Here’s an update to a chart I have shown regularly. Housing PRICES showed a bottom a while ago. Due to crowding out from the fiscal stimulus, it was expected that a housing recovery would be more visible in housing prices than in housing CONSTRUCTION. Nevertheless, it would not be a housing recovery unless construction increased to more normal levels, which is why I have watched the construction activity closely.
Note that this graph is construction SPENDING, which differ from the VOLUME of construction according to construction prices. 2009’s construction prices must be especially low, so a time series for the volume of construction activity should show 2009 to be less below prior years’ than shown by the spending series.
During the boom, I see an obvious crowding out (as opposed to the “crowding in” claimed by Professor Krugman): more housing construction was reducing non-residential construction, not increasing it. Remember that the multiplier advocates claim that spending in one sector motivates spending in another.
During the early part of the bust — though the end of 2008, and thus through 12 months of recession — I also see a clear crowding out: less housing construction was increasing non-residential construction. That non-residential construction spending increase did not need a spending boom in the housing or any other sector to get going (Krugman’s view) but rather needed LESS spending in other areas.
Even during 2009, it’s difficult to see housing spending drops doing much to significantly pulling down non-residential spending. To the degree that non-residential spending fell, it may be due to crowding out by public construction spending (not shown in the graph) … when I get some numbers on this I’ll let you know.