Housing Starts – Unemployment – Cost of Oil

If you have followed my blog, you will know that I am a housing advocate and believe that
“as housing goes – so goes the economy”. Well, the cost of oil and energy has also been a key component causing previous recessions.

Year               Housing Starts                             Unemployment Rate (%)                    Barrel of Oil Cost

 

1979               1,745,100                                             5.9                                               $74
1980               1,292,200                                             6.3                                               $99
1981               1,084,200                                             7.5                                                 85
1982               1,062,200                                             8.6                                                 71
1983               1,703,000                                           10.4                                                 63

 

 

1988               1,488,100                                             5.7                                          $23 - $38
1989               1,376,100                                             5.4                                   from 1988 - 1994
1990               1,192,700                                             5.4
1991               1,013,900                                             6.4
1992               1,199,700                                             7.3
1993               1,287,600                                             7.3
1994               1,457,000                                             6.6

 

1999               1,640,900                                             4.3                                         $21 - $34
2000               1,568,700                                             4.0                                  from 1999 - 2002
2001               1,602,700                                             4.2
2002               1,704,900                                             5.7

 

 

2006               1,800,900                                            4.7                                           $63
2007               1,355,000                                            4.6                                             67
2008                  905,500                                            7.7                                           $92
2009                  554,000                                          10.1                                             54
2010                  587,600                                            9.8                                             70
Est. 2011                                                                    9.4?                                          $98??
       Fannie Mae 710,000
              NAHB 575,000

 

• We need to add 125,000 new jobs per month just to keep up with population growth
• We need 1,400,000 new housing starts every year just to keep up with population growth and family formations.
• For each $10 rise in the cost of a barrel of oil, $0.25 is added at the pump and the economy declines.

History shows us that there is a connection or relationship of the cost of oil to unemployment and housing. In the past, the cost of oil declined after it reached over $90 per barrel due to policy changes, negotiations around the world or consumer demand caused price declines.

  

If the cost of oil continues to trend up and is sustained for a length of time due to Middle East unrest, I have made up my mind on what will happen – have you?