Reader comment on: USA Today on Blinder-Zandi
Submitted by J.Johnson (United States), Aug 31, 2010 10:47
The math is easy. New housing starts are down roughly 1,500,000 from the peak a few years ago. A new home costs roughly $200,000 averaged nationwide. Of this, roughly $100,000 can be attributed to labor costs, especially if the costs of furnishings and other indirect expenses are included. Multiplying 1.5 million times $100K equals $150 Billion. If the pay for these construction and related jobs is assumed to be on the order of $50,000 per year, the net losses in jobs equals $150 Billion divided by $50K, which is 3,000,000. In other words, just the crash in new home construction has cost the economy something like 3 million jobs. If the actual pay for these jobs is lower, say $37,500 a year, then the job losses rise to 4 million. The stimulus did not and could not fix this situation and it may well become the 'new normal' for a long time and put an end to all the happy talk about how even more govt spending (think: Krugman) is going to get us out of this mess. The real economic future is playing out in Illinois, where the state retirement fund is now paying benefits out of capital instead of earnings. It's just a matter of time until this spreads to California and beyond. Then life will get really interesting.
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