Monday, October 27, 2008
Employment in the lumber industry is falling as the housing industry suffers.
JACKSON, Miss. (AP) — The glut of homes in foreclosure, vacant, or stuck on the market has the nation’s lumber industry hanging on by a limb.
Since housing starts hit their peak in mid-2005, demand for lumber used in floors, home frames and cabinets has declined sharply, and experts say the number of unsold homes would need to significantly decrease before homebuilders commit to building new ones.
With fewer new houses under construction, and foreclosure notices surging this summer, there’s a lot at stake for the sawmills and loggers that feed the nation’s dwindling appetite for floorboard, housing frames and cabinets.
The industry, which employs more than 100,000 workers, has seen employment drop 13 percent the last three years, according to government data. Millions of private landowners that manage family owned timberlands also depend on the lumber industry.
Glenn Hughes, a forestry expert with the Mississippi State University Extension Service, said many loggers are faced with difficult decisions. A global economic slowdown, tight credit, and the housing bust are hitting sawmills hard and shutting down logging companies.
“Boy, surviving this downturn. I have talked to a lot of people who have been in the business for many, many, years — this is probably the roughest they have seen it,” Hughes said.
In 2007, the Southern region of the U.S. saw a 30-percent decrease in lumber production and that is mimicked in other parts of the country, said Peter J. Stewart, chief executive and founder of Forest2Market, a Charlotte, N.C.-based company that collects data on forest and wood products.
Over the last year, lumber prices have been “bumping up and down” on 30-year lows, he noted.
The brutal economics of the housing crisis don’t appear to be letting up, continuing to drag down demand for both hardwood lumber, for floors and cabinets, and softwood, used in home frames.
The Commerce Department reported that groundbreaking for new homes in September was the second-worse monthly total since 1959. It was January 1991 when the country — in a recession — saw lower housing starts.
Construction of new homes and apartments dropped by 6.3 percent last month pushing the total production to a seasonally adjusted annual rate of 817,000 units.
Even if home buyers miraculously returned to the market to purchase unsold homes, Al Schuler, a research economist with the USDA Forest Service, says it may be a little too late to lift up the lumber industry because the inventory of unsold homes is “a huge number.”
The inventory stands at about 10 months, according to the latest National Association of Home Builders figures, including about 4.2 million existing and new homes.
A four-month supply of housing inventory is ideal for the lumber industry, said Forest2Market’s Stewart. “Builders cannot build a home, not one single home for six months, and then we would be back to four months,” he said.
There is one bright spot, the falling housing starts could eventually reduce the glut of unsold homes.
But even if housing starts begin creeping back up, 2009 will be even tougher for the industry as people scale back building plans, according to George Barrett, editor of the Hardwood Review magazine, who has been tracking the lumber industry for several decades.
Meanwhile, during the past decade, furniture makers have closed or cut jobs because of competition from foreign markets and Schuler says many hardwood lumber producers switched to producing flooring, cabinets, and molding for residential structures.
“This is all tied to housing more directly than furniture,” Schuler said. “So that market is not going to turn around either until housing turns around.”
Bureau of Labor Statistics show the nation’s sawmills and wood preservation industry employed about 120,000 workers in 2005. That figure dropped to 105,000 in July 2008 and preliminary figures for August 2008 show employment at 104,100.
The industry has an annual payroll of nearly $4 billion, according to the Coalition for Fair Lumber Imports in Washington, D.C. An additional 620,000 American workers directly depend on the sawmills for their employment and about 10 million private landowners, managing close to 300 million acres of family owned timberlands, depend on the domestic lumber industry, according to the coalition’s numbers.