recent endorsement of land use reform by the Governor, along with complementary news articles and editorials against sprawl, seem to suggest the MAHB is an isolated force in support of continued growth and development.
In an early February editorial, our own Flint Journal said it well when it wrote: “Country living is a powerful lure and forces like the MAHB are consistently opposed to any limits on their ability to satisfy that demand.” In other words, the builders’ organization is fighting to preserve the public’s rights against the myriad of special interests that include the leadership of both political parties, the urban media, and every special interest group from the farmers and environmentalists, to the Chamber of Commerce and even the Realtors.

The Earth Liberation Front (ELF), perhaps best known for burning down a ski lodge in Vail (CO), has recently focused on Long Island. A Nation’s Building News article said the ELF is being investigated for three fires at houses under construction on the island, as part of its anti-sprawl efforts across America.

In its January/February issue of Sierra magazine, the Sierra Club accused NAHB of being hypocritical in its support for “Smart Growth,” because it opposed the two anti-growth ballot proposals in Colorado and Arizona last Fall. Both proposals, fostered by the Sierra Club, lost by big margins and were opposed by mainstream groups.

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“Triggers” to protect from surplus’ euphoria

  Throughout the 2000 campaign, Governor George Bush remained consistent in his call for a large tax cut. He continuously made the following points: 1) he trusts “the people, not the Government,” to decide how their money should be spent; 2) If we leave the surpluses in “Washington,” the congress will spend it; and 3) he (Bush) cut taxes twice in Texas due to projected surpluses.
   Well, whether Bush “won” the election or not may still be up for debate, but two things are not: He is the President; and, there will be a larger than economically responsible tax cut. In fact, the debate has shifted from size to shape, and automatic to “triggered.”
   “Triggered?” Currently a number of Northeast Republicans, along with several Democrats, are calling for cuts that will only materialize if and when the expected surpluses are realized. And, those so-called moderates may have received a boost from a most unlikely source last week, the Wall Street Journal.
   In an article that hasn’t received much attention in the rest of the media, the WSJ indicated that the Bush tax cuts left the Texas’ fiscal condition in dire straits, as forecasted surpluses never materialized. State lawmakers will soon be voting on a $700 million emergency spending bill (including $600 billion in for higher than expected Medicaid costs). And, in the next two-year budget, the Legislature faces another $1 billion in higher than expected Medicaid costs, and is committed to a first time subsidization of $4 billion in teachers’ health insurance costs.
   There are two critical problems with Bush’s campaign premises. First of all, projected surpluses don’t necessarily materialize. Secondly, Congress has shown an historic tendency to spend irresponsibly, whether in surplus or deficit.
   Today, when a Republican member of Congress speaks of fiscal responsibility rather than tax cuts, he (or she) is called “liberal” by the new GOP mainstream. However, the “trigger” endorsed by those Northeast “liberals” makes the kind of traditional Republican sense which seems to have disappeared from GOP dogma since the early 1980’s.

Barry

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Stair Geometry Confusion?

   Since the January 31st meeting on the new Michigan Residential Code, we’ve had a surprising number of questions on the stair geometry issue. Apparently, there’s some confusion regarding flexibility on the 8 1/4’ riser/9’ tread, requiring the following explanation:
   When Public Act 245 became law at the end of 1999, it immediately prohibited any building authority from enforcing any requirement more stringent than 8 1/4 by 9. However, that does not preclude a builder from using a lower riser or longer tread.   Remember, codes are minimum requirements. For example, the energy code mandates that the rating on wall insulation in Southern Michigan must be at least R13. It doesn’t mean the builder is prohibited from using R19 or R21.
   By the same token, the tread on a step can be longer than 9 inches; while the riser can measure any height up to, and including 8 1/4 inches.

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Beyond Seinfeld: It’s still about "Nothing" in particular

Some fascinating news out of Westwood Village (CA) this month regarding the most economically abused Americans, major college football players. The Wall Street Journal noted that UCLA’s “football players asked the United Steel Workers of America for advice on winning better benefits from the university.” This could be the start of something really interesting.

The repeal of the inheritance (“death tax”) possibly suffered a severe setback last week as Newsweek published the following quote: “It’s very expensive to be me,” noted former “Playmate,” actress and most exotic dancer Anna Nicole Smith who was testifying about managing to spend $6.7 million on clothes, jewelry and homes during her 14 month marriage to her late husband ... then again, it does help the Democrats in their desire to “target” tax cuts. After all, if we can target them towards 80 year old millionaires with young wives, we can pretty much assure an stimulus effect.

Coincidence? The day Hannibal opened in theaters across the country, kitchen products’ retailer Lechters announced it’s closing 166 outlets.

According to a report by the Employment Policy Foundation, lawyers, judges and farmers are among the workers most likely to marry within “their group.” So obviously, there are moral reproductive concerns far more serious than human cloning.

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Association News and Events: Parade looks strong; “Directory” Coming

   Although the first deadline isn’t until tomorrow (Tuesday), it appears that participation will be exceptional for this Spring’s Parade of Homes. Without the mail (Presidents’ Day), we’re already approaching thirty, and there’s more than 2 weeks until the final deadline.
   For applications not received or, at least, post marked by the 20th of this month, the fee for Parade participation rises to $2,700 ... and, to be accepted, all future entries must be postmarked no later than March 9th.
   The event will open May 12th, the traditional Saturday before Mothers’ Day, and run through the 27th. Again, if you’re missing you entry form and wish to enter the event, call the BAMF office immediately.

As Spring approaches, it’s nearing time to update the annual Association Directory ... so, we’ll be mailing the first of the forms in the March 6th Veritas.

   Also, there will be forms available at Tuesday’s Exhibitors’ Night, so you’ll be able to fill out the form that evening.
   As we’ve done throughout the past decade, the only advertising in the directory will be in the categorizing of members section (“yellow pages” style). Listings in that section cost $5 each ... (all members as of the printing date are automatically listed in the general section.
—Important—
   Due to what’s become continuous changes, we can only list members in the “Classified” section who respond to the survey ... each year, after the mailing of the directory, we’re hit with a number of calls from members asking why they’re not listed in particular categories? We can’t take it upon ourselves to list, even the obvious, when others may not be so obvious ... so, it’s critical that any member wishing to be classified, respond in each designated area of their business.

Housing Quarterly’s original deadline (March 9th) is almost here. After that date, we’ll be arranging placements and may not be able to accommodate additional requests for full color ads. So, once again, we ask that everyone (particularly if you want full color) let us, at least, know your plans for the Spring issue (expected out by Monday, May 7th).

Walli’s East on April 11th! As you may have seen on page 1, we found another option for General Membership meetings, setting April’s for Wednesday, the 11th, at Walli’s East. It’s got a convenient location (Center Rd. just south of I-69) and a facility that can accommodate more than 150. We’re confident it will work out well ... so mark it in your calendar and look for further details March 6th.

We’ll be setting up a Land Development Council meeting with Consumers power in mid March ... also, see 3/6 Veritas.

4th Annual Exhibitors’ Night on Tuesday Opens at 5 p.m. at Bonaparte’s in the Genesee Tech Center

   Some thought it was more fun (and a lot less frustrating) than the golf outing. Perhaps the most enjoyable association event over the past several years has been its annual Exhibitors’ Night, which was moved to the more spacious surroundings of Bonaparte’s, in the Genesee (Great Lakes’) Technology Center, at South Saginaw and Atherton Road. Due to its tremendous success last year, we’re returning for the 2001 event next Tuesday, February 27th.
   As of this morning, there were 34 tables reserved (so, there are still a few available; 6 foot @ $200; 8 foot @ $250), which will be set up for exhibiting by 5:00 p.m., for the event that will be over by 8:30 that evening.
   From the moment the event opens, complementary beer, wine and light hors d’oeuvres will be available. The special buffet, featuring cheese burgers, hot dogs and pizza will be open at 6:30, and will remain until around 8:00 p.m. when the evening will begin to wind down.
   Another popular feature of the event has been the prize drawings, which will begin at roughly 7:00 p.m., and will run until the prizes are all “spoken for.”
   The association held its first similar event in 1998, and the response was so strong, it had to turn away a dozen or so exhibitors the following year. So, in 2000, it moved to Bonaparte’s which could accommodate more than double the number of exhibits.
   This year, with the new scheduling flexibility, it was set for Tuesday, February 27th, so those who couldn’t go to New Orleans could have their own special Mardi Gras celebration.
   We’ve got a number of new exhibitors this year, covering just about every building product and service ... so, don’t miss this event.
   Since it’s set for Tuesday, we’ll have to give a commitment early ... to call the office immediately.

Economic Update: Greenspan testimony nearly “upbeat”

   In a surprise to some, Federal Reserve Chairman Alan Greenspan sounded considerably more upbeat on the nation’s economic condition, as he testified before the Senate Banking Committee last Tuesday. Suggesting that the “excep-tional weakness evident toward the end of last year” may have been due to severe weather, the chairman told the Senators that “it (the weakness) apparently did not continue in January.”
   And, regarding the sharp decline in consumer sentiment (which could also be weather {and perhaps media} related), he said confidence “remains at a level that in the past was consistent with economic growth.”
   However, despite the optimistic tone, Greenspan continued to focus on growth, rather than inflation, stating that “for the period ahead, downside risks predominate.” Though clarifying that we’re not in recession, he continued that recessions are such serious events, “we should take whatever actions we can to reduce the probability that it will occur.” So, he left the perception that the Fed will continue to cut rates when it meets on March 20th.
   The Chairman also noted that the Fed cut its growth forecast for this year’s 4th quarter to between 2% and 2.5%, along with its inflation forecast to the 1.75% to 2.25% range.

Scary Wholesale Price Numbers
   What could complicate the Fed’s anti-recession posture is a sharp rise in price levels. And, unfortunately, that’s exactly what happened when the Department of Labor released January’s Producer Price Index (PPI) last Friday, clearly indicating that inflation at the wholesale level surged at its fastest pace in more than a decade.
   The PPI was up a whopping 1.1% for the month, at a time a consensus of analysts was expecting a mild 0.2% rise, attributed to rising costs for fruits, vegetables, cars, cigarettes and energy. And, even the core rate (minus food and energy) was up 0.7%, well above expectations and the biggest jump 2 years.
   Despite the drastic data, there doesn’t appear to be a real sense of panic since many of the components that spiked in January can be attributed to weather (and auto industry alterations). Fortunately, the Fed will have February’s data prior to its next meeting.
Note: Consumer prices released Wednesday.

Productivity Slowed in 4th Quarter
   The gauge measuring how much American workers produce per hour grew at an annual rate of 2.4% during the fourth quarter, down from 3% during the previous three months. And, in the same release, the Labor Department said “unit labor costs” rose at a 4.1% rate, up from 3.2% the previous quarter.
   The labor cost increase could hardly be considered a surprise since a report in late January already noted that labor costs experienced their biggest gain in nearly a decade during the fourth quarter. However, productivity’s rise was healthier than one would expect, considering the deceleration in the nation’s economic activity during the period. When fixed labor costs are spread over fewer products, it can’t help but negatively affect both, productivity and per unit costs.

Industrial Output
   Industrial output declined for the fourth consecutive month in January, down 0.3%, according to the Federal Reserve. The report followed a 0.5% decline during December, as decision makers reacted to weaker consumer demand by slowing output.
   The "good news" is that capacity utilization fell to 80.2% which is its lowest level since 1992, meaning that once demand picks up, there is plenty of capacity for boosting production without fears of fueling inflationary price increases.

Housing Industry Update

After a couple of surprisingly strong months of single family starts and sales’ data, it wasn’t much of a surprise when NAHB reported that its Housing Market Index (HMI) rebounded somewhat in February, as it rose by 3 points to a level of 58. NAHB’s monthly survey of association members continues to suggest that more builders see conditions as “good” than “poor.”
Each of the three components of the HMI (current sales, expected sales over the next six months, and traffic at models) was up ... with “expected sales” and “traffic” experiencing their biggest rises in more than a year.

   Our first look at local permit activity for 2001 shows Southeast Michigan running 21.6% below last year’s level for January. Clarkston based Housing Consultants released their data for the first month of 2001, and just 3 counties (including Genesee) showed positive.
   The nine county region’s permit authorizations totaled 1,144 units, down by 315 from January ‘00, with Oakland, Living-ston, Macomb and Washtenaw all off roughly a third.
   Genesee showed an increase of 19 units over last year, with 107 total permits. Fenton Twp. led the way with 21, followed by Grand Blanc Twp. (16), Davison Twp. (12) and Clayton (8).
   Because of a number of variables, particularly the comparison of this winter’s weather to last winter’s, we can’t attach too much credence to the January data. However, the fact that permits were off just 4% nationally, does suggest that the weather is probably having more of an effect than economic conditions.
   Next Tuesday the Commerce Department is expected to release state by state permit data and it should give us a better feel for the question of whether it’s the severe winter or the local economy that’s responsible.

Et Tu Rotundo? In his State of the State address, Governor Engler endorsed the “land use” reforms championed by the anti-sprawl wing of his party. Eng-ler’s speech was followed by a barrage of articles and editorials singling out the Michigan Association of Home Builders as the lone opponent of said reforms.
Quite frankly, the deck is heavily stacked on the issue, with the State Chamber, and even the Realtors on board that runaway freight train that’s comin’ your way!

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