Paul Krugman Says This Is The 'Most Puzzling Chart' In Economics Right Now

Nobel laureate and noted economist Paul Krugman raised an interesting question regarding Housing Starts vis-a-vis employment in the sector on his Twitter page.

Krugman cited a chart by the St. Louis Federal Reserve and wondered why Housing starts have been on a decline while employment in the sector has continued its momentum.

Single-family housing starts, which reflect the bulk of homebuilding, declined 4.3% to a seasonally adjusted annual rate of 841,000 units in January, Reuters reported last month citing the Commerce Department. Single-family homebuilding plunged 27.3% from a year earlier.

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At the same time, overall housing starts fell 4.5% to 1.309 million units, hitting the lowest level since June 2020.

Employment: Compared to this, however, employment in the sector shows a steady momentum as shown by the chart.

"If you were looking at housing starts you’d think there was a significant slowdown in [the] process. But employment hasn’t declined at all. I honestly don’t know quite what’s happening, but surely this is a large part of the mystery," Krugman tweeted.

Krugman said this was the "most puzzling chart in economics right now."

"Much speculation about why Fed hikes haven’t done much to slow the economy, but too much focuses on businesses and consumers; housing is where monetary policy usually has the most traction," he tweeted.

It is noteworthy that last week, the average rate on the 30-year fixed mortgage breached the 7% mark, hitting 7.1%, as fears of sticky inflation and persistent rate hikes continue to impact markets.

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