While new housing production is expected to see a healthy rebound later this decade, ""Fannie Mae's"":http://www.fanniemae.com/portal/index.html Economic and Strategic Research (ESR) group believes ""an anticipated slowdown in workforce expansion suggests more modest prospects for new housing demand and construction than witnessed historically.""[IMAGE] [COLUMN_BREAK]
Although short-term cyclical factors have driven some of the recent workforce contraction, the group says longer-term forces--including the retirement of Baby Boomers--will ""soon usher a prolonged period of slower labor force expansion.""
According to recent projections from the Bureau of Labor Statistics (BLS), annual labor force growth is forecast to average just 0.6 percent between 2012 and 2025--nearly one-third the 1.5 percent average annual growth observed 1948.
However, using the Census Bureau's new projections for population growth over the coming years, Fannie Mae's team says labor force growth could range from as high as 0.9 percent (under optimistic conditions) to as low as 0.4 percent (using a base scenario).
""[H]istorical data covering the last five decades show that new housing production is positively correlated with the labor force growth rate,"" the group said in its latest commentary. ""The anticipated deceleration in labor force growth suggests a slowdown in homebuilding activity to meet reduced demand for new housing.""