Housing `Hangover' Kills Jobs as Spending Wanes; More Cuts Loom By Kathleen M. Howley http://www.bloomberg.com/apps/news?pid=20601109&sid=aCrdgd5WDnbs&refer=home Feb. 21 (Bloomberg) -- Denise Hamilton was earning the biggest salary of her life painting and packing refrigerator parts until Collis Inc. decided to shut its Evansville, Indiana, factory and she was fired. Hamilton, 36, lost her $11.20-per-hour job last month because Collis's main customer, Whirlpool Corp., the world's largest appliance maker, cut production after a drop in home sales reduced demand for new refrigerators, washing machines and dishwashers. Whirlpool fired 500 workers at its Evansville plant and Collis fired 160, including Hamilton. ``Working for Collis was the best job of my life,'' said Hamilton, a mother of two who lives on the outskirts of Evansville. ``Money is going to be tight.'' New and existing home sales dropped almost 10 percent last year, depressing demand for products from copper pipes to kitchen sinks and resulting in the loss of about 100,000 jobs in the U.S. Housing-related unemployment probably will increase in 2007, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts. Even if the housing market improves in the second half of 2007, as the National Association of Realtors predicts, sales of furniture and construction supplies will stagnate, said Amal Bendimerad, a research analyst at the Harvard center. Housing and related industries account for about 23 percent of the economy, according to the center. ``Appliance manufacturers and other suppliers are already feeling the heat, but they may not feel the full impact until the end of 2007,'' Bendimerad said. ``There's typically a lag of as much as a year.'' Furniture Makers, Plumbers By the end of this year, job cuts at companies including Whirlpool, Masco Corp. and Emerson Electric Co. may exceed the fallout from the 1991 housing slump, said Paul Puryear, managing director at Raymond James & Associates. The Bureau of Labor Statistics doesn't give data for housing-related job losses. ``The fallout in the early 1990s was much worse than what we've seen so far, but this downturn is not over,'' said Puryear, the head of real estate research for the unit of St. Petersburg, Florida-based Raymond James Financial Inc. ``The full impact hasn't hit yet.'' As the backlash from the latest slide spreads, U.S. economic growth probably will slow to 2.7 percent this year from 3.1 percent in 2006, said David Berson, chief economist of Washington-based Fannie Mae, the world's largest mortgage buyer. U.S. furniture makers fired 28,000 workers in the past year, according to the Bureau of Labor Statistics. Homebuilders have cut 24,000 jobs in the past three months alone. The U.K.'s Wolseley Plc, the world's biggest distributor of plumbing and heating equipment, has eliminated about 4,500 positions in the U.S., about the same number that Whirlpool plans to shed. `Ripple Effect' Masco, maker of Behr paint and Delta faucets, is firing 8,000 people, or about 16 percent of its U.S. workforce, after reporting its first loss in five years. Emerson Electric, based in St. Louis, cut 230 jobs at a plant that makes furnace components and Stanley Furniture in Stanleytown, Virginia, fired half the workers at one of its factories. ``We're going to see other industries have a hangover long after the housing recession is over,'' said Richard Yamarone, chief economist of Argus Research in New York. ``Housing has a ripple effect through the whole economy, from the carpet makers to the dishwasher salesmen.'' Builders broke ground in January on the smallest number of new homes since August 1997 as the industry struggled to unload last year's record 542,000 of unsold properties, the Commerce Department said in a Feb. 16 report. In the last three months of 2006, housing starts fell 24 percent from a year earlier. Wealth Effect? New-home sales probably will decline to an annualized pace of 944,000 in the third quarter and then rise to 959,000 in the last three months of the year, the National Association of Realtors said Feb. 7. Sales of previously owned homes bottomed in the fourth quarter at an annualized 6.24 million and will rise through at least the second half of 2008, the group said. Long gone is the so-called wealth effect that prompted consumers to increase spending as the values of their homes climbed, according to analysts, including Ivan Feinseth of New York-based Matrix USA LLC. The median price of a previously owned home will fall 1 percent to $216,500 this quarter from $218,700 a year earlier, the third consecutive quarterly decline, Chicago-based NAR said. Prices for new homes, about 15 percent of the real estate market, probably will rise 1.1 percent to $247,500, the slowest pace in 15 years. ``A slowdown in housing affects the purchases of everything, from furniture to kitchen sinks,'' said Feinseth, who last week downgraded his investment rating on Stanley Furniture to ``sell'' from ``buy.'' The stock has slumped 14 percent since August. Masco's Loss ``For the first time in many moons, the fourth quarter was a time for slowing sales in the United States and booming sales everywhere else in the world,'' Caterpillar Chief Executive Officer James Owens said in a Feb. 15 interview. ``I think we will see that essentially be the pattern for 2007.'' The world's largest maker of earthmoving equipment saw North American sales of backhoes and dump trucks fall 1 percent in the three months ended Dec. 31 as homebuilders cut production, Caterpillar said in a Jan. 26 statement. The Peoria, Illinois- based company forecast ``sharp declines'' for sales of the equipment in 2007. ``We've seen sales drop off by about 10 or 15 percent from last year,'' said Ron Stites of Wagner Equipment Co., in Aurora, Colorado, where a new Caterpillar excavator costs $200,000. ``The housing market in the whole region has slowed down,'' he said in a telephone interview from his office on the outskirts of Denver. Masco last week said it had a fourth-quarter loss of $187 million, or 49 cents a share, compared with net income of $173 million, or 41 cents, a year earlier. The company, based in Taylor, Michigan, blamed plummeting home sales and said further weakness might push 2007 earnings per share to $1.50 or less, compared with $2.22 in 2006. Metal Stockpiles Copper prices have tumbled 35 percent since reaching a record $4.04 a pound in May as the slowdown in home construction slashes demand for the metal used in pipes and wires. Builders are the biggest consumer of the metal, putting 439 pounds of copper into the average U.S. single-family home, according to data from the Copper Development Association in New York. Global stockpiles of the metal have climbed to the highest level since June 2004 as U.S. demand waned. Inventories monitored by the Comex division of the New York Mercantile Exchange have gained more than fourfold since July, a reflection of less metal being used in construction in the U.S., the world's second biggest copper consumer behind China. Shipments of appliances made by Whirlpool probably will fall by 2 percent to 3 percent in 2007, after declining 8 percent in the fourth quarter, the Benton Harbor, Michigan-based company said in a Feb. 7 statement. Unemployment Rate ``Current demand trends in the United States are expected to be down during the first half of the year and improve during the second half,'' said Jeff Fettig, Whirlpool's chairman and chief executive officer, in the statement. That will come too late to save jobs at the Collis factory in Indiana. On Monday, Hamilton started a new job unloading trucks at an Evansville warehouse owned by TJX Cos., the discount retailer based in Framingham, Massachusetts, that owns T.J. Maxx, Marshalls and A. J. Wright. She's making $3 less an hour than she made at Collis, where she worked for almost five years. ``I'm taking a pretty big cut in pay, but at least I found another job,'' said Hamilton, whose children are 5 and 9. Some of the Collis workers yelled at company managers and stormed out of the room when they heard the factory was closing, she said. ``Some people took it kind of hard,'' Hamilton said. Unemployment Rate While workers in appliance, furnace and furniture factories worry about their jobs, the rest of the labor market is showing strength, said Michael Darda, chief economist of MKM Partners LP in Greenwich, Connecticut. The U.S. unemployment rate was 4.6 percent in January, close to a five-year low of 4.4 percent in October, according to the Labor Department. ``There are certainly industries shedding jobs, but with the labor market as tight as it is, those workers will get reabsorbed into other parts of the economy,'' Darda said. That's not much comfort for executives such as Caterpillar's Owens, whose U.S. sales are falling. ``My guess is it's going to get a little bit worse,'' Owens said. To contact the reporters on this story: Kathleen M. Howley in Boston at email@example.com .