Back to housing. Always back to housing. From the St. Louis Fed:
Assuming that about 1 million construction jobs were lost when the real estate bubble burst, we estimate that nearly 800,000 additional jobs were lost in other industries as a consequence. Hence, the decline in construction accounts for nearly 40 percent of the total decline in employment between December 2007 and February 2010.
Real residential investment is nearly 60 percent below its peak in the fourth quarter of 2005 and 38 percent below its pre-recession level. Indeed, it has declined slightly more since the end of the recession in June 2009. Real nonresidential investment in structures (investment in commercial real estate) is 28 percent below its pre-recession level. All other components of real fixed investment are very near or significantly above their pre-recession levels.
Hence, the anemic investment in residential and commercial real estate has significantly contributed to the slow growth in employment. The problem appears to be an excess supply of real residential and commercial real estate, which will continue to impede investment in residential and commercial real estate. Unfortunately, the real supply of real estate can only adjust by depreciation, population growth (two very slow processes), or by a decline in its real value, which occurs when real estate prices decline relative to the prices of other commodities. While these adjustments take place, we expect only moderate growth rates of employment.