Popular Pandemic Renovation Projects
Spending on home improvement rose by an average of $745 per household in 2020, according to HomeAdvisor’s 2021 State of Home Spending. The most popular projects among the 5,000 homeowners who participated in the survey were do-it-yourself endeavors which not only improved people’s homes but gave them something useful to do during various stages of quarantine. The five most popular projects were interior painting (35%), bathroom renovations (31%), flooring (25%), landscaping (24% completed an average of 3.4 landscaping projects) kitchens (23%). Respondents reported that they used money they had initially planned to spend on vacations to fund their projects.
Lumber prices are expected to decline about 29.2% this year after rising 38.7% in 2021, according to IHS Markit as reported in ENR. Lumber prices fell precipitously over the summer last year and demand cooled off significantly from spring highs. However, prices have zoomed up since, which analysts attribute to storms and excessive flooding that started in November in British Columbia. About 14% of US softwood lumber comes from BC, so fears about supply disruption triggered panic buying. Analysts expect the market to improve during the first quarter, bringing prices down. Meanwhile, tariffs were doubled on Canadian softwood lumber products. Tariffs rose to 17.99% from 8.99%. Construction economists say this increase will hit homebuilders the hardest because lumber is much more important to single-family construction than to multifamily and commercial.
Faster Growing Cities See Higher Home Prices and More Inflation
Consumer prices rose most rapidly in US metros seeing the largest influx of new residents. Conversely, prices rose less in some traditionally expensive areas such as the San Francisco-Oakland-Hayward metro, as well as the New York City, Boston and Washington DC metros. Among metro areas with more than 2.5 million people, the Atlanta area saw the highest inflation at 9.8% for the 12 months through December. Phoenix, St. Louis and Tampa also saw annual inflation rates higher than the 7% national rate in December. The pandemic-fueled population shift from larger cities to suburbs or smaller metro areas, particularly in the Sunbelt, was driven by both retiring baby boomers and remote workers seeking warmer weather and lower living costs. That influx helped drive up housing costs and job gains which boosted incomes and fueled demand for housing, transportation and services such as dining and entertainment. Housing costs accounted for almost one-third of the CPI in the Atlanta area and similar places last year. The CPI’s shelter index measures the cost of tenants’ rent and homeowners’ inputted rent. The shelter index rose 10.2% in the Phoenix area and 7.7% in the Atlanta area late year; it was up 1.2% in the New York metro area and 0.8% in the San Francisco area. The index climbed 4.1% for the nation. The median sale price of homes in Atlanta rose nearly 23% in the year to December compared to the national increase of 15.2%. Prices rose 10.3% in the San Francisco area. The highest increase in the nation was in the Punta Gorda/Port Charlotte metro on Florida’s western Gulf coast, where prices were up 28.7%.
Global Supply Chain Issues Drive Deals
Mergers and Acquisitions companies believe it will be another strong year for mergers and partnerships in the US and in Canada. There were more than 4,500 deals and mergers in Canada in 2021, worth about US$349 billion. Canadian economists and specialists expect 2022 to be another record-setting year. The supply crunch has challenged manufacturers on many levels who just can’t find the products they need at a good price, or sometimes at all. It was a record-breaking year in the US as well, with $5.5 trillion in mergers and acquisitions during 2021. Analysts noted that businesses are flush with cash and capital markets are looking to continue the growth spurt through tech-driven transformation. In January 2022 there were $316 billion in deals, well above the long term median and showing no signs of slowing down. Major industry shifts toward innovation were evident in 2021 mergers and acquisitions, with $1.4 trillion in technology sector deals, the single largest group of transactions across sectors. Tech was behind trends in transportation and the drive toward electric vehicles; auto and transport deal value rose 113% to $396.4 billion. Sustainability goals and environmental responsibility are also spurring investments in the utility, power and energy industries.
What’s Up with Inflation?
The Fed is widely expected to begin raising interest rates at their meeting in March, with a goal of raising rates by a total of 1.5% this year using a series of 0.25% increases. Some analysts think the Fed may kick off with an increase of 0.5%. However, nearly 75% of CEOs polled by the Conference Board said that the Fed’s plan is unlikely to quickly cool inflation. Some 27% of CEOs expect to raise prices in the next six month and 45% plan to pass along cost increases in the next six to twelve months. The CEO Confidence Index fell eight points to 57 in the first quarter, marking the third consecutive quarterly decline. Just about half of CEOs expect the economic outlook to improve over the next six months, down from 61% who had a positive view last quarter.
Economists believe that inflation will stay well above the Fed’s 2% target this year and will continue as long as companies struggle to keep up with consumers’ surging demand for goods and services. Supply chain log jams are beginning to ease in some industries and the lack of government stimulus checks may slow demand. Wells Fargo expects the Consumer Price Index (CPI) to be hovering around 4% by the end of the year.
A metric known as the Misery Index, created by a top advisor to President Lyndon Johnson, uses a combination of the unemployment rate and the CPI’s measures of inflation to create a single number. The lower the number, the happier consumers are. Right now, the misery index is at 11.5, the highest level since the Great Recession. However, it was much higher in the 1970s and early 1980s and spent much of the 80s above 20. Inflation is hitting Americans right in the wallet, affecting how much they pay for everything from gas and groceries to big-ticket items such as automobiles. Shortages and having to settle for something that wasn’t quite what you wanted contribute to the misery.
A recent CNN poll showed that three-quarters of those surveyed were worried about the economy in their own community and 63% said the nation’s economy was in poor shape. More than 80% were worried about inflation. In some strange ways worrying about inflation contributes to it, as people rush to buy products before prices increase more or they disappear from shelves altogether.
Consumers think high inflation will be transitory, according to research released by the New York Fed. Despite all the headlines, consumers long-term expectations have been very stable since last summer. Consumers who were included in three Fed surveys through January expected inflation five years in the future to be running very close to 3%.
Where Are Employees Going?
Forty-one percent of professional service workers say they plan to look for a new job in the first half of the year, according to a recent survey by Robert Half staffing, up from 32% who intended to search in the second half of 2021. And 28% of the workers planning to job hunt would quit without having a new position lined up.
Staffing companies are reporting that a rising share of new hires quit their jobs after less than a month. Some object to employers increasing the number of days they’re expected to be in the office. In the current environment, employees don’t feel as if they need to stick with a job if it doesn’t feel right to them, as they believe they can easily get another one.
Even though openings are at record highs, many workers are still outside the labor force. Some parents are caring for kids because they can’t find or afford childcare. Other people are afraid of contracting COVID-19, especially with the more infectious but milder variant now dominant. And many people can delay their return to the workforce because they still have ample savings from unemployment benefits and stimulus checks.
Many employers are bumping up wages and offering signing bonuses and other perks to lure workers from other companies. Employees, in turn, are switching jobs in unprecedented numbers to take advantage of the many job openings and higher pay.
Why Workers are Leaving Work:
Fifty-four percent of workers surveyed by ZipRecruiter in September said they preferred a job that let them work from home. Only about 10% of jobs offer that option, though that’s up from 3% before the pandemic, according to ZipRecruiter chief economist Julia Pollak. Many employees are also quitting jobs that don’t allow them to work from home at least some of the time.
Pandemic Burnout. Nineteen percent of workers said they’re unhappy with how employers treated them during the pandemic. This could include those who burned out after being forced to work long hours while colleagues were out or those in stressful industries such as health care. On the flip side, that means that 81% of workers were satisfied with how they were treated.
Pandemic Opportunity. Twenty percent of workers surveyed by Joblist quit jobs to pursue new career paths and their passions. Thirteen percent of workers quit because their jobs didn’t provide work-life balance. One-third of workers quit jobs to launch businesses, according to a Digital.com survey shows.
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